With the looming Euro crisis and drought in some States, the Planning Commission is set to lower the average growth rate target to 8.2 per cent for the 12th Plan.
Lowering the growth target means lower revenues, which could put a pressure on controlling the fiscal deficit. The Government has set a fiscal deficit target of 5.1 per cent for 2012-13, but various agencies expect it to be higher.
The proposed average growth rate target is lower than the two scenarios mentioned in the 12th Plan Approach Paper of nine per cent and 9.5 per cent, higher than the 8.2 per cent average growth during the 11th Plan period.
This issue will be discussed in the full Planning Commission meeting, chaired by Prime Minister Manmohan Singh on September 15. The 12th Plan period has already started from April 1 and will end on March 31, 2017.
“Now, the aim will be to get an average yearly growth of 8.2 per cent for the entire Plan period, with nine per cent growth in the terminal year. This will be more realistic,” a senior Government official told Business Line .
Once the full Planning Commission takes a view on the revised rate, the matter will go to the National Development Council for final endorsement. The Council is likely to meet in October.
This development is taking place at a time when various private agencies have lowered the growth projection to sub-6 per cent. The Reserve Bank of India also lowered its projection for the current year to 6.5 per cent. However, Prime Minister’s Economic Advisory Council (PMEAC) estimated 6.7 per cent growth this fiscal.
Commenting on the changing situation, D.K. Pant, Director, Fitch Ratings said, “If the Planning Commission is lowering the growth projection factoring in the global situation, this could translate into lower revenues. Also, if untargeted subsidies and wasteful expenditure are not checked, there could be serious implications on Indian debt and deficit dimension.”
Positive developments
Meanwhile, there is some positive development for the current fiscal, the first year of the 12th Plan. With the monsoon reviving in some States, particularly in rice-growing areas, there is possibility of better kharif output.
Also, a late monsoon will enable better moisture in the soil, creating a better environment for rabi crops.
“The net result is that farm contribution in the gross domestic product this year is unlikely to be affected,” said the official.