Resource crunch likely to blame

NEW DELHI: The 10th Plan targets for growth may have gone awry due to the over-optimistic estimation of resources that would be available for Plan spending.

The situation is unlikely to improve over the remainder of the Plan period. Compounding the problem will be the new priorities identified by the National Common Minimum Programme. The approach paper for the mid-term appraisal (MTA) holds lower-than-expected Plan allocations to be partly responsible for the faltering growth.

It has also voiced concerns over the effect the implementation of the Fiscal Responsibility and Budget Management (FRBM) Act will have on budgetary support for Plan programmes, a large chunk of which are development programmes aimed at reducing social disparity. Alarmingly, the gross budgetary support as a ratio of GDP, may actually decline.

“The MTA will present a candid assessment of the resource position facing both the Centre and states and the implications for the last two years of the 10th Plan.�

The allocations for the Central sector plan (including the PSU plan) for the first three years was about 44.2% of the total Plan, against expectations of 54%.

The situation in the states is more grave, as they have not received the estimated resources through devolution. This was due to a variety of reasons such as slower growth in the economy and below-projection growth of the tax revenue to GDP ratio.

The states’ performance was also below expectations. They have been burdened with losses to their electricity boards and the overhang of implementing the recommendations of the Fifth Pay Commission.

On the impact of the FRBM Act, an analysis of the Commission suggests that on an optimistic assumption — which includes early implementation of tax reforms — the gross budgetary support to the Plan as a ratio of GDP will increase by just 0.5% over the next 2 years.