People might think I am just a critique of Indian government policies for nothing. However, statements from leading policymakers only forces you to keep criticising.
If there was another moment to prove the growth at all costs fascination for Indian government, it is this recent speech by India’s PM. This speech has created waves for PM’s three growth scenarios for 12th plan. However, there is just no mention of an equally bigger problem of inflation. Where search for “growth” leads to 16 finds, for inflation there are none.
The speech notes of some achievements of 11th 5yp:
“I welcome you to this meeting which has been convened to consider the draft Twelfth Five Year Plan.We ended the Eleventh Plan with some notable achievements. The economy grew at an average annual rate of 7.9 percent. This is commendable for a period which saw two global crises – one in 2008 and another in 2011.
Poverty declined twice as fast between 2004-05 and 2009-10 than it did in the previous ten years. Agriculture grew at 3.3 percent per annum in the Eleventh Plan, much faster than the 2.4 percent observed in the Tenth Plan.These are positive features. However, we must also recognise that the Twelfth Plan is starting in a year when the world economy is experiencing difficulties and our economy has also slowed down.
These short term problems present a challenge, but they should not lead us to undue pessimism about our medium term proposals.
How about inflation? Average WPI inflation between 2007-12 has been around 7%. It is lower at 7% because inflation in 2007-08 averages 4.74% and during crisis (OCt-08 to Oct-09) at 3.3%. From Nov-09 it averages 8.8% and that is where much of the problems have been. But then one cannot remove all the points and take only high inflation points. The best way to say is despite the crisis when inflation crashed to touch even -0.4% in Jun-09, it manages to average 7%. The average preferable inflation is around 5%. So still a good 2% higher over a medium term which is high.
And nothing at all on how bad inflation engine has been. Just that how growth engine has derailed.
However, there are some points which could lead to lower inflation in 12th plan (though does not really mention it). Things like infrastructure, agriculture etc are there like in all plans.
The third key component of the Plan is the set of policies which can improve performance in individual sectors. Let me mention a few key sector priorities.
- Health, education, and skill development are key sectors which enhance human capability and can contribute hugely to the objective of promoting inclusive growth. They have been given high priority in the Twelfth Plan.
- Agricultural growth must be accelerated to about 4 percent.
- Manufacturing must grow much faster than it has, to generate the employment growth we need.
- Infrastructure development is vital. It needs a combination of public investment and Public Private Partnerships.
- Energy is a difficult area where our policy needs a comprehensive review. We are energy deficient and import dependence is going up. It is vital for our energy security that we increase domestic production and also increase energy efficiency. Rational energy pricing is therefore critical. Our energy prices are out of line with world prices. The recent increase in diesel prices is an important step in the right direction.
- Water is another area where problems of scarcity and the challenges of effective resource management are likely to expand in the years that lie ahead.
- Urbanisation is a new challenge which we must address.
There should have been a target for inflation as well..Why is it missing in the list despite having such a terrible record?