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This File was last Updated/Modified: April 04 2014 17:38:19.

Overview of the Plan

Overview of the Plan

State of the Economy and the Plan

  • Growth rate of GDP during the first three years of the Plan is estimated to be 6.2 per cent per annum on an average as against a target of 6.5 per cent.
  • Significant shortages in growth performance have been recorded in Agriculture, Mining and Quarrying and Manufacturing sectors, while Construction, Communications, Public Administration and Community Services have exceeded the targets.
  • Both domestic savings and investment have fallen short of targets by over 5 per cent. The entire shortfalls are in the public sector, where public savings has recorded a shortfall of 70 per cent and public investment a shortfall of 23 per cent.
  • Private investment has exceeded the target by over 3 per cent.
  • Investment in agriculture and allied services, mining and financial services have fallen short of the targets by over 20 per cent. Registered manufacturing, construction and other services (including software) have exceeded their investment targets.
  • In the final two years of the Plan, both public investment and public savings are expected to recover strongly, but are unlikely to attain the targets set in the Plan.
  • The investment targets in Agriculture and Allied activities, Mining and Quarrying and Electricity are unlikely to be met in the last two years of the Plan.
  • All other sectors are likely to meet the targets according to current trends.
  • The balance of payments position is likely to remain comfortable in the last two years of the Plan despite rise in the international price of petroleum. The current account deficit is not expected to exceed 1.4 per cent of GDP for this period.
  • External financing is expected to remain comfortable, with a mild acceleration in foreign direct investment and significantly higher inflow of foreign portfolio investment.
  • The deterioration of the fiscal position is primarily due to serious slippages in the tax revenues, particularly at the Centre. The tax GDP ratio of the Centre was expected to be 10.4 per cent of GDP in 1999-2000, but the realized ratio is only about 8.7 per cent.
  • Despite an expected revival in the tax/GDP ratio, it is unlikely that the central budget support to the Plan can be maintained at the target level. It is estimated that only about 87 per cent of the Plan target may actually be attained by the end of the Plan period. This compares unfavourably with the 93 per cent realisation during the Eighth Plan.
  • Total public investment, as a result, would be about 81 per cent of Plan targets. During the Eighth Plan, the realisation in public investment was 85.4 per cent of the target.
  • Due to serious slippages in public investment in physical and social infrastructure, the pipeline investment for the Tenth Plan will be low. This may weaken the possibility of significant acceleration in the growth rate during the Tenth Plan period.


Public Sector Plan : Resource Position - Centre and States

Centre

Plan Projections and its Realisation:

There has been a shortfall of 8.6 per cent in the Gross Budgetary Support (GBS) of Rs. 2,05,290 crore provided by the Centre for the Plan. Only a little below 50 % of the projected budgetary resources to be provided by the Centre for its own Plan could be made available during the first three years of the Ninth Plan. Central Assistance to States and UTs plan has been according to the pattern envisaged in the Ninth Plan.

The Internal and Extra Budgetary Resources (IEBR) of Rs. 133,403 crore raised by the Central Public Sector Enterprises (CPSEs) were also lower by 18 per cent as compared to Plan Projections during the first three years of the Ninth Plan (1997-98 to 1999-2000).

Constraints:

The expected buoyancy in Revenue Receipts particularly that of Union Excise did no materialize whereas, growth in Revenue Expenditure of the Centre substantially exceeded the Plan estimates. The non-plan expenditure growth has been mainly due to the following: a) Increase in interest liability on incremental domestic debt vis--vis projections, mainly due to larger market borrowings and higher market related rates of interest thereof; b) Impact of pay increase following the Central Fifth Pay Commissions recommendations; c) large increase in explicit subsidies on food and fertilizers; and d) large increase in implicit subsidies.

The shortfall in the Revenue Receipts has been 5.6 percent, while growth in revenue expenditure of the Centre was 6.8 percent higher than the Plan projections.

The widening gap between revenue receipts and revenue expenditure of the Centre resulted in sharp deterioration in the Balance from Current Revenue (BCR) of the order of Rs. 62,767 crore during 1997-2000.

The improvement anticipated in the Internal Resource Generation and in the borrowings of the CPSEs has also not been forthcoming. As a result, the Internal Resource Generation and borrowings of the CPSEs for their Plan investment were lower by 14 per cent and 13 per cent respectively compared to the Plan projections.

Fiscal Impact:

The shortfall in mobilization of budgetary resources for the Plan in the first three years has been offset to some extent through a larger recourse to borrowings than projected in the Ninth Plan. However, increased borrowings have led to excessive fiscal deficit beyond sustainable levels.

Thus, Gross Fiscal Deficit of the Centre has been increasing persistently. It accounted for 32 per cent of the total Central Government expenditure in 1997-98 and 1998-99 and will increase to 36 per cent for the year 1999-2000, leading to larger interest liability and revenue expenditure.

Policy Imperatives:

Along with widening of the tax-base with regard to the services sector, recovery of arrears and enforcement of tax compliance, especially in case of direct taxes need more attention.

Strict control over wasteful expenditure through adoption of Zero-base budgeting system for all Plan and non-Plan schemes; optimization of Budget provisions through re-prioritisation; and convergence of schemes and programmes have become essential.

Speeding up of the process of dis-investment in non-strategic PSEs in order to mobilize more resources for Plan investment.

States

  • Only 44.4 % of the projected resources have been mobilized by the States during the first three years of the Ninth Plan.
  • There has been a massive deterioration in the contribution of ‘Own funds’ of the States to Plan resources and the ARM has been low. This has led to dependence on increased borrowings to finance their plan.
  • The shortfall in the contribution of ‘Own funds’ of the States has been mainly due to deterioration in States ‘BCR’ and unsatisfactory performance of State level Public Enterprises.
  • Non-Plan revenue expenditure has increased at a faster pace than revenue receipts due to rapid increase in interest receipts and impact of pay revision.
  • The performance of State Electricity Boards (SEBs) and State Road Transport Corporations (SRTs) among the State-level public enterprises has been quite dismal.
  • The volume of tax devolution on account of Tenth Finance Commission recommendations also was lower than the projections due to shortfall in buoyancy of Central tax revenues.