India’s 12th Five Year Plan to Focus on ‘Inclusive Growth’

As India’s government prepares to submit its approach paper for its 12th five-year plan (a plan which covers years 2012 to 2017), the Planning Commission’s focus on instilling “inclusive growth” is making headway. The plan is expected to be one that encourages the development of India’s agriculture, education, health and social welfare through government spending. It is also expected to create employment through developing India’s manufacturing sector and move the nation higher up the value chain. Prime Minister Manmohan Singh, however, warned that maintaining fiscal discipline is important as well.

The commission will likely strive to enact policies that will achieve somewhere around a 10 percent growth rate in factories and a 4 percent growth rate in farm produce, though Prime Minister Singh has asked the plan to set the nation’s growth rate firmly at 9 percent to 9.5 percent.

Come May, a view into the implementation of these goals should be apparent. A question that India’s government will have to grapple with, much like that of any emerging market, is whether to continue to focus on GDP growth in the face of soaring food prices and economy-wide inflation.

An important aspect of generating “inclusive growth” is shifting the target of government aid to rural areas. Typically, large projects such as power generation, roads whereby freight can travel, and airports receive the lion’s share of government subsidies, while rural infrastructure receives comparatively little.

A recent op-ed piece in the Wall Street Journal by Saurabh Tripathi, a partner with Boston Consulting Group, echoed these sentiments.

“Rural infrastructure, which serves 70 percent of the population, doesn’t get the attention it deserves. As the Planning Commission sets out to draft the country’s planned investments for the next five years, it is important to take note of this gap, and the innovative solutions needed to fill it,” Tripathi wrote.

As indicated from the planning commission’s presentation to the prime minister on April 21, the quantitative metrics known thus far in the early stage of the five-year plan are:

A target of GDP growth in the 9 percent to 9.5 percent range
An increase in literacy rates to 100 percent between the plan’s period from 2012 to 2017
An increased expenditure on health from 1.3 percent to 2.0 percent of GDP
In a boon for industry, the planning commission indicated that it aims to have industry and manufacturing-related activities grow by 11 percent over the next five years, contrasted to 8 percent over the previous 11th five-year plan. It also aims to undertake somewhat vaguely defined, but certainly well-intentioned, structural and regulatory reforms to facilitate investment.

The presentation highlighted the planning commission’s views that commercial energy demand is expected to increase by 7 percent per year over the next five years.

To address that increase in demand, the planning commission recommended that all methods of current energy production and distribution be developed, from coal to nuclear energy to solar and wind, and proposed that existing taxes on electricity should not be raised.

Interestingly, the Planning Commission envisioned an expansive role for Indian SOE Coal India:

“Coal India must become a coal supplier and not just a mining company. Should plan to import coal to meet coal demands. This requires blending of imported and domestic coal as supplied by Coal India.”

All told, in its early stages, the 12th five-year plan promises a lot for rural development and growth. In that sense, it is similar to China’s latest iteration of its five-year plan, which seeks to improve the lot of rural Chinese peoples by increasing urbanization and industrial efforts in central and western China. But, by contrast, while the Chinese government seems to be continuing with nation-wide industrialization efforts, the Indian government may be attempting to promote a policy of reverse migration by making rural living more attractive with some access to modern amenities, but hopefully without the accompanying chaos that goes with it.

(Courtesy : http://www.2point6billion.com/news/2011/04/25/indias-12th-five-year-plan-to-focus-on-inclusive-growth-9151.html)
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