People's Democracy

  Mid-Term Appraisal Of The 10th Plan: A Critique

Prasenjit Bose /Surajit Das

THE Planning Commission has recently undertaken a Mid-Term Appraisal of the Tenth Five Year Plan (2002-2007). It is stated at the beginning of Part I of the Mid-Term Appraisal (MTA) document, “the Mid-Term Appraisal presents a detailed assessment of the performance of the economy as a whole as well as an assessment of performance in individual sectors in comparison with the Tenth Plan targets”. The fifty-first meeting of the National Development Council (NDC) held on June 27 & 28, 2005 at New Delhi has given official approval to this document.

The role of the state in economic development has been a matter of considerable debate in the era of trade and financial liberalisation. The experience of the decade and a half of “economic reforms” in India has reinforced the validity of the traditional wisdom that economic growth in a market economy cannot automatically take care of the problem of distribution. The ‘trickle down’ doctrine has failed the empirical test miserably. The defeat of the NDA in the last Lok Sabha elections was to a large extent due to the disillusionment of the people with an economic regime, which was unable to address the problems of unemployment and poverty. In the backdrop of prime minister Manmohan Singh’s call for “reforms with a human face” it was expected that the Planning Commission would take a fresh look at the nature of state intervention in the economy in terms of employment generation, poverty alleviation, food security and the performance of the social sectors. The MTA, however, does not reflect any significant rethink on the course of economic development being pursued in the country.

DISMAL RECORD OF FUND UTILISATION

An important feature, common for all the sectors, is the gross under-utilisation of funds. Given the level of the plan outlay, which in any case is inadequate for most sectors, the actual utilisation of funds is pathetic. If we look at the realisation of public sector outlays in first three years of the Tenth Plan we’ll see that only 48.5 per cent of central plan outlay, 49.3 per cent of state plan outlay, 34.8 per cent of PSEs’ outlay, 49.6 per cent of total budgetary resources, 37.6 per cent of total public investment and 42.9 per cent of total public sector outlays have been realised. During the first three years of the Tenth Plan, only 47.6 per cent of total the Tenth Plan outlay could be spent in a key sector like Agriculture. In important social sectors like education and health the total fund utilisation in the first two years of the Tenth Plan as a percentage of total Tenth Plan Outlay were only 31 per cent and 29.5 per cent respectively. This dismal record of fund utilisation reflects poorly on the performance of the central government over the past three years.

NEGLECT OF AGRICULTURE CONTINUES

The overall GDP growth, which averaged 6.5 per cent p a for 2002-3 to 2004-5, is much lower than the target of 8.1 per cent p a set for the Tenth Plan. Although, for a large economy like India a 6.5 per cent annual growth is not insignificant, the real problem lies elsewhere. There was a key sub-target of 4 per cent growth in agriculture, set against the ‘disappointing performance of 2 per cent growth of agriculture, that was achieved during the Ninth Plan (1997 – 2002)’. However, during the first three years of the Tenth Plan we have experienced an even more disappointing growth rate of 1.27 per cent p a in agriculture on an average. (The 9.5 per cent growth rate in agriculture registered in the year 2003-04 was because of a low base since we experienced – 6.8 per cent growth in the preceding year).

The MTA document while recognising the distress in agriculture in almost all sub-sectors has also pointed it out as the main focus area. But in real terms (at 2001-02 prices) the Tenth Plan Outlay for Agriculture has increased only by 9.7 per cent over the Ninth Plan outlay. As far as under utilisation of funds is concerned, till date the Tenth Plan has not performed significantly better than the Ninth Plan in any way. Whereas the Ninth Plan could utilise only 73.5 per cent of its outlay for the Ministry of Agriculture, the Tenth Plan could utilise only 47.6 per cent during the first three years of the Plan. In the backdrop of declining public investment in agriculture, which is one of the main causes underlying the agrarian crisis, the MTA was expected to recommend a substantial scaling up of the Plan outlay. It has failed to deliver on that count. The low growth rate in agriculture also reflects dwindling domestic demand. Even necessities like food articles are demanded less in the domestic market, solely because of the lack of purchasing power of a large section of our population due to widespread unemployment and poverty. In spite of experiencing a healthy growth rate of GDP, extremely skewed distribution of income has left a large section of the population with inadequate purchasing capacity and extreme economic vulnerability.

Thousands of farmers (mainly cash crop producers) have committed suicide all over the country over the past three years because of highly volatile international prices, fluctuating domestic demand and growing indebtedness. In this backdrop it was expected that some steps would be suggested to mitigate the crisis, by setting up of a price stabilization fund for certain categories of crops and undertaking debt relief measures on a massive scale. Not only are such measures ignored completely, but the MTA document goes on to reaffirm the pro-landlord bias of the Tenth Plan, where it was indicated that demographic factors, changes in agricultural technology and the increasing importance of market forces has considerably weakened the case for a land reform programme. In keeping with such a class-biased perspective the MTA document suggests that our tenancy laws are highly restrictive and in the changed circumstances the existing ceiling laws should be revised. If such changes are actually brought in with respect to tenancy laws and land ceiling the already skewed distribution of land would be aggravated.

NO RESPITE FOR THE UNEMPLOYED

Despite recognising the fact that unutilised capacity and large-scale involuntary unemployment co-exist in our economy the MTA has failed to recommend a stepping up of overall public investment in order to boost the economy. While the targeted public investment was 7.5 per cent of GDP for 2002-03 and 2003-04, actual public investment was only 6.15 per cent for the given period as compared to 9.2 per cent in 1991-92. In the face of such low levels of government investment the employment situation continues to remain grim. The MTA points out that, ‘providing “gainful and high quality employment at least to addition to the labour force” is one of the monitorable targets of the Tenth Five Year Plan’. The Tenth Plan envisaged the creation of 50 million new employment opportunities over the Plan period, against a total addition to the labour force of 35 million persons. The estimated unemployment rate based on current daily status basis has increased from 8.87 per cent of labour force in 2001-02 to 9.12 per cent in 2002-03, 9.13 per cent in 2003-04 and 9.11 per cent in 2004-05. In terms of absolute number the estimated number of unemployed people rose from 3.35 crore in 2001-02 to 3.51 crore, 3.58 crore and 3.64 crore in the years 2002-03, 2003-04 and 2004-05 respectively. The estimates from the data provided in MTA show that the growth rate of employment at 1.71 per cent p a was in fact lower than that of labour force, which grew at 1.80 per cent p a during first three years of Tenth Plan. Moreover employment in the organised sector has gone down in absolute terms during this period. In that sense the Tenth Plan period so far has been an era of “job loss growth”.

According to NSS 55th round (large sample), 1999-2000, out of the total workforce of 39.7 crore (usual status basis), only 2.8 crore were in the organised sector, which constitutes only 7 per cent of the total workforce. More than 55 per cent of our total workforce is still dependent on agriculture and more than 64 per cent of the total unorganised sector workforce also belongs to agriculture and mining. Given this backdrop, the only way to fulfil the Tenth Plan promise of providing “gainful and high quality employment” was to increase public sector employment. Unfortunately, instead of that what we are witnessing today is a reduction in employment in the public sector in a systematic and planned manner. The MTA document while bypassing the whole issue of employment generation through greater public investment has chosen to rely on the shallow premise of supply-side economics by suggesting that employment can be generated by making our labour laws “simpler”.

POVERTY & HUNGER: DECEPTIVE APPROACH

Prof Utsa Patnaik, in her well-researched article The Republic of Hunger published during the tenure of the right-wing NDA government had written, “…the diagnosis of the problem of hunger is incorrect and a worsening situation is being interpreted as betterment. No remedial measure can be expected of the policy advisers and rulers of this country, which was once a developing economy, but which has been turned into the Republic of Hunger”. The MTA document reflects the continuance of a more or less similar outlook towards the burning issues of poverty and hunger. Although it has been recognised in the MTA document that the poverty estimates based on NSS 55^th round, 1999-2000 and the previous measures of poverty are not comparable because of the interim changes in methodology, yet time and again it has been argued that poverty has been significantly reduced during 1990s. Besides exposing the contradictions within the Planning Commission, the hollow claims of poverty reduction begs the question that if the proportion of unemployed has increased in the economy, how has poverty declined?

Going by the direct estimate of calorie intake (1999-2000 NSS data) almost half of our urban population and three fourth of our rural population is undernourished. The per capita food availability in India has gone down drastically from 177 kg per annum in 1991-92 to only 157.7 kg per annum in 2002-03. Dismantling of the Public Distribution System has indubitably contributed to the worsening of food security in the country. Despite the precarious situation the MTA continues to debate whether to change over to a universal PDS or continue with the existing targeted PDS. Despite the fact that most of the undernourished below poverty line people either could not be detected or are out of the coverage area of PDS, the inadequacies of a targeted PDS in a country like India has not been understood so far. 

CONCLUSION

Despite the commitments made in the Common Minimum Programme and the rhetoric of a “New Deal” for rural India, the fact that approach of the UPA government on economic policies is not fundamentally different from its predecessor is borne out by the Mid-term Appraisal of the Tenth Five Year Plan. The MTA was an opportunity for course correction with regard to agriculture, employment generation, poverty alleviation, food security and the social sectors. Unfortunately, that opportunity has been lost.