The first single largest economic exercise of the new millennium – the Tenth Five Year Plan (2002-07) - has been approved by the Union Cabinet. This will now go to the National Development Council (NDC) for ratification by the State governments. 

The nod has come after some doubts over the feasibility of achieving Plan targets, particularly the 8 per cent annual economic growth. Apprehension was raised in the light of slowing down of the economy in recent months. But skepticism on this front has been tempered by the strong fundamentals of the economy with inflation at a low level of 4 per cent despite a failed monsoon, comfortable foreign exchange reserves and a steady Rupee. External Reserves are at an all time high of US dollars 64 billion. Notably, the recent accretion in reserves has come at a very low cost to the country, clearly reflecting pragmatic economic policies.

After the Cabinet meeting presided over by the Prime Minister, Shri Atal Bihari Vajpayee, the Deputy Chairman of the Planning Commission, Shri K.C. Pant exuded confidence in the economy’s efficacy to meet all major targets. Interestingly, the Commission’s optimism has come coinciding with the Reserve Bank’s lowering of the Growth Domestic Product (GDP) target from 6.5 to 5.5 percent for the current fiscal. This apparent deviation need not deter the task of meeting the 8 per cent goal as the cut in lending rates to a 30 year low is likely to ease money supply for the industry to invest and ignite economic growth. While there is no reason to question the Commission’s positive projections, the only worry comes from the brakes being sought to be applied in the path of Reforms by the Opposition – the Congress, the original proponents of liberalization and the left parties besides some partners of the NDA coalition. 

The Plan, in an unprecedented fashion, has set higher GDP targets for all the States. But how fiscally mismanaged States like Bihar and Uttar Pradesh are going to achieve these goals remains to be seen.

The Plan document expects as much as Rs.78, 000 crore from disinvestments precedes towards the Rs. 9,21,291 crore Central Plan outlay over the next five years. This means disinvestments proceeds are intended to finance 11 per cent of the Central budgetary support to the Plan. The outlay for the States and Union Territories will be Rs.6, 71,009 crore. The total Public Sector outlay for the Plan is 15, 92, 300 crore, including a gross budgetary support of Rs.706, 000 crore.

The document proposes to carry forward key reforms, especially in agriculture, to generate 50 million jobs in the next five years. It also seeks to raise FDI flow to US dollars 7.5 billion annually. For the first time, the document has introduced a volume dedicated to State plans, their concerns and strategies. It envisages cut in poverty ratio from 26 per cent to 21 per cent by 2007, provision of drinking water to all villages, cleaning of major polluted rivers, increase in literacy rate from 65 per cent to 75 per cent and universalisation of elementary education by 2003.

Shri Pant minced no words while stressing that meeting these ambitious goals would require tough economic measures which in turn would call for political consensus and the necessary will for implementation. The document has prepared a roadmap for tax reforms to achieve the tax-GDP growth ratio of 10.3 per cent during the Plan period from the existing 8.6 per cent. The 8 per cent annual growth target would require investment of 28.4 per cent of GDP, which is sought to be met from the domestic savings of 26.8 per cent of GDP and external savings of 1.6 per cent. The major additional savings would have to come from higher production and government dis-savings from a negative level of 4.5 per cent to negative 0.5 per cent of GDP. 
It has recommended widening of the tax base, improving collections, removing tax incentives and concessions. No doubt, all these apparent unpopular measures would require political will and executive determination to translate them into action. 

The worrying factor, however, is the needless brakes sought to be placed on the path of reform-oriented strategy. This has been the case since the launch of liberalization.
The economic liberalization, which had its modest beginning in the mid-1980s has had a bumpy journey in the last one-decade and a half. 

Described as the huge, slumbering elephant, Indian economy was given a rude prod in 1991 at the height of a debt crisis that saw the virtual scraping of the foreign exchange barrel. Under the dictates of International Monetary Fund (IMF) and the World Bank, which had pulled the country out of a dangerous debt trap, a la Brazil, the subsequent Congress government pursued the reforms process. Under the single party Congress government there were few problems in furthering liberalization. Not that there was no criticism or opposition to the reforms. But whatever was there could be handled with little or no fuss as there was general agreement within the government on the new philosophy. 

The coalition era had dawned in 1996. The inherent pulls and pressures, the constant danger of instability and strident, dissenting voices within successive coalition governments under Deve Gowda, I K Gujral and Atal Bihari Vajpayee had all created frequent roadblocks on the liberalization lane. The Finance Ministers had to constantly do a frustrating balancing act.
Infact Prime Minister Vajpayee has had to constantly look over the shoulders of his coalition partners to satisfy himself that his reforms push got their approval. Though the resistance he had faced from the Opposition parties on the pace and content of the reforms has been politically understandable. 

As Foreign Direct Investment (FDI) began a gradual decline for a variety of reasons, including uncertainty on the reforms front, the Government has had to look at the disinvestment route to mop up resources needed to fund key infrastructure sectors. When it came to disinvesting in the oil majors Bharat Petroleum and Hindustan Petroleum, all hell seem to have suddenly broken out. But Vajpayee’s resounding response came during his address to the full meeting of the Planning Commission, which scrutinized the Draft Plan. He chose this highest policy making forum to settle his tormentors’ hash. 

In a clear message to the doubters of Reforms within his Cabinet, Vajpayee said he would actively pursue the disinvestments of PSUs. He, however, hastened to add that he would not follow such an FDI policy as would weaken Indian industry or hurt national interests. 
Answering criticism of a perceived foreign-dominated development models, the Prime Minister stressed that planning in India is not a static concept and not enslaved by dogma. "It has to take into account the dominant new trends in the national and global economies," 
These are, of course, words reflecting the mature wisdom of a world leader reconciling to the realities of a brave new world order under the all-encompassing globalization. His remarks are also a clear recognition of the reality that India’s Plan process has to go hand in hand with Reforms.