M A I N   N E W S

It needs courage to ensure growth, says PM
* Says policy logjam can hurt economy
* Defends FDI decisions, diesel price hike 
Tribune News Service

Activists of the Trinamool Congress march during a demonstration against foreign direct investment in multi-brand retail in Kolkata on Saturday. — AFP

New Delhi, September 15
After announcing ‘big bang’ economic reforms in the last two days, Prime Minister Manmohan Singh today warned that a policy logjam scenario could badly hurt growth prospects of the country.

In his opening remarks at the full Planning Commission meeting for approving the 12th Plan document, the Prime Minister said the Plan for the first time presents three alternative scenarios.

Scenario I is when there are lot of positive results on growth and inclusion. Scenario II is called "insufficient action", and describes state of partial action with weak implementation, which can lead to growth coming down to 6-6.5 per cent.

Scenario III is called the policy logjam, said the Prime Minister. “It reflects a situation where for one reason or another, most of the policies needed to achieve Scenario 1 are not taken. If this continues for any length of time, vicious cycles begin to set in and growth could easily collapse to about 5 per cent per annum,” he said.

The economy has been caught in a logjam for the past year or so with few decisions being taken due to several factors, including political opposition. After the government’s announcement on diesel hike and allowing FDI in retail in the last two days, there have been vociferous protests by UPA allies and Opposition parties.

“It will take courage and some risks to ensure that the economy reverts to a high growth path and this logjam is prevented,” the Prime Minister said.

Justifying the diesel price hike as an important step in the right direction, he said, rational energy pricing was critical and "our energy prices are out of line with world prices".

He also justified the need for foreign direct investment saying that the 12th Plan projects a current account deficit of 2.9 per cent of the GDP which must be financed through FDI and FII inflows. “I believe we can attract the financing we need provided our fiscal deficit is seen to be coming under control and the growth momentum is regained,” he said.

The 12th Plan (2012-17) is proposing an annual average growth rate of 8.2 per cent, which is lower than the earlier estimate of 9 per cent. The economy recorded a growth rate of 7.9 per cent in the 11th Plan. On the lowering of the target, Manmohan Singh added that some downward revision is realistic given the state of the world economy.  Stressing the need to revive investment in the economy, the Prime Minister said the investment environment is critical and the fiscal deficit, which is too high, should be brought down to release domestic resources for productive deployment in the economy.

The commission approved the 12th Five Year Plan document subject to certain suggestions being incorporated. Deputy Chairman of the Planning Commission Montek Singh Ahluwalia said the growth plan is ‘realistic’. However, according to Ahluwalia, half-hearted approach towards reforms can cause the growth to slip do 5-6% levels. He acknowledged that multiple clearances for infrastructure projects tend to hamper growth. Ahluwalia said emphasis will be given to infrastructure, power and healthcare in the 12th Five Year Plan.