"The pressures on government finances have become so acute that the share of public investment in total investment in the country, which was targeted to about 46 per cent during the Eighth Plan, has fallen to less than 30 per cent in the closing years of the plan," it said.

The plan panel also cautioned that private investment in the country would also be retarded due to infrastructure shortages, lack of aggregate demand and the "inefficient or fragmented financial intermediation system". The note, to be made public soon for discussion, said foremost taskbefore the centre and the states was to increase revenues accompanied by removing "deleterious effect of inter state tax competition."

The commission was, however, optimistic that a seven per cent economic growth would be achieved during the current financial year for attaining an overall 6.5 per cent annual growth in the gross domestic product in the ninth plan period (1997-2002).

"The plan explicitly recognises that public resources are being used relatively inefficiently, and that a much greater impact could be made even with existing resources provided that methods of implementation and delivery mechanisms are improved," the note said. It sought democratic decentralisation for greater transparency.