'Policy logjam may pull down growth to 5%'

In fresh grim news for the economy, the Planning Commission has cut the growth rate target for the Twelfth Five Year Plan (2012-17) to 8.2 per cent from 9 per cent. However, it has said that even this target is not a "foregone conclusion" and the rate could slip to as low as 5 per cent if "difficult decisions" are not immediately taken to reverse the economic slowdown.

The warning is contained in an agenda note circulated for the full Planning Commission meeting due to be chaired by Prime Minister Manmohan Singh on Saturday. The note presents three scenarios for GDP growth over the next five years at a time when the economy has been buffeted by global as well as domestic headwinds.

"The Plan emphasises that the ideal Scenario 1 called 'Strong Inclusive Growth', which is the 8.2 per cent growth scenario, is not a foregone conclusion," the agenda note says. The commission has blamed "several internal constraints, macro-economic imbalances, slowing down of major investment projects in energy and transport because of implementation problems" for hindering the economy and causing growth projections to be moderated.

"The projected 8.2 per cent growth rate in the Twelfth Plan period (Scenario 1) can be realised only if early steps are taken to reverse the current slowdown and also other key constraints that will otherwise prevent the economy from returning to a higher growth path are redressed through appropriate policy decision," the commission has said.

Failure to do this could lead growth rates slumping to 6-6.5 per cent in what the note calls 'Scenario 2'.

"There is also a Scenario 2 called 'Insufficient Action' in which some policy actions are taken but, they are partial and not effectively implemented," the note says. "In this scenario all the virtuous cycles do not kick in" and the country will have to be satisfied with growth between 6-6.5 per cent, it says.

... contd.

ALSO READ

Govt aims to bring down CAD to 2.5% by 12th Plan-end, says Montek

Raghuram Rajan not in favour of sovereign bond to finance CAD

Airfares: Travel agents to keep shutters down on Tuesday

Companies expand background check on jobseekers