Debate on fiscal prudence or larger outlays at Plan Panel meet

New Delhi, Oct 16 (UNI) The Full Planning Commission meeting on October 18, 2006, to approve the Approach Paper to the Eleventh Plan (2007-11) is likely to witness some heat and dust over contentious issues such as fiscal prudence or inclusive growth, thrust to agriculture, the strategy for employment and labour reforms.

The meet is likely to witness the biggest debate on whether to go in for tight fiscal control or to permit a little loosening over the strict Fiscal Responsibility and Budget Management Act (FRMB) targets to provide more for rural development, education, health and the like. The battle lines appear to have been drawn and the UPA government will have to take a final view of the matter.

The backdrop to the entire event is the economy riding high growth rates in recent past and Finance Minister P Chidambaram's insistence that FRBMA needs to be strictly complied with in view of his commitment in this regard to Parliament. Almost a contrarian position has been taken by Planning Commission Deputy Chairman Montek Singh Ahluwalia who has argued for a more 'inclusive growth'--monies required for funding the huge social sector programmes--given the hindsight provided by the first NSSO large sample survey study (2004-05) that poverty eradication has belied expectations.

In the draft approach paper, Dr Ahluwalia had argued that being too feetish about FRMB targets could come in the way of larger outlays on social sector programmes, where monumental expenditures have been committed by the United Progressive Alliance(NCMP) in the National Common Minimum Programme (NCMP).

The Reserve Bank of India (RBI) has taken a view that a more liberal approach to the FRMB Act, could lead to higher inflation.

Its fears perhaps are justified as the latest WPI data indicates that inflation crossed the five per cent mark, riding on higher food and energy prices.

Informed sources in the Commission say the Finance Minister is bound to defend his stand of not relaxing the targets under the FRBMA, while political heavy weights like Human Resource Development Minister Arjun Singh, Agriculture Minister Sharad Pawar, and Railway Minister Lalu Prasad will make out a case that for the next five years fiscal constraints should not be allowed to come in the way of the many development programmes.

In a way they are one with Dr Ahluwalia's stand on larger resources as being more critical than strict fiscal prudence, having outlined ambitious programmes relating to their ministries.

Prime Minister Manmohan Singh has clearly stated that a Public-Private partnership model is most suited for the development of infrastructure, whose requirements he placed at 320 million dollars in the next five years.

If the government's commitment have to be met under the NCMP, then the Gross Budgetary Resources would need to grow by an annual rate of 20 per cent.

Similarly, there are differing perceptions among the Cabinet Ministers who are ex-officio members of the Commission relating to agriculture, labour reforms and on the issue of employment, sources say.

After the meeting of the full Planning Commission, the Aproach Paper would go for Cabinet approval and in a month's time before the National Development Council (NDC).

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