Power Infra 2

Indias 12th Five Year Plan to Focus on Inclusive Growth
Posted on Monday, April 25, 2011 by 2point6billion.com
Apr. 25 As Indias government prepares to submit its approach paper for its 12th five-year plan (a plan which covers years 2012 to 2017), the Planning Commissions focus on instilling inclusive growth is making headway. The plan is expected to be one that encourages the development of Indias agriculture, education, health and social welfare through government spending. It is also expected to create employment through developing Indias manufacturing sector and move the nation higher up the value chain. Prime Minister Manmohan Singh, however, warned that maintaining fiscal discipline is important as well. The commission will likely strive to enact policies that will achieve somewhere around a 10 percent growth rate in factories and a 4 percent growth rate in farm produce, though Prime Minister Singh has asked the plan to set the nations growth rate firmly at 9 percent to 9.5 percent.
Come May, a view into the implementation of these goals should be apparent. A question that Indias government will have to grapple with, much like that of any emerging market, is whether to continue to focus on GDP growth in the face of soaring food prices and economy-wide inflation.
An important aspect of generating inclusive growth is shifting the target of government aid to rural areas. Typically, large projects such as power generation, roads whereby freight can travel, and airports receive the lions share of government subsidies, while rural infrastructure receives comparatively little.
A recent op-ed piece in the Wall Street Journal by Saurabh Tripathi, a partner with Boston Consulting Group, echoed these sentiments.
Rural infrastructure, which serves 70 percent of the population, doesnt get the attention it deserves. As the Planning Commission sets out to draft the countrys planned investments for the next five years, it is important to take note of this gap, and the innovative solutions needed to fill it, Tripathi wrote.
As indicated from the planning commissions presentation to the prime minister on April 21, the quantitative metrics known thus far in the early stage of the five-year plan are:
A target of GDP growth in the 9 percent to 9.5 percent range An increase in literacy rates to 100 percent between the plans period from 2012 to 2017 An increased expenditure on health from 1.3 percent to 2.0 percent of GDP
In a boon for industry, the planning commission indicated that it aims to have industry and manufacturing-related activities grow by 11 percent over the next five years, contrasted to 8 percent over the previous 11th five-year plan. It also aims to undertake somewhat vaguely defined, but certainly well-intentioned, structural and regulatory reforms to facilitate investment.
The presentation highlighted the planning commissions views that commercial energy demand is expected to increase by 7 percent per year over the next five years.
To address that increase in demand, the planning commission recommended that all methods of current energy production and distribution be developed, from coal to nuclear energy to solar and wind, and proposed that existing taxes on electricity should not be raised.
Interestingly, the Planning Commission envisioned an expansive role for Indian SOE Coal India:
Coal India must become a coal supplier and not just a mining company. Should plan to import coal to meet coal demands. This requires blending of imported and domestic coal as supplied by Coal India.
All told, in its early stages, the 12th five-year plan promises a lot for rural development and growth. In that sense, it is similar to Chinas latest iteration of its five-year plan, which seeks to improve the lot of rural Chinese peoples by increasing urbanization and industrial efforts in central and western China. But, by contrast, while the Chinese government seems to be continuing with nation-wide industrialization efforts, the Indian government may be attempting to promote a policy of reverse migration by making rural living more attractive with some access to modern amenities, but hopefully without the accompanying chaos that goes with it.
The planning committees PowerPoint, as well as Prime Minister Singhs opening and closing remarks, can be found here. Dezan Shira & Associates can assist with corporate establishment, legal, tax and due diligence issues in India. The firm maintains offices in Delhi, Mumbai, Bangalore, Chennai and Kolkata. Please email [email protected] or visit www.dezshira.com for details. Related Reading
India Market Entry The Establishment Legalities Explained In this issue of India Briefing, we give the why and how for market entry into India. Specifically, we walk you through the eligibility requirements, tax liability, application and wind-up processes for liaison offices, project offices, branch offices, and private limited companies. Anti-Inflationary Policies May Weaken Emerging Market Growth India May Overtake China in GDP Growth by 2012 2011-2012 Union Budget Step in the Right Direction for India

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Indias 12th Five Year Plan to Focus on Inclusive Growth

Posted on Monday, April 25, 2011 by 2point6billion.com

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