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Cut in GBS to hit social sectors: Plan panel

Press Trust of India, PTI  New Delhi, February 18, 2003
First Published: 15:10 IST(14/1/2003) | Last Updated: 20:58 IST(18/2/2003)

The Planning Commission on Tuesday warned that any shortfall in the proposed Plan provision of Rs. 1,34,064 crore for 2003-04 could lead to a reduction in resources for social sectors like education and rural development.

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Commission officials told PTI that since Rs. 54,000 crore has already been committed to the states in their annual plan for the next fiscal, any reduction in the gross budgetary support (GBS) would entail reduction in the Plan expenditure for the Centre.

"While the Plan expenditure for the Centre in the current fiscal was around Rs. 67,000 crore, in case the GBS is reduced to Rs. 1,00,000 crore, the Centre's share would be reduced to Rs. 46,000 crore since Rs. 54,000 crore is the bare minimum that has to be given to the states," said an official.

Finance Minister Jaswant Singh had, in a recent communication to Planning Commission Deputy Chairman K C Pant, expressed his inability to be able to agree with the proposed Plan expenditure of Rs. 1,34,064 crore for 2003-04.

"It is extremely unlikely that a provision of Rs. 1,34,064 crore for the second year (2003-04) of the Tenth Plan as GBS could be made," he had said in his letter to Pant.

Sources pointed out that since both education and rural development had an annual increase of between Rs. 3000-4000 crore each in their plan expenditure, a cut in their outlay could be most easily made without affecting public investment.

In his communication to Finance Minister, Pant had warned that "any shortfall in the GBS will fall almost entirely on public investment, especially in key infrastructure sectors like power, roads and irrigation. In such a situation, not only will the process of recovery receive a set-back, sustained accleration in growth will become more difficult".

Officials pointed out the first two years of the Tenth Plan were crucial to generate demand in the economy and considering that the projections of the commission in the first year of the Plan were by and large on target, there was a need to step up investment in the second year.

"The plan panel has deliberately front-loaded the plan expenditure in the 10th Plan to the initial years. A substantial increase in the plan expenditure in the second year of the plan is necessary to sustain the confidence of the investors in the economic revival," they said.

Sources said that the present indications of economic growth in the current fiscal were by and large as per Commission projections which had forecast that the manufacturing sector would contribute between 5.7 to 5.9 per cent of the gross domestic product (GDP).

Though there are fears that an increase in expenditure could violate fiscal discipline, it has been seen that this problem is taken care of by an increase in the economic demand and improvement in private investment, sources added.


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