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Liberalise FDI, improve regulations to achieve 9% growth, Planning Commission tells PM

The plan panel says land, infrastructure, remain major constraints; regulatory environment must change to reduce cost of doing business

New Delhi: Concerned over the weakness in the manufacturing sector, the Planning Commission today pitched for further liberalisation of the FDI policy and improvement of business regulations, to step up the GDP growth rate to 9%-9.5% in the 12th Plan, from 8.2% in the current plan.

"Tune up FDI and trade policies to attract quality investment in critical areas," the Commission said in a presentation before prime minister Manmohan Singh, at the meeting of the full plan panel, PTI reports.

Regretting that the manufacturing performance has remained "weak", the Commission said that India needs to target a growth of 11%-12% in the sector in the 12th Plan (2012-17).

"(Manufacturing) needs a growth of 11%-12% a year to create necessary jobs," it said, and underlined the need for greater value addition and better use of technology to promote growth and improve the trade balance.

Noting that land and infrastructure remained major constraints, the Commission called for setting up of national manufacturing investment zones and better a business regulatory framework to ensure broader spread of industrial base.

"Exclusive manufacturing zones, more liberal foreign direct investment and trade policies together with a better regulatory framework are in the prescription," it said.
During the presentation, deputy chairman Montek Singh Ahluwalia cautioned that manufacturing was not promising the desirable outcome and it could have a cascading effect unless new initiatives were taken to catalyse this sector.

Regarding regulations, the Commission stressed on the need to improve the business regulatory framework to ensure improvement in the cost of doing business and issues related to transparency. "It is generally felt that more transparency is needed and industry needs regulations to shed fears of uncertainty and political manipulations," it said.

The Plan panel said that the country's economic growth during the current Plan period (2007-12) is likely to average 8.2%. This is lower than the original target of 9% growth set for the 11th Plan. But the Planning Commission described the 8.2% growth as "still remarkable", in view of the global economic downturn during the period.

The Plan panel pointed out that despite efforts by the UPA government, it had not been able to introduce FDI in multi-brand trade because of opposition from some sectors. "It is generally felt that liberal FDI would not only check over-profiteering, but also regulate the labour force engaged in the sector," it said.
The Commission observed that problems also arose in special economic zones due to the fear among sections of the population that such zones would take away productive agricultural land.
For micro, small and medium enterprises (MSMEs), the Commission supported the idea of promoting clusters to enhance productivity of the sector.

Among other suggestions, the Planning Commission said that the government must target a 4% growth in agriculture during the five-year period beginning 2012. For this, farmers need to be provided with better rural infrastructure, including storage and food processing facilities.

The panel also suggested expanding the Rashtriya Krishi Vikas Yojana for development of the farm sector.

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