Prospects and policy challenges in the Twelfth Plan: A special article by Montek Singh Ahluwalia in EPW

The year 2011-12 is the last year of the Eleventh Plan and this is therefore an appropriate time to review what has been achieved with a view to identify weaknesses in the strategy that need to be corrected, and also identify new challenges that may require new initiatives. The paper is presented in the hope of spurring a broader discussion on these issues.

The Indian economy will enter the Twelfth Plan period in an environment of great promise, but the next five years will also be a period of major challenges. The economy has done well on the growth front during the Eleventh Plan, but, going by the information that is at least currently available, not so well on inclusion.

Much of what needs to be done to accelerate Gross Domestic Product (GDP) growth during the Twelfth Plan will be done by the private sector, but the central and state governments have a crucial role to play in providing a policy environment that is seen as investor-friendly and is supportive of inclusive growth.

Four critical challenges facing the economy in the Twelfth Plan, which are perhaps more serious than they were at the start of the Eleventh Plan, are those of (a) managing the energy situation, (b) managing the water economy, (c) addressing the problems posed by the urban transformation that is likely to occur, and (d) ensuring protection of the environment in a manner that can facilitate rapid growth. In addition, the efficiency in implementation of projects on the ground needs to be greatly improved.

The paper is structured thus -

• Section 1 provides an overview of performance against the stated objectives of the Eleventh Plan.
• Section 2 provides a macro level assessment of the prospects of improving growth performance in the Twelfth Plan.
• Section 3 identifies some key policy challenges that need to be addressed.

The paper deals with the following challenges related to water resources –

• Managing water scarcity in the Twelfth Plan period is in some ways even more daunting than the challenge posed by energy. Since water is largely a state subject, success depends critically on the state governments. They need to act on both the supply and the demand side.
• On the supply side, action is necessary on several fronts including building storage dams, investing in watershed management to improve surface water retention and groundwater recharge, and forcing industry to treat waste water for reuse. In terms of prioritization we need to do much more on watershed management projects, which involve one-tenth of the cost per hectare as compared to large irrigation projects, have fewer environmental problems, and generally provide a much higher return on investment. The central government should perhaps restructure its financial assistance to incentivise more action in watershed development.
• Efforts at expanding supply are important but they will not suffice and they will have to be accompanied by efforts on the demand side to improve efficiency of water use such as adoption of the System of Rice Intensification (SRI), which enables rice to be grown with much less water than in traditional flood irrigation.
• The first step in evolving a rational water policy is to make a scientific assessment of the available water resources in each basin in the country and then define basin specific strategies for water management.
• State governments should combine price rationalisation with establishment of statutory water regulators to determine water allocation for different uses such as household needs, agriculture and industrial use.
• There is also a case for revisiting the various laws in place to regulate the use of groundwater.

The paper can be download below while the comments by Dr. Y Venugopal Reddy and the response by Dr. Montek Singh Ahluwalia are available here