Eleventh Plan Performance for Himachal Pradesh

The Eleventh Five Year Plan enters the last year of its tenure on the 1st April, 2011. With the finalisation of the Annual Plan for 2011-12, the process of stocktaking of the performance should commence. It is presumably on this account that commentators have begun commenting on the performance of the State on the attainment of the financial parameter of the plan. The annual plan for Himachal Pradesh for 2011-12 has been fixed at Rs. 3,300 crore. Since the data on financing it would become available with a time lag, it will not be possible to comment on the financing of the annual plan and in the same context about the overall Eleventh Plan.

A story was carried by a regional newspaper a couple of days ago saying that the State will nearly realize the targeted financial investment for the Eleventh Five Year Plan and there would be a nominal shortfall of about Rs. 373 crore against the original approved plan size of Rs. 13,778 crore for 2007-12 period. It is stated that the aggregate of the approved outlays/actual expenditure for the years for which such data is available would come to Rs. 13,405 crore and thus there would be a curtailment in the size of about 3 per cent.

This picture is far drawn from truth. The approved plan size of Rs. 13,778 crore for 2007-12 period was determined at the base year prices for 2006-07. The aggregate of the investment amounting to Rs. 13,405 crore is at nominal prices or in common parlance at the current prices for the respective years, and not at the base prices. For any comparison to be meaningful, it is necessary that the realised sizes of the five annual plans are deflated to the base year by using deflators based either on the increase in the index of wholesale prices annually or the increase in the consumer price index numbers for industrial workers annually which generally represent inflation based on either of the indices. The data on the inflation rates based on WPI or the CPI for industrial workers and the real investment estimates for the Eleventh Plan for Himachal Pradesh are depicted in the following table:-

(Rs. crore)

Sources : Economic Survey of India 2011 for inflation rates; and Government of HP data for actual expenditure for 2007-08 and 2008-09 and approved outlays for 2009-10, 2010-11 and 2011-12.

Notes:

1. @ This represents the actual expenditure or the approved outlays for the respective years as per the available data.
2. * This is the average figure for April-December data actually available
3. ** This is the assumption for inflation rate taken for the purpose of writing this note for the year 2011-12.

The above data clearly reveals that in real terms (at the base prices of 2006-07) the actual investment against the original plan size of Rs. 13,778 crore comes to Rs. 11,023 crore when the nominal outlays are adjusted against the inflation rate based on the wholesale price indices; and to Rs. 10,217 crore when the nominal outlays are adjusted against the inflation rate based on the consumer price indices for industrial workers. These represent a shortfall of 20 per cent against the original outlay and 26 per cent of the original outlay, respectively and not the 3 per cent as reported in the print media. This level of financial investment erosion in the Plan is certainly going to impact the physical content of the Plan, which is a matter of further analysis and detailed examination after the actual data become available.

DK Sharma is an economist, who retired as Principal Secretary Planning – Government of Himachal Pradesh.

DK Sharma

Devinder Kumar Sharma, a former Principal Adviser and Secretary Planning, Government of Himachal Pradesh, is a visiting professor and an economist. He lives in Shimla.