Lack of consensus in coalition can hurt India's growth: Montek

As the country faces the possibility of a fractured mandate after the 2014 general elections, Planning Commission Deputy Chairman Montek Singh Ahluwalia is of the view that in an era of coalition governments, special steps are needed to build consensus around policies or else, India will not be able to grow at its full potential.

Talking to Business Standard recently, Ahluwalia said precisely because of this reason, the 12th Five-Year Plan, for the first time, projected three growth scenarios over the five years, instead of having one consistent target. The scenarios are of an average growth of eight per cent over the five-year Plan period, 6-6.5 per cent and 5-5.5 per cent.

"Many people think we have moved into a period when no single party will get a clean mandate. I am not an expert on voting behaviour, but if the result is coalition governments, then special steps are needed to build a consensus around sensible policies," Ahluwalia said. His comments assume significance in the likelihood of a fractured mandate in the coming general elections.

By the time the mid-term appraisal of the 12th Plan (2012-13 to 2016-17) gets over, a new government will be at the Centre, hence the onus will be on it to implement that, he added.

Ahluwalia also said achieving an average annual growth rate of eight per cent over the Plan period might not be possible unless there was a strong growth in the last two years of the Plan period as growth rate had been lower than expected in the first two years. "It’s quite clear that in the first two years, the growth rate is low, and so in all probability, getting to our target of an average eight percent in the five-year period may not be possible. But we should put the economy on the eight per cent path by the end of the Plan period." 

On the expected challenges for the commission while finalising the Plan performance in the mid-term, Ahluwalia said demand for power would be lower than projected, but coal production targets should not be lowered because the 12th Plan assumed that demand would outstrip supply, leading to larger coal imports. 

"I can assure you that if the policies recommended by the Planning Commission in the 12th Plan are implemented, we will get back to eight per cent. But if the right policies are not followed, we must accept a poorer outcome."