Financing the eighth plan c.1

Various preliminary exercises on the Eighth Plan have brought into sharp focus the challenges of plan financing. Until the plan document is formally adopted by the National Development Council, we will remain in the dark about the financial magnitude of the plan. As of now, a broad consensus has emerged on a growth rate of 6 per cent annually during 1990-95 and a total plan investment of Rs. 650,000 crores at 1989-90 prices. But, between now and when the Council endorses the plan doc ument, anything can happen. There are many a slip between the cup and the lip, wrote Keynes in his General Theory though in an entirely unrelated context. But, this needs recalling considering that the Eighth Plan is ultimately the respon sibility of the Government to be formed at the Centre after the 1989 Lok Sabha elections.

The book "Financing the Eighth Plan" throws up several issues bearing on the resources effort for the Plan. Deficit financing has over successive plan per iods become an important component of the plan but there are limits to its role during 1990-95. The final award of the Ninth Finance Commission and its adop tion of a normative approach to receipts and expenditure of the Centre and States alike will have some impact on plan financing. The book concludes by asking whether instead of coping with a perpet ual resources crunch we should not think of a freeze on investment growth.