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SUMMARY RECORD OF DISCUSSIONS OF THE NATIONAL DEVELOPMENT COUNCIL (NDC) MEETINGS Five Decades of Nation Building (Fifty NDC Meetings) Vol - V (45th to 50th Meetings) GOVERNMENT OF INDIA PLANNING COMMISSION Please Note: Every effort has been made to ensure that the contents of this publication, which has been compiled for making available at one place the Record of Discussions the fifty Meetings of the National Development Council, are as accurate as possible. However, considering that this voluminous publication has been brought out from the Records, some of which are very old, users are requested to refer to the original text in case of any doubt/dispute. CONTENTS 45th Meeting of NDC ...................................................................................................... 1 46th Meeting of NDC .................................................................................................... 31 47th Meeting of NDC .................................................................................................... 79 48th Meeting of NDC .................................................................................................. 137 49th Meeting of NDC .................................................................................................. 219 50st Meeting of NDC................................................................................................... 357 FORTY FIFTH MEETING OF THE NATIONAL DEVELOPMENT COUNCIL APRIL 5, 1993 SUMMARY RECORD GOVERNMENT OF INDIA PLANNING COMMISSION Forty Fifth NDC Meeting SUMMARY RECORD OF THE DISCUSSIONS HELD AT THE FORTY FIFTH MEETING OF THE NATIONAL DEVELOPMENT COUNCIL (NDC) AGENDA & SUMMARY RECORD The National Development Council held its forty fifth meeting at Parliament House Annexe, New Delhi on 5th April, 1993, under the Chairmanship of Shri P.V. Narasimha Rao, Prime Minister, and Chairman of the Council. 2. The list of participants is appended. 3.1. Shri Pranab Mukherjee, Deputy Chairman, Planning Commission welcomed the participants and apprised them of the main agenda item, namely, the Report of the Committee on Austerity set up under the Chairmanship of Shri Biju Patnaik, Chief Minister of Orissa, in pursuance of the decision taken by the National Development Council at its forty-third meeting held in December, 1991. to examine the possibilities of reducing State Governments’ expenditure. He informed the Council that though the Report of the Committee on Austerity would be the main item on the agenda for consideration and approval, reports of the three other NDC Committees, viz., Committees on Population, Employment and Literacy were also being presented for consideration by the NDC. Keeping in view both the amount of work put in by these Committees and the many valuable recommendations made by them on the critical areas of population, employment and literacy, he requested the Council to consider these Reports also subject to the availability of time and authorise the concerned administrative Ministries/Departments to initiate action for implementing the recommendations contained in them. He also requested the members to convey to the Planning Commission in writing their views and suggestions so that they could be placed before the NDC in its next meeting. 3.2. The Deputy Chairman observed that the Hon’ble Members of the Council were aware of the constraints relating to resource mobilisation for economic development, especially in the context of economic liberalisation and the need to compete in a world where quality and cost assumed immense importance. He also referred to the compelling need to strengthen infrastructure and ensure a fair deal to the rural population. Both of these have reinforced the need for adopting austerity measures to contain unproductive non-developmental expenditure. Referring to the recommendations for effecting austerity in government expenditure made by the Committee on Austerity after indepth research into various aspects of the increase in state governments’ expenditure and its components, Deputy Chairman pointed out that adoption of these recommendations would go a long way in releasing resources for the much needed developmental work. In this context he invited Hon’ble Members’ attention to the observation made by the Austerity Committee on the role of both the Centre and the State governments in the task of containing non developmental expenditures. He also referred to the problems of special category states and urged them to abide by the spirit of the Austerity Committee’s recommendations. 3.3. The Deputy Chairman pointed out that the States’ Balance from Current Revenues (BCR) for the year 1992-93 amounted to (-) Rs. 4490 crores. The share of special category states, which 1 Summary Record of Discussions of the NDC Meetings was ignored for plan financing, amounted to (-) Rs.1542 crores. However, the latest estimates in respect of some non-special category states for 1992-93 have indicated improvement in BCR as a result of the measure for Additional Resource Mobilisation as well as economy in expenditure taken by them. While considerable improvement in the availability of resources for plan was noticed in the case of such states, the BCR registered deterioration in some other states, with consequent shortfall in plan outlays despite the provision of central support as per commitments. Determined efforts for cutting down non-plan revenue expenditure, therefore, assumed utmost urgency in such states. 3.4. He also invited the attention of the participants to the 1993-94 Budget proposals of the states and observed that the Planning Commission has the opportunity to examine some of the proposals. Recalling the Annual Plan discussions, he pointed out that the states had committed for ARM amounting to Rs. 7073 crores in 1993-94, which included resource mobilisation by state level public enterprises and the impounding of DA. However, a substantial sum was to be raised through Budgetary measures. Analysis of the available details in respect of 13 non-special category states showed that the ARM measures in the budget proposals amounted to Rs. 720 crores only. The inevitable consequence of such a serious shortfall would be a sharp fall in developmental expenditure which, in turn, would result in deceleration of economic growth. In view of such serious repercussions, the Deputy Chairman expressed anxiety that India’s Economic Reforms Package would be in jeopardy and India would find it extremely difficult to manage her BoP position. Keeping in view the socio-economic tensions likely to result from such a situation, he pointed out that India had no alternative but to make a determined effort to step up resource mobilisation efforts and trim the nonplan revenue expenditure to the barest minimum. 3.5. He, however, noted the need for caution to ensure that austerity measures would not be confined to budgetary cuts, which would one day leave money only for payment of salaries to government employees. He therefore emphasised the need for reducing the number of employees in Central as well as State Governments by at least 10 per cent during the Eighth Plan period. In this context, he observed that if the formula based (index-linked) D.A payments continued, the states would require additional amount of Rs. 40,000 crores during the Eighth Plan. He added that with an approved Eighth Plan Outlay of Rs. 4,34,100 crores including Rs. 1,79,985 crores for the states, a substantial improvement in the BCR of the order of Rs. 7,000 crores per annum for the Centre and States would be required to avert any erosion in the approved Eighth Plan outlay. 3.6. Recapitulating the work done by the Committee on Austerity the Deputy Chairman informed the participants that during the period 1984-85 to 1990-91 the Non-Plan Revenue Expenditure (NPRE) of the 15 non-special category states grew by 17.0% whereas their revenue (including all grants from Centre) grew only by 15.1%. He then referred to the major components of Government expenditure, viz., administrative expenditure, direct and indirect subsidies, and observed that among the non-special category states, all except Maharashtra, Orissa and Rajasthan registered increase in administrative expenditure as a percentage of total revenue. In view of the utmost need for economy in expenditure, the Deputy Chairmen, exhorted all the states to bring down the ratio of non-plan revenue expenditure to total revenues by at least 5 percentage points during the Eighth Plan period, as recommended by the Committee on Austerity. 3.7. In regard to the expenditure on subsidy, which covers different items of public services, including budgetary support for the state enterprises, he observed that only 17 per cent of the cost of providing social and economic services could be recovered from the users of these services. For obvious reasons, the recovery rate in the case of social services is lower than that in the case 2 Forty Fifth NDC Meeting of economic services. As regards additional resource mobilization, it is necessary to revamp the public distribution system, introduce suitable adjustments/revision in electricity tariffs, irrigation rates, bus fares, and the fees for higher education on the lines recommended by the Austerity Committee. 3.8. As for the other major sources of increase in the Non-Plan Revenue Expenditure, the Deputy Chairman pointed out that the proportion of net interest payments in total revenue of the states nearly doubled from 4.4% in 1984-85 to 8% in 1989-90, and added that such growth in interest