New Delhi: One of the biggest challenges for the next government will be to resolve problems of the urban poor who have not benefited from poverty alleviation schemes and are reeling under high prices, a senior official said.
"The urban poor are the most squeezed section of society due to high inflation rate in the past years. It is a big challenge before any government to deal with the situation. There was a lot of talk on this issue for the past five years but nothing substantial has been done so far," National Statistical Commission Chairman Pronab Sen said.
According to Sen, the rural poor were insulated from the impact of higher commodity prices by schemes such as the employment guarantee programme, which were not available for the poor living in cities.
The rural poor have easier access to food grains, vegetables, fruits, poultry and milk at reasonable prices, but those in the urban areas have to pay market prices for them. Sen said due to the rise in prices of agriculture produce, the rural poor benefited and their income went up, while the slowdown in industrial activity caused job losses and income erosion in urban areas.
During April-February, the index of industrial production, a measure of factory activity, declined 0.1 per cent compared with a 0.9 per cent growth in the corresponding period of 2012-13. Retail inflation measured in terms of the Consumer Price Index increased to 8.31 per cent in March from 8.03 per cent in February, mainly on account of vegetables, fruits, pulses, milk, spices, and egg, fish and meat.
Inflation as measured by the Wholesale Price Index increased to 5.7 per cent in March from 4.68 per cent in the previous month. Inflation for primary food articles for March increased to 9.9 per cent from 8.12 per cent in the previous month mainly on account of increase in prices of moong, urad, vegetables, fruits, milk and fish. Sen was of the view that wages in cities have not increased in tandem with retail inflation because industry uses WPI inflation for assessing its productivity and profitability.
Retail inflation remained in the range of 8 to 11 per cent since March last year, whereas WPI was between 4.5 and 7.5 per cent, leading to a mismatch between industry's assessment of profitability and workers' demand for an increase in wages.
Sen said that the other key challenge for the new government would be to push new projects worth Rs 2 lakh crore. "All those projects with gestation periods of four to five years would take off only when the investor is assured and clear about the government's policies. However, projects with a gestation period of up to one-and-a-half years would anyway take off," Sen said.
According to Sen's assessment, the economy is not in that bad a shape as it is made out to be because there is ample growth in factory activity in the unorganised sector, which is reflected in gross domestic product (GDP) data and not in the Index of Industrial Production.
He is of the view that the economy can touch an annual average growth rate of 7 per cent in the 12th Five-Year Plan (2012-17) as against the targeted 8 per cent. However, he feels India can achieve the 8 per cent mark in the terminal years of the 12th Plan. Advance estimates of the Central Statistics Office (CSO) show the economy is expected to grow at 4.9 per cent in 2013-14.
The economy expanded 4.5 per cent in 2012-13, the first year of the Plan period. In the current financial year, economic growth is projected at 5.5 per cent. Sen said that to achieve an annual average growth rate of 8 per cent in the 12th Plan period, the economy would have to expand at over 12 per cent in 2015-16 and 2016-17, which is very difficult. Asked if the new government can make changes in the 12th Plan document during the mid-term review expected in October, he said, "They can prioritise the issues or areas of operation but making major changes in the 12th Plan is difficult."
Asked about commodity prices, given the forecast for a below-normal monsoon because of the El-Nino effect, Sen said, "Prices were rising even when we had good stocks of food grains in the past several years. If we are going to sit idle on stocks and do nothing, then nothing can be done about rising prices. It is premature to talk about the monsoon's effect on prices."
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