longer-term perspective, can have only severe adverse consequences for growth prospects of the Indian economy on healthy lines and socially equitable basis. At the meeting of the new finance minister which he recently held with a group of prominent economist, the question was posed whether the government had any option but to make a drastic cut in the plan outlay in the current year. The economists pleaded that a cut in the plan outlay should be avoided to safeguard the plan targets. The fact, however, is that, given the strained resources position, sharp cuts in plan outlay not only in the current year, the third year of the Seventh Five-Year Plan, but also in the coming year seem inevitable. If the earlier estimates of the official planners were that 85 per cent of the outlay postulated in the Seventh Five-Year Plan will be realised in real terms, it now appears, with inflation rocking the economy and diversion of resources in the hands of the government to meet the current contingency, that the Seventh Plan outlay in real terms may turn out to be not more than 75 per cent of the plan target. Combined with a sharp deterioration in the balance of payments position, the economic prospects indeed appear to be grim What is in the offing is really a tragic slide down from a comfortable position during the first two years of the plan when the government was able to find, in spite of generous fiscal concessions to upper and middle income brackets, sufficient resources by deficit financing and market borrowing for investment equal to 40 per cent of the plan outlay. This was possible in the conditions of an upswing in the economy in the wake of the new peak in agricultural production attained in 1983-84. The budget for the current year had hopefully provided for 20 per cent more of plan outlay so that by the end of the third year of the plan, 60 per cent of the planned outlay would be realised. This could be a commendable performance in plan implementation but this is not now likely to materialise. The progress of plan implementation looks like coming to a grinding halt with prospects blighted for a return to the growth path of an annual average of 5 per cent realised in the first two years of the plan. What is now on the cards is that the Seventh Five-Year Plan too will end up with what the late Professor Raj Krishna dubbed as the hindu rate of growth of 3.5 per cent. Since this low level of growth also suffers from serious distortions because of a marked tilt in favour of the tertiary sector in its composition, the Indan economy will be even more vulnerable and its growth potential weaker at the end of the Seventh Five-Year Plan than it was at its start. The prospects for the Eighth Plan are, therefore, bleak, especially because the Seventh Five-Year Plan itself, in spite of fanciful talk of a march to the twenty-first century, was conceived without any longer term perspective and advance action for the Eighth Plan was not provided for in its formulation. There can be no skirting in these conditions of the need for additional resource mobilisation effort which is non- inflationary and.progressive. There has been some cursory and fanciful talk of more indirect taxes on luxury items. But with any idea of directly taxing the incomes and wealth of urban as well as rural upper and middle classes ruled out as politically and socially unacceptable, a meaningful and adequate resource mobilisation effort on sound lines is bound to remain weak and stilted. The government, already embroiled in many controversies and its credibility gravely eroded, is really on the horns of many dilemmas in the management of the economy as well as of the polity.
