Macroeconomic Modelling of Emerging Scenarios for India’s Twelfth Five-Year Plan

Abstract

India’s 12th Five-Year Plan (2012–13 to 2016–17) emphasises ‘faster, sustainable and more inclusive growth’. The GDP growth target for the Plan was initially fixed at 9 per cent and later revised to 8 per cent against the backdrop of significant contraction of domestic output during the first two years of the Plan period. The Plan document has set a target of achieving a 2 percentage point reduction in poverty per annum. However, the document has cautioned that achieving the revised growth target also needs special efforts and structural reforms in the economic, social and political systems. For the first time, the Planning Commission has proposed to work on ‘scenario planning’ for the 12th Plan. It has proposed three scenarios: ‘The Flotilla Advances’, ‘Muddling Along’ and ‘Falling Apart’. The main thrust of scenario analysis is to highlight the need for specific interventions in policy to achieve the goals of the Plan. Using the macroeconometric model developed by the National Council for Applied Economic Research (NCAER) in India, the study finds that GDP growth rate will decline significantly under the Falling Apart scenario compared with the other two scenarios. As a result, poverty reduction is expected to be marginal under this scenario. The Falling Apart scenario will also lead to an unsustainable fiscal and current account deficit situation over the medium term. The other important finding of the study is that investment in social infrastructure (education and health) and physical infrastructure would not only achieve higher economic growth but also sustain it in the long term and both infrastructures have a similar impact on growth.

JEL Classification: B22, O21, E37

Keywords

Macro Modelling Forecasting Five-Year Plan Indian Economy

1. INTRODUCTION

India’s overall economy grew at an annual average rate of 7.7 per cent during the 10th Five-Year Plan (2002–03 to 2006–07), which was a substantial improvement over the 5–6 per cent growth rate during the 1990s. But it was felt that the higher growth was not sufficiently inclusive (Planning Commission, 2007: 1).¹ The incidence of poverty (Headcount Ratio, HCR) reduced by only by 0.76 percentage points annually during this Plan. In view of these concerns, the 11th Five-Year Plan (FYP) emphasised achieving ‘faster growth with more inclusiveness’. The Planning Commission had set an ambitious annual GDP growth target of 9 per cent and a reduction in the HCR by 10 percentage points during the Plan period (2 percentage points per year). The economy, however, actually expanded by only 8.1 per cent during the Plan period, owing to a severe slowdown and its effects during 2008–09 and 2011–12 following the crisis (Government of India, 2013).² The National Sample Survey Organisation (NSSO) consumer expenditure data available for the end period of the 11th FYP shows that poverty declined by 15 percentage points between 2004–05 and 2011–12, an average of 1.88 percentage points per annum in eight years.³ In other words, this suggests that the poverty reduction during the 11th FYP was presumably close to the target of 2 percentage points per annum and more than double the rate achieved in the previous Plan.

Continuing with the objective of achieving ‘faster growth with more inclusiveness’, the Planning Commission’s Approach Paper for the 12th Five-Year Plan (2012–13 to 2016–17) pointed to a new vision of ‘faster, sustainable and more inclusive growth’ (Government of India, Planning Commission, 2013). All three dimensions have synergies and are systemically interlinked. Higher and sustainable growth will provide the required fiscal space to the government to allocate resources in areas where the country has been lagging in development. Development resources are needed in wide-ranging areas such as health and education, infrastructure, energy, management of natural resources and ensuring better implementation and improved accountability. India continued to perform poorly in health and education. As per the UN Human Development Report (2011): Sustainability and Inequality India’s position was 134 out of 187 countries on the Human Development Index (United Nations Development Programme, 2011). The Planning Commission, Government of India (2011) estimates that India’s labour force is expected to expand by 32 per cent over the next 20 years in contrast to a decline in China and other developed countries. This ‘demographic dividend’ will raise the potential for economic growth. However, this outcome is not possible without enhancing health, education and skill development. Some experts think that there is a possibility of the ‘demographic dividend’ becoming a ‘demographic curse’ if India falls into the ‘lower-middle income trap’.⁴

Compared to the period of the pre-1990s, the private corporate sector has expanded and is playing a bigger role in driving India’s economic growth. The policy and institutional framework across many sectors has also experienced significant changes to meet the present needs and challenges. The Indian economy is now more integrated with the rest of the world and positive or adverse developments in other countries or regions have repercussions on the domestic economy. The East Asian crisis in 1997–98 and the global financial crisis in 2008–09 are examples of such impact felt in varying degree.

India’s quest for high economic growth stumbled post-2008–09. Although continued uncertainty in the global economy after its collapse since 2008 has played an important role in India’s growth slowdown, the role of domestic factors also remains important. The investment climate turned unfavourable. The ratio of Gross Fixed Capital Formation (GFCF) to GDP was 28.5 per cent in 2013–14 (advance estimates) compared with 32.9 per cent in 2007–08 (Government of India, Ministry of Finance, 2014).⁵ Domestic savings, which enable investment, have also witnessed significant decline due to persistent high inflation since 2008, with a drop from 36.8 per cent in 2007–08 to 30.8 per cent in 2011–12 (Government of India, 2013). Higher government spending during the crisis period led to the recovery of growth in the immediate year following the crisis of 2008–09 but could not sustain the high growth subsequently. The post-crisis period has experienced significant mismatch between the demand and domestic supply of goods and services and the rising cost of living. Demand rose owing to increased government expenditure on programmes that generated rural employment and tax breaks that stimulated demand, but the supply side was interrupted due to drought, inefficient distribution systems and a weakened investment climate. Sectors sensitive to the interest rate witnessed a deceleration of output growth due to high interest rates, which emerged to keep the inflation rate from rising further. Other factors, such as non-availability of land for projects in a timely manner and environmental concerns, led to delays in the initiation of new investment projects.

The major challenge ahead for the economy is to revive economic growth, which remained below 4.5 per cent in 2012–13 and below 5 per cent in 2013–14, the lowest since 2003–04. India adds 1.5 million people to its labour force every year. Without higher growth and employment generation, there will be social distress. Recognising that the growth rate will be low during the first two years of the 12th Plan period, with uncertainties prevailing in both the domestic and external sectors, the Planning Commission scaled down the GDP growth target to 8.0 per cent for the 12th FYP period from its initial target of 9 per cent (Planning Commission, 2013).⁶ However, the Commission has cautioned that achieving the revised target also needs special efforts. The 8–9 per cent annual GDP growth is not a ‘business as usual’ scenario and it would be difficult to sustain it without key structural reforms in the country’s economic, social and political systems.

In contrast to the earlier Plans, the Planning Commission proposed to work on ‘scenario planning’ for the 12th FYP. The Plan document has specified three scenarios: ‘Flotilla Advances’ or ‘Strong, Inclusive Growth’; ‘Muddling Along’ or ‘Insufficient Action’; and ‘Falling Apart’ or ‘Policy Logjam’. The purpose of scenario analysis is to highlight the need for specific interventions in policy to achieve the main goals of the Plan.

In this context, the present study makes an attempt in formulating growths scenarios for the Plan under alternative policy directions. The analysis of the three alternative scenarios noted earlier has been set in an economy-wide or macroeconomic framework. The pace and pattern of inclusion, GDP growth and government finances are three important outcome variables addressed in this framework. The macroeconometric model used in the analysis provides an assessment of these dimensions of the economy over the medium term.

2. EMERGING SCENARIOS

The Planning Commission, in its report Shaping India’s Future has specified three scenarios: ‘The Flotilla Advances’, ‘Muddling Along’ and ‘Falling Apart’. These scenarios were later incorporated into the draft Twelfth Plan under the official names of ‘Strong, Inclusive Growth’, ‘Insufficient Action’ and ‘Policy Logjam’. We have retained the original names here as they convey the differences across scenarios more clearly. The key points articulated under the three scenarios in the Twelfth FYP document (Planning Commission, 2013) are highlighted below:

Scenario 1: The Flotilla Advances

This is the future of an India with a federal governance system in which the wheels begin to mesh more smoothly, and local governance institutions and small enterprises are nurtured and grow effectively. Livelihood opportunities, along with community-based solutions and enterprises for addressing environmental issues, are seen to be emerging.

Scenario 2: Muddling Along

In this scenario the economy requires strong reforms, and some reforms are initiated. However, these reforms may not address core governance issues, and therefore, are not effective. Centralised government systems struggle with demands for decentralisation. Small enterprises are sought to be encouraged, but the agenda of big business dominates. The policy conflict between subsidies and the financial stability of the economy remains unresolved.

Scenario 3: Falling Apart

This scenario is a result of India remaining stuck in a centralised governance system in the face of demands for devolution by centralised mega-schemes and projects, and ‘redistribution’ of wealth is sought to be achieved through a system of ‘handouts’ and subsidies. The impatience and political logjam that result put India under severe stress.

3. KEY FEATURES OF THE NCAER MACROECONOMETRIC MODEL

The present analysis is based on incorporating additional features into the macroeconometric model developed at the NCAER in previous years and updating the model for more recent data. Details of model structure, estimated equations and variables are documented in the Appendices.

The key features of the model are:

At the sectoral level, output is determined by capital stock and demand conditions. Investment adds to capital stock; productivity improvements affect output from a given level of capital stock; and demand influences capacity utilisation, and therefore, output. Labour does not appear in output determination, essentially reflecting that availability is not a constraint to the expansion of output.

Improvement in productivity is captured through: (i) physical infrastructure development and (ii) human capital development (health and education). It is important to note here that total factor of productivity is not directly estimated in the model, but is captured indirectly through improvement in both physical and human capital infrastructure. Government expenditure, which drives both physical and human capital, is exogenously specified in nominal terms in the model. The effect of these productivity influencing factors varies from sector to sector. The estimated relationships in this analysis show that productivity improvement through physical infrastructure is greater in the case of manufacturing than services other than transport, storage and communication; it is the opposite in the case of human capital improvement. These two sources of productivity improvement have been specified in the output determination of the manufacturing sector and in the sector ‘services other than infrastructure’. Infrastructure includes two National Accounts Statistics (NAS) sectors: (i) transport, storage and communication and (ii) electricity, gas and water supply.

Prices are estimated at the sectoral level, which are then aggregated to provide overall measures of inflation. In the case of agriculture, prices are estimated at further disaggregated levels and then aggregated to get the overall agricultural price. Sectoral prices are influenced by the administered prices, international prices and monetary variables.

The model has an exogenously specified exchange rate. The interest rate is sensitive to exchange rate depreciation, the external interest rate and domestic inflation.

Inflation will have an impact on the interest rate, which will, in turn, affect interest payments and sustainability of the fiscal position. A higher fiscal deficit-to-GDP ratio would negatively affect private investment and growth.

One aspect of the inclusive growth dimension has been characterised by the link between output growth, the sectoral composition of overall output growth and incidence of poverty. However, the model has no feedback from poverty incidence to growth.

The model captures the impact of a reduction in petroleum sector subsidies on the overall GDP and inflation through two channels: removing the price subsidy burden on the oil industry will improve investment by the oil industry and, hence, growth. On the other hand, higher oil prices will lead to higher inflation if there is no further investment.

The estimated equations for private investment were not able to capture fully the impact of the global crisis of 2008–09 and the more recent slowdown in the economy in 2012–13. In order to reflect actual growth conditions in the model, we have adjusted the estimated intercept in the private investment equation in 2012–13 and 2013–14. This adjustment has been retained in all three scenarios.

The schematic view of the sectoral links among the variables is depicted in Figure 1.

Figure 1

Schematic View of the Macroeconometric Model

4. SCENARIO ANALYSIS USING A QUANTITATIVE ECONOMIC MODEL

In this section, we present the results of each scenario separately. These results are based on the specifications of exogenous and policy variables. The exogenous variables have been specified to derive the outcome of endogenous variables. The future values of the exogenous variables are determined from their past trends and judgement of the alternative paths for these variables. We have taken the average growth rate in the past five to ten years as an initial specification for each exogenous variable, which would then be respecified to be consistent with the three alternative scenarios being examined.

4.1 The Flotilla Advances

This is an optimistic scenario under the assumption that the government continues to drive key structural policy reforms and their effective implementation. Decentralisation and good governance policies will improve the efficiency of the public delivery system and address supply-side bottlenecks. These are qualitative perceptions and it is difficult to quantify and capture their full impact on macroeconomic parameters. Instead, we have identified a few quantitative variables to capture these positive impacts indirectly. We assume that in a positive policy environment, the investment climate would also be positive. There will be significant net capital inflows and healthy growth in private investment, both being drivers of economic growth. Reforms in oil, fertilisers and other key sectors would reduce the subsidy burden and improve the fiscal position of the government. The government could divert part of these fiscal savings towards creating productive assets, including enhancing human capital. Improving the quality of health and education is seen as an important instrument for improving productivity. Our analysis shows that a one rupee investment in human capital or in physical infrastructure generates very similar growth impacts.

We assume improved global conditions in terms of GDP growth in the world economy and stabilisation of international oil and non-oil commodity prices. These assumptions are based on the projections of the World Economic Outlook (International Monetary Fund, 2012).

As per IMF estimates (IMF, 2012), prices of oil and non-oil commodities were expected to remain low in 2013 compared with 2012, leading domestic oil and manufacturing prices to remain stable in 2013. Concerns remain for the prices of agricultural commodities, which depend upon agricultural output and effectiveness of the food distribution system.

The exchange rate of the rupee depreciated on average by 2 per cent against the US dollar in 2009–10 and 2011–12. Since GDP growth is expected to remain low during the first two years of the 12th Plan period, there will be upward pressure on the rupee. We assume 1.5 per cent depreciation of the rupee against the US dollar from 2013–14.

The BSE Sensex recorded a significant growth of 26 per cent between 2004–05 and 2008–09, which was a period of high economic growth of around 9 per cent in India. In contrast, during the crisis years (for example, in 2008–09 and 2011–12), there was a large decline. Accordingly, we have assumed a nominal growth of 5 per cent in 2013–14 and a higher growth of 10 per cent thereafter.

In the case of agriculture, we assume rainfall to remain normal (long-run average) from the second year of the 12th Plan. We also assume that the irrigated area will increase by 2 per cent per year.

Consistent with the earlier combination of exogenous variables, under this optimistic scenario we expect the investment climate to improve compared with the crisis years. Public investment, which is basically policy-determined, is expected to increase in nominal terms by 15 per cent in Agriculture and allied sectors and 14 per cent in the non-agriculture sectors. Foreign direct investment and net invisible receipts are expected to remain low in the first two years of the Plan period and to improve thereafter.

As per the medium-term fiscal strategy of the central government, the fiscal deficit is expected to come down to around 3.6 per cent of the GDP by 2015–16 from the current level of 5 per cent of GDP. We expect that subsidies, particularly oil and fertiliser, will be phased out substantially during the Plan period. We assume that total central government subsidies as a percentage of GDP will decline to around 1.4 per cent by 2016–17 from the current level of 2.57 per cent. In contrast, we expect that allocation of resources to the health and education sectors will improve. The increased allocations to the health and education sectors are expected to improve the quality of human resources and raise GDP growth in the long term.

Fiscal consolidation not only depends on cutting down unproductive expenditure such as subsidies and interest payments, but also on expanding the tax base and improving revenue collection. We expect that the implementation of the Direct Tax Code (DTC) and Goods and Services Tax (GST) will improve tax collection from 2014–15 onwards.

Domestic energy prices are specified to remain stable in 2013–14 and to increase marginally thereafter.

The growth of money supply (M3) declined to around 15 per cent in 2012–13 owing to tight credit conditions to control high inflation. We expect the money supply to ease from 2013–14, which will facilitate private investment. Details of the assumptions on the exogenous/policy variables are given in Table 1.

Table 1
Assumptions for the Exogenous/Policy Variables for the Flotilla Advances Scenario

Variables Unit *2004/05 to 2008/09** *2009/10 to 2011/12** 2012–13 2013–14 2014–15 2015–16 2016–17

Agriculture Related

Rainfall Relative to normal Deficit 8% Normal Normal Normal Normal

Gross irrigated area (million hectares) %YOY 2.5 – 2.0 2.0 2.0 2.0 2.0

Minimum support price for rice %YOY 9.7 8.3 5.0 5.0 5.0 5.0 5.0

Minimum support price for wheat %YOY 12.0 6.0 10.0 8.0 5.0 5.0 5.0

Minimum support price for sugarcane %YOY 2.2 23.8 8.0 8.0 5.0 5.0 5.0

Global Conditions

World GDP (at constant prices) %YOY 3.5 3.0 3.2 3.3 4.0 4.0 4.0

International crude oil price index (US$) %YOY 28.5 0.5 −3.5 −1.0 5.0 5.0 5.0

International non-fuel price index (US$) %YOY 10.8 13.6 0.0 0.0 7.0 7.0 7.0

LIBOR % 3.5 0.2 0.2 0.2 0.2 0.2 0.2

NEER %YOY −1.1 −3.2 −10.1 −0.5 −0.5 −0.5 −0.5

NER (Rs/US$) %YOY 0.0 2.1 13.4 1.5 1.5 1.5 1.5

BSE Sensex %YOY 26.0 11.9 1.3 5.0 10.0 10.0 10.0

Investment Climate

FDI (US$) %YOY 73.9 19.5 −10.0 15.0 20.0 20.0 20.0

NETINV (US$) %YOY 27.3 10.4 15.0 20.0 30.0 30.0 30.0

Public gross fixed capital formation, Agriculture and allied sectors %YOY 23.9 − 15.0 15.0 15.0 15.0 15.0

Public gross fixed capital formation, non-agriculture sectors %YOY 21.2 – 14.0 14.0 14.0 14.0 14.0

Fiscal Account

Subsidies (Centre) (%GDPmp) 1.55 2.13 2.59 2.08 1.80 1.59 1.40

General government expenditure on health and family welfare (%GDPmp) 1.06 1.16 1.21 1.29 1.33 1.43 1.57

General government expenditure on education, art and culture (%GDPmp) 2.70 3.20 3.48 3.78 3.89 4.06 4.26

No. of educational institutions %YOY 3.1 2.0 2.0 2.0 2.0 2.0 2.0

Direct tax collection rate (Centre) %YOY 9.5 −3.3 −1.0 1.0 5.0 5.0 5.0

Indirect tax collection rate (Centre) %YOY −3.0 −0.9 −3.0 1.0 3.0 3.0 3.0

Disinvestment (Centre) (Rs. crore) 9,178 25,809 24,000 40,000 30,000 30,000 30,000

Other Variables

Domestic energy price (WPI) %YOY 6.7 8.1 10.5 5.0 6.5 6.5 6.5

Variables Unit 2004/05–2008/09 2009/10–2011/12 2012–13 2013–14 2014–15 2015–16 2016–17

Agriculture Related

Rainfall Relative to normal Deficit 8% Normal Normal Normal Normal

Gross irrigated area (million hectares) %YOY 2.5 – 2.0 2.0 2.0 2.0 2.0

Minimum support price for rice %YOY 9.7 8.3 5.0 5.0 5.0 5.0 5.0

Minimum support price for wheat %YOY 12.0 6.0 10.0 8.0 5.0 5.0 5.0

Minimum support price for sugarcane %YOY 2.2 23.8 8.0 8.0 5.0 5.0 5.0

Global Conditions

World GDP (at constant prices) %YOY 3.5 3.0 3.2 3.3 4.0 4.0 4.0

International crude oil price index (US$) %YOY 28.5 0.5 −3.5 −1.0 5.0 5.0 5.0

International non-fuel price index (US$) %YOY 10.8 13.6 0.0 0.0 7.0 7.0 7.0

LIBOR % 3.5 0.2 0.2 0.2 0.2 0.2 0.2

NEER %YOY −1.1 −3.2 −10.1 −2.5 −2.5 −2.5 −2.5

NER (Rs/US$) %YOY 0.0 2.1 13.4 2.5 2.5 2.5 2.5

BSE Sensex %YOY 26.0 11.9 1.3 5.0 5.0 5.0 5.0

Investment Climate

FDI (US$) %YOY 73.9 19.5 −10.0 10.0 10.0 10.0 10.0

NETINV (US$) %YOY 27.3 10.4 15.0 15.0 15.0 15.0 15.0

Public gross fixed capital formation, agriculture and allied %YOY 23.9 – 15.0 12.0 12.0 12.0 12.0

Public gross fixed capital formation, non-agriculture sectors %YOY 21.2 – 14.0 10.0 10.0 10.0 10.0

Fiscal Account

Subsidies (Centre) (%GDPmp) 1.55 2.13 2.59 2.09 1.94 1.81 1.69

General government expenditure on health and family welfare (%GDPmp) 1.06 1.16 1.2 1.3 1.3 1.3 1.4

General government expenditure on education, art and culture (%GDPmp) 2.70 3.20 3.5 3.6 3.7 3.8 3.9

No. of educational institutions %YOY 3.1 2.0 2.0 1.5 1.5 1.5 1.5

Direct tax collection rate (Centre) %YOY 9.5 −3.3 −1.0 1.0 3.0 3.0 3.0

Indirect tax collection rate (Centre) %YOY −3.0 −0.9 −3.0 1.0 2.0 2.0 2.0

Disinvestment (Centre) (Rs. crore) 9,178 25,809 24,000 20,000 20,000 20,000 20,000

Other Variables

Domestic energy price (WPI) %YOY 6.7 8.1 10.5 6.0 7.5 7.5 7.5

M3 %YOY 19.1 15.4 15.0 16.0 20.0 20.0 20.0

Variables	Unit	2004/05 to 2008/09*	2009/10 to 2011/12*	2012–13	2013–14	2014–15	2015–16	2016–17
Agriculture Related
Rainfall	Relative to normal			Deficit 8%	Normal	Normal	Normal	Normal
Gross irrigated area (million hectares)	%YOY	2.5	–	2.0	2.0	2.0	2.0	2.0
Minimum support price for rice	%YOY	9.7	8.3	5.0	5.0	5.0	5.0	5.0
Minimum support price for wheat	%YOY	12.0	6.0	10.0	8.0	5.0	5.0	5.0
Minimum support price for sugarcane	%YOY	2.2	23.8	8.0	8.0	5.0	5.0	5.0
Global Conditions
World GDP (at constant prices)	%YOY	3.5	3.0	3.2	3.3	4.0	4.0	4.0
International crude oil price index (US$)	%YOY	28.5	0.5	−3.5	−1.0	5.0	5.0	5.0
International non-fuel price index (US$)	%YOY	10.8	13.6	0.0	0.0	7.0	7.0	7.0
LIBOR	%	3.5	0.2	0.2	0.2	0.2	0.2	0.2
NEER	%YOY	−1.1	−3.2	−10.1	−0.5	−0.5	−0.5	−0.5
NER (Rs/US$)	%YOY	0.0	2.1	13.4	1.5	1.5	1.5	1.5
BSE Sensex	%YOY	26.0	11.9	1.3	5.0	10.0	10.0	10.0
Investment Climate
FDI (US$)	%YOY	73.9	19.5	−10.0	15.0	20.0	20.0	20.0
NETINV (US$)	%YOY	27.3	10.4	15.0	20.0	30.0	30.0	30.0
Public gross fixed capital formation, Agriculture and allied sectors	%YOY	23.9	−	15.0	15.0	15.0	15.0	15.0
Public gross fixed capital formation, non-agriculture sectors	%YOY	21.2	–	14.0	14.0	14.0	14.0	14.0
Fiscal Account
Subsidies (Centre)	(%GDPmp)	1.55	2.13	2.59	2.08	1.80	1.59	1.40
General government expenditure on health and family welfare	(%GDPmp)	1.06	1.16	1.21	1.29	1.33	1.43	1.57
General government expenditure on education, art and culture	(%GDPmp)	2.70	3.20	3.48	3.78	3.89	4.06	4.26
No. of educational institutions	%YOY	3.1	2.0	2.0	2.0	2.0	2.0	2.0
Direct tax collection rate (Centre)	%YOY	9.5	−3.3	−1.0	1.0	5.0	5.0	5.0
Indirect tax collection rate (Centre)	%YOY	−3.0	−0.9	−3.0	1.0	3.0	3.0	3.0
Disinvestment (Centre)	(Rs. crore)	9,178	25,809	24,000	40,000	30,000	30,000	30,000
Other Variables
Domestic energy price (WPI)	%YOY	6.7	8.1	10.5	5.0	6.5	6.5	6.5
Variables	Unit	2004/05–2008/09	2009/10–2011/12	2012–13	2013–14	2014–15	2015–16	2016–17
Agriculture Related
Rainfall	Relative to normal			Deficit 8%	Normal	Normal	Normal	Normal
Gross irrigated area (million hectares)	%YOY	2.5	–	2.0	2.0	2.0	2.0	2.0
Minimum support price for rice	%YOY	9.7	8.3	5.0	5.0	5.0	5.0	5.0
Minimum support price for wheat	%YOY	12.0	6.0	10.0	8.0	5.0	5.0	5.0
Minimum support price for sugarcane	%YOY	2.2	23.8	8.0	8.0	5.0	5.0	5.0
Global Conditions
World GDP (at constant prices)	%YOY	3.5	3.0	3.2	3.3	4.0	4.0	4.0
International crude oil price index (US$)	%YOY	28.5	0.5	−3.5	−1.0	5.0	5.0	5.0
International non-fuel price index (US$)	%YOY	10.8	13.6	0.0	0.0	7.0	7.0	7.0
LIBOR	%	3.5	0.2	0.2	0.2	0.2	0.2	0.2
NEER	%YOY	−1.1	−3.2	−10.1	−2.5	−2.5	−2.5	−2.5
NER (Rs/US$)	%YOY	0.0	2.1	13.4	2.5	2.5	2.5	2.5
BSE Sensex	%YOY	26.0	11.9	1.3	5.0	5.0	5.0	5.0
Investment Climate
FDI (US$)	%YOY	73.9	19.5	−10.0	10.0	10.0	10.0	10.0
NETINV (US$)	%YOY	27.3	10.4	15.0	15.0	15.0	15.0	15.0
Public gross fixed capital formation, agriculture and allied	%YOY	23.9	–	15.0	12.0	12.0	12.0	12.0
Public gross fixed capital formation, non-agriculture sectors	%YOY	21.2	–	14.0	10.0	10.0	10.0	10.0
Fiscal Account
Subsidies (Centre)	(%GDPmp)	1.55	2.13	2.59	2.09	1.94	1.81	1.69
General government expenditure on health and family welfare	(%GDPmp)	1.06	1.16	1.2	1.3	1.3	1.3	1.4
General government expenditure on education, art and culture	(%GDPmp)	2.70	3.20	3.5	3.6	3.7	3.8	3.9
No. of educational institutions	%YOY	3.1	2.0	2.0	1.5	1.5	1.5	1.5
Direct tax collection rate (Centre)	%YOY	9.5	−3.3	−1.0	1.0	3.0	3.0	3.0
Indirect tax collection rate (Centre)	%YOY	−3.0	−0.9	−3.0	1.0	2.0	2.0	2.0
Disinvestment (Centre)	(Rs. crore)	9,178	25,809	24,000	20,000	20,000	20,000	20,000
Other Variables
Domestic energy price (WPI)	%YOY	6.7	8.1	10.5	6.0	7.5	7.5	7.5
M3	%YOY	19.1	15.4	15.0	16.0	20.0	20.0	20.0

Note: We assume that private investment would improve during the last three years of the 12th FYP. *Actuals.

In Table 2, we report the broad macroeconomic indicators under the scenario for the Plan period. Overall GDP at constant 2004–05 prices is projected to grow by an average of 7.8 per cent during the Plan period. Across production sectors, the services sector is expected to register higher growth of 9 per cent, followed by industry growth of around 7.1 per cent and agriculture by 3.3 per cent. The average growth rates across sectors will remain low in the 12th Plan period compared with the previous Plan period, mainly due to a significant contraction in growth during the first year of the 12th FYP. The current and fiscal deficits (central and general government) are expected to decline during the last three years of the Plan period on account of higher net invisibles flow, improved exports and higher GDP growth and tax revenue collection. The investment rate (gross capital formation) is estimated to be round 40 per cent by 2016–17 to achieve higher GDP growth. The poverty headcount ratio would decline by 6.3 per cent during the Plan period (at around 1.26 per cent per annum), which is lower than the 7.7 per cent (provisional) in the 11th Plan due to lower GDP growth.

4.2 Muddling Along

Under this scenario, India would initiate some reform measures to encourage investment. However, the business environment would continue to remain weak, since the reforms may cover only a narrow set of issues. We assume that the external conditions will remain the same as under the Flotilla Advances scenario. However, the net invisible receipts and FDI inflows will remain weak due to domestic policy uncertainty. The capital market (BSE Sensex) will continue to show poor returns in this scenario and there will be greater pressure on the rupee to depreciate against the US dollar. Both the central and state governments will miss the opportunity to control unproductive expenditure.

As a consequence of the slow pace of reforms, total subsidies as a percentage of GDP are assumed to decline at a lower rate from the current level of 2.57 per cent to 1.69 per cent of GDP by 2016–17. This under-performance is the underlying framework for the assumptions of various exogenous variables in the model. The detailed assumptions and changes in exogenous variables under the Muddling Along scenario are highlighted in green in Table 3.

Table 2
Results for the Flotilla Advances Scenario (Baseline) for Major Macroeconomic Parameters during the 12th Plan Period

GDP at 2004–05 Base % YOY Change 2011–12 11th FYP Average 2012–13 2013–14 2014–15 2015–16 2016–17 12th FYP Average

Variables

Real GDP

Agriculture 3.6 3.9 2.0 3.5 3.5 3.7 3.7 3.3

Industry 3.5 7.2 3.9 5.4 8.2 9.0 9.0 7.1

Services 8.2 9.7 6.7 7.7 9.8 10.3 10.5 9.0

Total 6.2 8.0 5.3 6.5 8.6 9.1 9.3 7.8

Exports ($-term) 21.0 20.1 −1.8 11.5 21.9 15.1 15.6 12.4

Imports ($-term) 32.3 22.3 5.0 15.6 20.0 21.6 22.3 16.9

Inflation (WPI) 8.5 6.9 7.2 5.9 5.9 6.0 6.0 6.2

As Percentage of GDP at Market Prices (2004–05 base)

Current account* −4.2 −2.7 −5.1 −4.4 −3.4 −3.1 −3.0 −3.8

Fiscal deficit (Centre) 5.9 5.2 5.4 4.8 4.1 3.5 3.0 4.2

Fiscal deficit (Centre + states) 8.3^$ 7.5^$ 7.8 7.4 6.3 5.4 4.7 6.3

Investment Requirement

Fixed investment rate 30.6 31.8 29.7 30.7 32.8 33.8 34.6 32.3

Investment rate 35.6 36.2 34.0 35.0 37.6 39.0 39.7 37.1

Poverty Ratio**

Poverty (rural) 31.8^$ – 30.6 28.4 28.5 25.0 24.1 27.3

Poverty (urban) 19.3^$ – 19.0 18.5 17.9 17.3 16.8 17.9

Poverty (national) 28.0^$ – 27.1 26.1 24.3 23.0 21.7 24.4

GDP at 2004–05 Base % YOY Change	2011–12	11th FYP Average	2012–13	2013–14	2014–15	2015–16	2016–17	12th FYP Average
Variables
Real GDP
Agriculture	3.6	3.9	2.0	3.5	3.5	3.7	3.7	3.3
Industry	3.5	7.2	3.9	5.4	8.2	9.0	9.0	7.1
Services	8.2	9.7	6.7	7.7	9.8	10.3	10.5	9.0
Total	6.2	8.0	5.3	6.5	8.6	9.1	9.3	7.8
Exports ($-term)	21.0	20.1	−1.8	11.5	21.9	15.1	15.6	12.4
Imports ($-term)	32.3	22.3	5.0	15.6	20.0	21.6	22.3	16.9
Inflation (WPI)	8.5	6.9	7.2	5.9	5.9	6.0	6.0	6.2
As Percentage of GDP at Market Prices (2004–05 base)
Current account*	−4.2	−2.7	−5.1	−4.4	−3.4	−3.1	−3.0	−3.8
Fiscal deficit (Centre)	5.9	5.2	5.4	4.8	4.1	3.5	3.0	4.2
Fiscal deficit (Centre + states)	8.3^$	7.5^$	7.8	7.4	6.3	5.4	4.7	6.3
Investment Requirement
Fixed investment rate	30.6	31.8	29.7	30.7	32.8	33.8	34.6	32.3
Investment rate	35.6	36.2	34.0	35.0	37.6	39.0	39.7	37.1
Poverty Ratio**
Poverty (rural)	31.8^$	–	30.6	28.4	28.5	25.0	24.1	27.3
Poverty (urban)	19.3^$	–	19.0	18.5	17.9	17.3	16.8	17.9
Poverty (national)	28.0^$	–	27.1	26.1	24.3	23.0	21.7	24.4

Notes: *Surplus (+)/deficit (–). $ estimated.

**Based on Planning Commission’s Poverty Line.

Table 3

Assumptions for the Exogenous/Policy Variables for the ‘Muddling Along’ Scenario

Variables	Unit	2004/05–2008/09	2009/10–2011/12	2012–13	2013–14	2014–15	2015–16	2016–17
Agriculture Related
Rainfall	Relative to normal			Deficit 8%	Normal	Normal	Normal	Normal
Gross irrigated area (million hectares)	%YOY	2.5	–	2.0	2.0	2.0	2.0	2.0
Minimum support price for rice	%YOY	9.7	8.3	5.0	5.0	5.0	5.0	5.0
Minimum support price for wheat	%YOY	12.0	6.0	10.0	8.0	5.0	5.0	5.0
Minimum support price for sugarcane	%YOY	2.2	23.8	8.0	8.0	5.0	5.0	5.0
Global Conditions
World GDP (at constant prices)	%YOY	3.5	3.0	3.2	3.3	4.0	4.0	4.0
International crude oil price index (US$)	%YOY	28.5	0.5	−3.5	−1.0	5.0	5.0	5.0
International non-fuel price index (US$)	%YOY	10.8	13.6	0.0	0.0	7.0	7.0	7.0
LIBOR	%	3.5	0.2	0.2	0.2	0.2	0.2	0.2
NEER	%YOY	−1.1	−3.2	−10.1	−2.5	−2.5	−2.5	−2.5
NER (Rs/US$)	%YOY	0.0	2.1	13.4	2.5	2.5	2.5	2.5
BSE Sensex	%YOY	26.0	11.9	1.3	5.0	5.0	5.0	5.0
Investment Climate
FDI (US$)	%YOY	73.9	19.5	−10.0	10.0	10.0	10.0	10.0
NETINV (US$)	%YOY	27.3	10.4	15.0	15.0	15.0	15.0	15.0
Public gross fixed capital formation, agriculture and allied	%YOY	23.9	–	15.0	12.0	12.0	12.0	12.0
Public gross fixed capital formation, non-agriculture sectors	%YOY	21.2	–	14.0	10.0	10.0	10.0	10.0
Fiscal Account
Subsidies (Centre)	(%GDPmp)	1.55	2.13	2.59	2.09	1.94	1.81	1.69
General government expenditure on health and family welfare	(%GDPmp)	1.06	1.16	1.2	1.3	1.3	1.3	1.4
General government expenditure on education, art and culture	(%GDPmp)	2.70	3.20	3.5	3.6	3.7	3.8	3.9
No. of educational institutions	%YOY	3.1	2.0	2.0	1.5	1.5	1.5	1.5
Direct tax collection rate (Centre)	%YOY	9.5	−3.3	−1.0	1.0	3.0	3.0	3.0
Indirect tax collection rate (Centre)	%YOY	−3.0	−0.9	−3.0	1.0	2.0	2.0	2.0
Disinvestment (Centre)	(Rs. crore)	9,178	25,809	24,000	20,000	20,000	20,000	20,000
Other Variables
Domestic energy price (WPI)	%YOY	6.7	8.1	10.5	6.0	7.5	7.5	7.5
M3	%YOY	19.1	15.4	15.0	16.0	20.0	20.0	20.0

Note: We assume that private investment would continue to remain sluggish till 2016–17 as against the baseline assumption of an improved private investment scenario in the Flotilla Advances scenario.

The results of the second scenario are summarised in Table 4. Overall GDP growth is estimated at 6.0 per cent per year for the Plan period, which is a decline of 1.8 percentage points over the Flotilla Advances scenario. The decline in GDP growth comes in the services and industry sectors due to the decline of private investment in these non-agriculture sectors. The Agriculture sector witnesses marginal decline due to the decline of public investment in this sector. There is deterioration of the fiscal deficits in the Muddling Along scenario compared with the Flotilla Advances scenario. The fiscal deficit of the centre has increased to 4.6 per cent of GDP from 4.2 per cent under the Flotilla Advances scenario. The current account deficit (per cent of GDP), however, improves owing to decline in imports that is positively influenced by domestic growth. The investment rate which was 37.1 per cent for the entire Plan period under the Flotilla Advances scenario declines to 35.1 per cent under the Muddling Along scenario. There is less impact on poverty reduction, since the growth effects are smaller. The poverty headcount ratio is projected to decline by 5.2 percentage points during the Plan period under the Muddling Along scenario, which is a decline of 1.04 per cent per annum.

Table 4

Muddling Along Scenario of Major Macroeconomic Parameters during the 12th Plan Period #

GDP at 2004–05 base % YOY change	2011–12	11th FYP Average	2012–13	2013–14	2014–15	2015–16	2016–17	12th FYP Average
Variables
Real GDP
Agriculture	3.6	3.9	2.0	3.5	3.4	3.6	3.5	3.2
Industry	3.5	7.2	3.9	4.8	5.5	5.4	5.9	5.1
Services	8.2	9.7	6.7	6.8	7.3	7.3	7.4	7.1
Total	6.2	8.0	5.3	5.8	6.3	6.3	6.5	6.0
Exports ($-term)	21.0	20.1	−1.8	13.0	23.2	16.5	17.0	13.6
Imports ($-term)	32.3	22.3	5.0	15.0	16.3	16.7	17.3	14.0
Inflation (WPI)	8.5	6.9	7.2	6.4	6.4	6.5	6.5	6.6
As Percentage of GDP at Market Prices (2004–05 base)
Current account*	−4.2	−2.7	−5.1	−4.2	−3.1	−2.8	−2.5	−3.5
Fiscal deficit (Centre)	5.9	5.2	5.4	4.9	4.6	4.3	4.0	4.6
Fiscal deficit (Centre + states)	8.3^$	7.5^$	8.8	7.8	7.1	6.4	6.0	7.2
Investment Requirement
Fixed investment rate	30.6	31.8	29.7	30.0	30.8	31.2	31.6	30.7
Investment rate	35.6	36.2	34.0	34.2	35.0	35.8	36.5	35.1
Poverty Ratio**
Poverty (rural)	31.8^$	–	30.6	29.0	29.0	26.4	25.5	28.1
Poverty (urban)	19.3^$	–	19.0	18.5	18.1	17.8	17.4	18.2
Poverty (national)	28.0^$	–	27.1	26.4	25.0	23.7	22.8	25.0

Notes: *Surplus (+)/deficit (–). $ estimated. **Based on Planning Commission’s Poverty Line. # These results need to be compared over the baseline results.

4.3 Falling Apart

This is the most pessimistic scenario of the three in terms of both economic performance and policy environment. This scenario reflects a situation in which the government is unable to undertake key policy reforms. Subsidy levels are not stabilised. The policy logjam, especially relating to investments, which was witnessed in the later part of the 11th Plan, would continue. Tax revenue growth remains weak and the implementation of key tax policy reforms such as the DTC and GST will be delayed further.

Under this scenario, we assume that total subsidies remain at about 2 per cent of GDP during the 12th Plan period. The allocation of resources in health and education sectors would decline as a ratio to GDP from the current levels due to resource constraints. Public sector investment, both in the Agriculture and non-agriculture sectors, would decline substantially compared with the pre-crisis level.

We assume the external conditions remain the same as under the previous two scenarios. But there will be a further deceleration of foreign direct investment and net invisibles inflow due to policy uncertainty in the domestic economy. The exchange rate will show further depreciation of the rupee against the US dollar owing to weak domestic growth and inflationary conditions. Details of the exogenous/policy assumptions under the Falling Apart scenario are given in Table 5.

Table 5
Assumptions for the Exogenous/Policy Variables for the Falling Apart Scenario

Variables Unit 2004/05–2008/09 2009/10–2011/12 2012–13 2013–14 2014–15 2015–16 2016–17

Agriculture Related

Rainfall Relative to normal Deficit 8% Normal Normal Normal Normal

Gross irrigated area (million hectares) %YOY 2.5 – 2.0 2.0 2.0 2.0 2.0

Minimum support price for rice %YOY 9.7 8.3 5.0 5.0 5.0 5.0 5.0

Minimum support price for wheat %YOY 12.0 6.0 10.0 8.0 5.0 5.0 5.0

Minimum support price for sugarcane %YOY 2.2 23.8 8.0 8.0 5.0 5.0 5.0

Global Conditions

World GDP (at constant prices) %YOY 3.5 3.0 3.2 3.3 4.0 4.0 4.0

International crude oil price index (US$) %YOY 28.5 0.5 −3.5 −1.0 5.0 5.0 5.0

International non-fuel price index (US$) %YOY 10.8 13.6 0.0 0.0 7.0 7.0 7.0

LIBOR In per cent 3.5 0.2 0.2 0.2 0.2 0.2 0.2

NEER %YOY −1.1 −3.2 −10.1 −4.0 −4.0 −4.0 −4.0

NER (Rs/US$) %YOY 0.0 2.1 13.4 4.0 4.0 4.0 4.0

BSE Sensex %YOY 26.0 11.9 1.3 0.0 0.0 0.0 0.0

Investment Climate

FDI (US$) %YOY 73.9 19.5 −10.0 2.0 2.0 2.0 2.0

NETINV (US$) %YOY 27.3 10.4 15.0 10.0 10.0 10.0 10.0

Public gross fixed capital formation, agriculture and allied %YOY 23.9 – 15.0 10.0 10.0 10.0 10.0

Public gross fixed capital formation non-agriculture sectors %YOY 21.2 – 14.0 5.0 5.0 5.0 5.0

Fiscal Account

Subsidies (Centre) (%GDPmp) 1.55 2.13 2.02 2.04 2.06 2.08 2.10

General government expenditure on health and family welfare (%GDPmp) 1.06 1.16 1.2 1.2 1.1 1.1 1.1

General government expenditure on education, art and culture (%GDPmp) 2.70 3.20 3.4 3.3 3.2 3.2 3.1

No. of educational institutes %YOY 3.1 2.0 2.0 1.0 1.0 1.0 1.0

Direct tax collection rate (centre) %YOY 9.5 −3.3 −1.0 1.0 2.0 2.0 2.0

Indirect tax collection rate (centre) %YOY −3.0 −0.9 −3.0 1.0 1.0 1.0 1.0

Disinvestment (centre) (Rs. crore) 9,178 25,809 20,000 10,000 10,000 10,000 10,000

Other Variables

Domestic energy price (WPI) %YOY 6.7 8.1 10.0 6.0 9.0 9.0 9.0

M3 %YOY 19.1 15.4 15.0 16.0 20.0 20.0 20.0

Variables	Unit	2004/05–2008/09	2009/10–2011/12	2012–13	2013–14	2014–15	2015–16	2016–17
Agriculture Related
Rainfall	Relative to normal			Deficit 8%	Normal	Normal	Normal	Normal
Gross irrigated area (million hectares)	%YOY	2.5	–	2.0	2.0	2.0	2.0	2.0
Minimum support price for rice	%YOY	9.7	8.3	5.0	5.0	5.0	5.0	5.0
Minimum support price for wheat	%YOY	12.0	6.0	10.0	8.0	5.0	5.0	5.0
Minimum support price for sugarcane	%YOY	2.2	23.8	8.0	8.0	5.0	5.0	5.0
Global Conditions
World GDP (at constant prices)	%YOY	3.5	3.0	3.2	3.3	4.0	4.0	4.0
International crude oil price index (US$)	%YOY	28.5	0.5	−3.5	−1.0	5.0	5.0	5.0
International non-fuel price index (US$)	%YOY	10.8	13.6	0.0	0.0	7.0	7.0	7.0
LIBOR	In per cent	3.5	0.2	0.2	0.2	0.2	0.2	0.2
NEER	%YOY	−1.1	−3.2	−10.1	−4.0	−4.0	−4.0	−4.0
NER (Rs/US$)	%YOY	0.0	2.1	13.4	4.0	4.0	4.0	4.0
BSE Sensex	%YOY	26.0	11.9	1.3	0.0	0.0	0.0	0.0
Investment Climate
FDI (US$)	%YOY	73.9	19.5	−10.0	2.0	2.0	2.0	2.0
NETINV (US$)	%YOY	27.3	10.4	15.0	10.0	10.0	10.0	10.0
Public gross fixed capital formation, agriculture and allied	%YOY	23.9	–	15.0	10.0	10.0	10.0	10.0
Public gross fixed capital formation non-agriculture sectors	%YOY	21.2	–	14.0	5.0	5.0	5.0	5.0
Fiscal Account
Subsidies (Centre)	(%GDPmp)	1.55	2.13	2.02	2.04	2.06	2.08	2.10
General government expenditure on health and family welfare	(%GDPmp)	1.06	1.16	1.2	1.2	1.1	1.1	1.1
General government expenditure on education, art and culture	(%GDPmp)	2.70	3.20	3.4	3.3	3.2	3.2	3.1
No. of educational institutes	%YOY	3.1	2.0	2.0	1.0	1.0	1.0	1.0
Direct tax collection rate (centre)	%YOY	9.5	−3.3	−1.0	1.0	2.0	2.0	2.0
Indirect tax collection rate (centre)	%YOY	−3.0	−0.9	−3.0	1.0	1.0	1.0	1.0
Disinvestment (centre)	(Rs. crore)	9,178	25,809	20,000	10,000	10,000	10,000	10,000
Other Variables
Domestic energy price (WPI)	%YOY	6.7	8.1	10.0	6.0	9.0	9.0	9.0
M3	%YOY	19.1	15.4	15.0	16.0	20.0	20.0	20.0

Note: We assume private investment will deteriorate due to the policy logjam and anti-business climate as against the assumption of improved private investment in the Flotilla Advances scenario.

In Table 6, we summarise the estimates of key macroeconomic parameters for the 12th FYP under the Falling Apart scenario. The overall annual GDP growth for the Plan period is estimated at 4.8 per cent, a decline of 3 percentage points over the Flotilla Advances scenario. The GDP growth rate declines across all sectors because of a significant fall in investment (both private and public), rising fiscal deficit and worsening external conditions. The country will enter the ‘low-middle income growth trap’. The results also show high fiscal and current account deficits, which are unsustainable, because the debt levels would rise, leading to a greater debt-servicing burden.

The investment rate would decline to below 33 per cent from the 37.1 per cent seen under the Flotilla Advances scenario. A significant decline in GDP growth would also jeopardise inclusive growth, and poverty reduction will be much smaller than in the Flotilla Advances scenario.

5. SUMMARY AND CONCLUSIONS

This study provides a macroeconomic framework to analyse the three alternative scenarios that were described in the Twelfth Five-Year Plan document. Each scenario represents alternative policy paradigms. The study uses an adaptation of an updated version of NCAER’s macroeconometric model to analyse each scenario. The results of key macroeconomic variables under the three alternative scenarios are summarised in Table 7 and Figures 2–4.

The results indicate that GDP growth rate will decline significantly under the Falling Apart scenario compared with the other two scenarios. As a result, poverty reduction is expected to be marginal. The Falling Apart scenario will also lead to an unsustainable fiscal deficit situation over the medium term. The current account deficit shows improvement under the Muddling Along and Falling Apart scenarios compared with the Flotilla scenario for two reasons: first, we assume that external conditions will remain the same under the three scenarios, thereby enabling exports to be unaffected by slower growth, and second, imports decline due to a contraction of domestic output and export earnings are further supported by the depreciation in the exchange rate. However, this is also an unsustainable position, because the underlying weakening of the rupee and lower growth lead to reduced capital inflows.

Table 6

Falling Apart Scenario of Major Macroeconomic Parameters during the 12th FYP#

GDP at 2004–05 Base % YOY Change	2011–12	11th FYP Average	2012–13	2013–14	2014–15	2015–16	2016–17	12th FYP Average
Variables
Real GDP
Agriculture	3.6	3.9	2.0	3.5	3.4	3.5	3.4	3.2
Industry	3.5	7.2	3.9	3.8	3.8	3.8	4.1	3.9
Services	8.2	9.7	6.7	5.2	5.2	5.4	5.7	5.6
Total	6.2	8.0	5.3	4.6	4.6	4.7	5.0	4.8
Exports ($-term)	21.0	20.1	−1.8	13.4	23.5	16.9	17.4	13.9
Imports ($-term)	32.3	22.3	5.0	12.4	13.0	13.6	14.1	11.6
Inflation (WPI)	8.5	6.9	7.2	6.5	7.1	7.1	7.1	7.0
As Percentage of GDP at Market Prices (2004–05 base)
Current account*	−4.2	−2.7	−5.1	−3.9	−2.9	−2.4	−2.2	−3.3
Fiscal deficit (Centre)	5.9	5.2	5.4	5.0	4.8	4.7	4.5	4.9
Fiscal deficit (Centre + States)	8.3^$	7.5^$	8.8	8.1	7.5	6.9	6.3	7.5
Investment Requirement
Fixed investment rate	30.6	31.8	29.7	29.2	28.8	28.1	27.4	28.7
Investment rate	35.6	36.2	34.0	33.8	33.0	32.1	31.3	32.8
Poverty Ratio**
Poverty (rural)	31.8^$	–	30.6	29.3	29.3	28.3	27.4	29.0
Poverty (urban)	19.3^$	–	19.0	18.6	18.4	18.1	17.9	18.4
Poverty (national)	28.0^$	–	27.1	26.8	25.8	25.0	24.2	25.8

Notes: *Surplus (+)/deficit (–). $ estimated. **Based on Planning Commission’s Poverty Line.

# The results need to be compared with the Muddling Along scenario.

Table 7

Summary Results of the Three Alternative Scenarios during the 12th Plan Period

	2011–12	11th FYP Average	2012–13	2013–14	2014–15	2015–16	2016–17	12th FYP Average
Variables
GDP at Constant 2004–05 base (%YOY)
Flotilla Advances	6.2	8.0	5.3	6.5	8.6	9.1	9.3	7.8
Muddling Along	6.2	8.0	5.3	5.8	6.3	6.3	6.5	6.0
Falling Apart	6.2	8.0	5.3	4.6	4.6	4.7	5.0	4.8
Inflation (%YOY, WPI)
Flotilla Advances	8.5	6.9	7.2	5.9	5.9	6.0	6.0	6.2
Muddling Along	8.5	6.9	7.2	6.4	6.4	6.5	6.5	6.6
Falling Apart	8.5	6.9	7.2	6.5	7.1	7.1	7.1	7.0
Current Account*(%GDPmp)
Flotilla Advances	−4.2	−2.7	−5.1	−4.4	−3.4	−3.1	−3.0	−3.8
Muddling Along	−4.2	−2.7	−5.1	−4.2	−3.1	−2.8	−2.5	−3.5
Falling Apart	–4.2	−2.7	−5.1	−3.9	−2.9	−2.4	−2.2	−3.3
Fiscal Deficit (Centre) (%GDPmp)
Flotilla Advances	5.9	5.2	5.4	4.8	4.1	3.5	3.0	4.2
Muddling Along	5.9	5.2	5.4	4.9	4.6	4.3	4.0	4.6
Falling Apart	5.9	5.2	5.4	5.0	4.8	4.7	4.5	4.9
Fixed Investment Rate (%GDPmp)
Flotilla Advances	30.6	31.8	29.7	30.7	32.8	33.8	34.6	32.3
Muddling Along	30.6	31.8	29.7	30.0	30.8	31.2	31.6	30.7
Falling Apart	30.6	31.8	29.7	29.2	28.8	28.1	27.4	28.7
Poverty Ratio National**
Flotilla Advances	28.0^$	–	27.1	26.1	24.3	23.0	21.7	24.4
Muddling Along	28.0^$	–	27.1	26.4	25.0	23.7	22.8	25.0
Falling Apart	28.0^$	–	27.1	26.8	25.8	25.0	24.2	25.8

Notes: *Surplus (+)/deficit (–). $ estimated** Based on Planning Commission’s Poverty Line.

Figure 2

Growth rate of GDP under Three Scenarios for the Twelfth Plan

Figure 3

Fiscal Defcit (% of GDP) of the Central Government under Three Scenarios for the Twelfth Plan

Figure 4

Headcount Ratio of Poverty under Three Scenarios for the Twelfth Plan

Footnotes

MODEL STRUCTURE AND ESTIMATED EQUATIONS

GLOSSARY OF VARIABLES

Sl. No.	Variable List	Description	Type
1	A	Gross Cropped Area (Million Hectares)	Endogenous
2	ACOTTON	Gross Area under Cotton (Million Hectares)	Endogenous
3	AI	Gross Irrigated Area (Million Hectares)	Exogenous
4	AICOTTON	Gross Irrigated Area under Cotton (Million Hectares)	Endogenous
5	AINFG	Gross Irrigated Area under Non-Foodgrain (Million Hectares)	Endogenous
6	AIOILS	Gross Irrigated Area under Oilseeds (Million Hectares)	Endogenous
7	AIOTFOOD	Gross Irrigated Area under Other Food (Million Hectares)	Endogenous
8	AIOTNFG	Gross Irrigated Area under Other Non-foodgrains (Million Hectares)	Endogenous
9	AIRICE	Gross Irrigated Area under Rice (Million Hectares)	Endogenous
10	AISUGAR	Gross Irrigated Area under Sugar (Million Hectares)	Endogenous
11	AIWHEAT	Gross Irrigated Area under Wheat (Million Hectares)	Endogenous
12	ANFG	Gross Cropped Area under Non-Foodgrain (Million Hectares)	Endogenous
13	AOILS	Gross Cropped Area under Oilseeds (Million Hectares)	Endogenous
14	AOTFOOD	Gross Cropped Area under Other Food (Million Hectares)	Endogenous
15	AOTNFG	Gross Cropped Area under Other Non-Foodgrains (Million Hectares)	Endogenous
16	ARICE	Gross Cropped Area under Rice (Million Hectares)	Endogenous
17	ASUGAR	Gross Cropped Area under Sugar (Million Hectares)	Endogenous
18	AWHEAT	Gross Cropped Area under Wheat (Million Hectares)	Endogenous
19	BRENTOIL	UK Brent oil ($/bbl)	Exogenous
20	BSE_AVG	Sensex (Average of Months)	Exogenous
21	CABRBI	Current Account Balance (RBI definition) (₹ Crore)	Endogenous
22	CABRBIRATIO	Current Balance (%GDPmp)	Endogenous
23	CAPEXP_T	Capital Expenditure of General Government (₹ Crore)	Endogenous
24	CAPEXPEDN_T	Capital Expenditure on Education (% of GDPmp)	Exogenous
25	CAPEXPH_T	Capital Expenditure on Health (% of GDPmp)	Exogenous
26	CAPEXPOTH_T	Capital Expenditure Other than Health and Education (₹ Crore)	Exogenous
27	CAPRCPT_T	Non-Debt Capital Receipts (₹ crore)	Endogenous
28	CARRCPT_C	Non-Debt Capital Receipts-Centre (₹ Crore)	Endogenous
29	CD_PETRO_C	Custom Duty from Petroleum sector-Centre (₹ Crore)	Endogenous
30	CDR_PETRO_C	Custom Duty Rate from Petroleum Sector-All India (%)	Endogenous
31	CETOT_T	Compensation to Employees-Total (₹ Crore)	Exogenous
32	CEXP_T	Capital Expenditure—All India (₹ Crore)	Exogenous
33	CEXP_C	Capital Expenditure-Centre (₹ Crore)	Exogenous
34	CP	Private Final Consumption Expenditure (₹ Crore)	Endogenous
35	CPIAGL	Consumer Price Index of Agricultural Labour (1993–94 = 100)	Endogenous
36	CPIIW	Consumer Price Index of Industrial Worker (1993–94 = 100)	Endogenous
37	CRUDECON	Crude Oil Consumption (‘000 Tonnes)	Endogenous
38	CRUDEPROD	Crude Oil Production (‘000 Tonnes)	Exogenous
39	CSTAR	International Crude Oil Price Index (2005 = 100)	Exogenous
40	DBORW_C	Domestic Borrowing-Centre (₹ Crore)	Exogenous
41	DBORW_T	Domestic Borrowing-Total (₹ Crore)	Exogenous
42	DISINV_C	Disinvestment-Centre (₹ Crore)	Exogenous
43	DISINV_T	Disinvestment Receipts-All India (₹ Crore)	Exogenous
44	DLIB_C	Domestic Liabilities-Centre (₹ Crore)	Endogenous
45	DLIB_T	Domestic Liabilities-All India (₹ Crore)	Endogenous
46	DRATAGR	Depreciation Rate of Gross Capital Formation—Agriculture (per cent)	Exogenous
47	DRATCON	Depreciation Rate of Gross Capital Formation—Construction (per cent)	Exogenous
48	DRATEGW	Depreciation Rate of Gross Capital Formation—Electricity, Gas and Water Supply (per cent)	Exogenous
49	DRATMQM	Depreciation Rate of Gross Capital Formation—Mining, Quarrying and Manufacturing (per cent)	Exogenous
50	DRATSER	Depreciation Rate of Gross Capital Formation—Services (per cent)	Exogenous
51	DRATTSC	Depreciation Rate of Gross Capital Formation—Transport, Storage and Communication (per cent)	Exogenous
52	DTAX_C	Domestic Tax Collection—Center (₹ Crore)	Endogenous
53	DTAX_T	Domestic Tax Collection—All India (₹ Crore)	Endogenous
54	DTRATE_C	Direct Tax Collection Rate—Centre (per cent)	Exogenous
55	DTRATE_T	Direct Tax Collection Rate—All India (per cent)	Exogenous
56	EBORW_T	External Borrowing-Centre (₹ Crore)	Exogenous
57	EDNHINDEX15	Education and Health Index	Endogenous
58	EBORW_T	External Borrowing All India (₹ Crore)	Exogenous
59	ELIB_C	External Liabilities—Center (₹ Crore)	Endogenous
60	ELIB_T	External Liabilities—All India (₹ Crore)	Endogenous
61	EMPPUB_T	Employment in Public Sector—All India (Crore)	Exogenous
62	EMPUB_C	Employment in Public Sector—Central (Crore)	Exogenous
63	EX_PETRO_C	Excise Duty on Petroleum—Centre (₹ Crore)	Endogenous
64	FDEF_C	Gross Fiscal Deficit—Centre (₹ Crore)	Endogenous
65	FDEF_T	Gross Fiscal Deficit—All India (₹ Crore)	Endogenous
66	GCFTOT	Gross Capital Formation Total (₹ Crore)	Endogenous
67	GDPAGR	Gross Domestic Product at Factor Cost—Agriculture and Allied (₹ Crore)	Endogenous
68	GDPCON	Gross Domestic Product at Factor Cost—Construction (₹ Crore)	Endogenous
69	GDPEGW	Gross Domestic Product at Factor Cost—Electricity, Gas and Water Supply (₹ Crore)	Endogenous
70	GDPFC	Gross Domestic Product at Factor Cost—Total (₹ Crore)	Endogenous
71	GDPMP	Gross Domestic Product at Market Price—Total (₹ Crore)	Endogenous
72	GDPMQM	Gross Domestic Product at Factor Cost—Mining, Quarrying and Manufacturing (₹ Crore)	Endogenous
73	GDPNONAGR	Gross Domestic Product at Factor Cost—Non-Agriculture (₹ Crore)	Endogenous
74	GDPSER	Gross Domestic Product at Factor Cost—Services (₹ Crore)	Endogenous
75	GDPTSC	Gross Domestic Product at Factor Cost—Transport, Storage and Communication (₹ Crore)	Endogenous
76	GDR	Public Distribution of Rice (Million Tonne)	Exogenous
77	GDW	Public Distribution of Wheat (Million Tonne)	Exogenous
78	GFCE	Government Final Consumption Expenditure (₹ Crore)	Endogenous
79	GFCFG_infra	Gorss Fixed Capital Formation in Infrastructure (₹ Crore)	Endogenous
80	GFCFG_INFRA	Gross Fixed Capital Formation in Infrastructure-Public (₹ Crore)	Endogenous
81	GFCFGAGR	Gross Fixed Capital Formation in Agriculture-Public (₹ Crore)	Endogenous
82	GFCFGCON	Gross Fixed Capital Formation in Construction-Public (₹ Crore)	Endogenous
83	GFCFGEGW	Gross Fixed Capital Formation in Electricity, Gas and Water Supply-Public (₹ Crore)	Endogenous
84	GFCFGMQM	Gross Fixed Capital Formation in Mining, Quarrying and Manufacturing-Public (₹ Crore)	Endogenous
85	GFCFGSER	Gross Fixed Capital Formation in Other Services-Public (₹ Crore)	Endogenous
86	GFCFGTOT	Gross Fixed Capital Formation-Public (₹ Crore)	Endogenous
87	GFCFGTSC	Gross Fixed Capital Formation in Transport, Storage and Communication-Public (₹ Crore)	Endogenous
88	GFCFP_INFRA	Gross Fixed Capital Formation in Infrastructure-Private (₹ Crore)	Endogenous
89	GFCFPTOT	Gross Fixed Capital Formation-Private (₹ Crore)	Endogenous
90	GFCFTOT	Gross Fixed Capital Formation-Total (₹ Crore)	Endogenous
91	GNPFC	Gross National Product at Factor Cost (₹ Crore)	Endogenous
92	GNPMP	Gross National Product at Market Price (₹ Crore)	Endogenous
93	GOCEX_C	Government Current Expenditure Excluding Wage Bill, Interest Payment and Subsidies—Center (₹ Crore)	Exogenous
94	GOCEX_T	Government Current Expenditure Excluding Wage Bill, Interest Payment and Subsidies—All India (₹ Crore)	Exogenous
95	GPR	Procurement of Rice (₹/Qtl.)	Exogenous
96	GRVAAGR	Growth Rate of Agricultural Sector Output (in Percent)	Endogenous
97	GRVANONAGR	Growth Rate of Non-agricultural Sector Output (in Percent)	Endogenous
98	GTCEX_T	Government Current Expenditure—All India (₹ Crore)	Endogenous
99	GWBILL_C	Government Wage Bill—Center (₹ Crore)	Endogenous
100	GWBILL_T	Government Wage Bill—All India (₹ Crore)	Endogenous
101	HCR_N	Head count ratio of poverty_All India (in per cent)	Endogenous
102	HCR_R	Head count ratio of poverty_Rural (in per cent)	Endogenous
103	HCR_U	Head count ratio of poverty_Urban (in per cent)	Endogenous
104	IMPCRUDE	Imports of Crude Oil (₹ Crore)	Endogenous
105	INDTAX_C	Indirect Tax Collection—Center (₹ Crore)	Endogenous
106	INDTAX_ NPETRO_C	Indirect Tax on Non-Petroleum-Centre (₹ Crore)	Endogenous
107	INDTAX_T	Indirect Tax Collection—All India (₹ Crore)	Endogenous
108	INDTRATE_C	Indirect Tax Rate—Center (per cent)	Exogenous
109	INDTRATE_T	Indirect Tax Rate—All India (per cent)	Exogenous
110	INFL	Inflation Rate (per cent)	Endogenous
111	INSCRAG	Institutional Credit to Agriculture Sector (₹ Crore)	Exogenous
112	INSTITUTES	No. of Educational Institutes in India	Exogenous
113	INTPAY_C	Interest Payment—Center (₹ Crore)	Endogenous
114	INTPAY_T	Interest Payment—All India (₹ Crore)	Endogenous
115	IRATEDOM_C	Interest Rate on Domestic Debt—Center (per cent)	Endogenous
116	IRATEDOM_T	Interest Rate on Domestic Debt—All India (per cent)	Endogenous
117	IRATEEXT	Interest Rate on External Debt (per cent)	Endogenous
118	LIBOR	International Interest Rate (per cent)	Exogenous
119	LINT10	Long-term Interest Rate (10-year government securities)	Endogenous
120	M3	Money Supply (₹ Crore)	Endogenous
121	MCRUDE	Imports of Crude Oil (₹ Crore)	Endogenous
122	MEDOIL	Imports of Edible Oil (₹ Crore)	Endogenous
123	MNONPOLOIL	Imports Non-Petroleum Oil (₹ Crore)	Endogenous
124	MTOTAL	Total Imports (₹ Crore) DGCI&S	Endogenous
125	MTOTAL$	Total Imports (US$) DGCI&S	Endogenous
126	MTOTRBI	Total Imports (₹ Crore) RBI	Endogenous
127	NEER	Nominal Effective Exchange Rate (Index, 1985 = 100)	Exogenous
128	NER	Nominal Exchange Rate (₹/$US)	Exogenous
129	NETINV	Net Invisible Receipts (₹ Crore)	Exogenous
130	NFIAB	Net Factor Income from Abroad (₹ Crore)	Exogenous
131	NTREV_C	Non-tax Revenue—Center (₹ Crore)	Endogenous
132	NTREV_T	Non-tax Revenue—All India (₹ Crore)	Endogenous
133	OCAPRECPT_T	Other Capital Receipts (₹ Crore)	Exogenous
134	PAG	Implicit Price Deflator for Gross Domestic Product from Agriculture (Index, 1993–94 = 100)	Endogenous
135	PALL	Implicit Price Deflator for Overall Gross Domestic Product at Factor Cost (Index, 1993–94 = 100)	Endogenous
136	PCON	Implicit Price Deflator for Gross Domestic Product from Construction (Index, 1993–94 = 100)	Endogenous
137	PDEF_C	Primary Deficit—Center (₹ Crore)	Endogenous
138	PDEF_T	Primary Deficit—All India (₹ Crore)	Endogenous
139	PEGW	Implicit Price Deflator for Gross Domestic Product from Electricity, Gas and Water Supply (Index, 1993–94 = 100)	Endogenous
140	PEXPTOT	Implicit Price Deflator for Over all Private Final Consumption Expenditure (Index, 1993–94 = 100)	Endogenous
141	PGDPMP	Implicit Price Deflator for Gross Domestic Product at Market Price (Index, 1993–94 = 100)	Endogenous
142	PGCFGAG	Implicit Price Deflator for Public Investment in Agriculture (Index, 1993–94 = 100)	Endogenous
143	PGCFGCON	Implicit Price Deflator for Public Investment in Construction (Index, 1993–94 = 100)	Endogenous
144	PGCFGEGW	Implicit Price Deflator for Public Investment in Electricity, Gas and Water Supply (Index, 2004–05 = 100)	Endogenous
145	PGCFGMQM	Implicit Price Deflator for Public Investment in Mining, Quarrying and Manufacturing (Index, 2004–05 = 100)	Endogenous
146	PGCFGSER	Implicit Price Deflator for Public Investment in Other Services (Index, 2004–05 = 100)	Endogenous
147	PGCFGTSC	Implicit Price Deflator for Public Investment in Transport, Storage and Communication (Index, 2004–05 = 100)	Endogenous
148	PGCFPTOT	Implicit Price Deflator for Overall Private Investment (Index, 2004–05 = 100)	Endogenous
149	PGDPMP	Implicit Price Deflator for GDPmp (Index, 2004–05 = 100)	Endogenous
150	PGFCFGAGR	Implicit Price Deflator for Government Investment in Agriculture (Index, 2004–05 = 100)	Endogenous
151	PGFCFGCON	Implicit Price Deflator for Government Investment in Construction (Index, 2004–05 = 100)	Endogenous
152	PGFCFGEGW	Implicit Price Deflator for Government Investment in EGW (Index, 2004–05 = 100)	Endogenous
153	PGFCFGMQM	Implicit Price Deflator for Government Investment MQM (Index, 2004–05 = 100)	Endogenous
154	PGFCFGSER	Implicit Price Deflator for Government Investment in Services other than TSC (Index, 2004–05 = 100)	Endogenous
155	PGFCFGTSC	Implicit Price Deflator for Government Investment in TSC (Index, 2004–05 = 100)	Endogenous
156	PGFCFPTOT	Overall Implicit Price Deflator for Private Investment (Index, 2004–05 = 100)	Endogenous
157	PGNPFC	Implicit Price Deflator for Gross National Product at Factor Cost (Index, 1993–94 = 100)	Endogenous
158	PGNPMP	Implicit Price Deflator for Gross National Product at Market Price (Index, 1993–94 = 100)	Endogenous
159	PMQM	Implicit Price Deflator for Gross Domestic Product from Mining, Quarrying and Manufacturing (Index, 1993–94 = 100)	Endogenous
160	POPLN	Mid Year Population (Million)	Exogenous
161	PPC	Procurement Price of Rice (₹/Qtl.)	Exogenous
162	PPI_USA	Producer Price Index-USA (2005 = 100)	Exogenous
163	PPR	Procurement Price of Rice (₹/Qtl.)	Exogenous
164	PPS	Procurement Price of Sugarcane (₹/Qtl.)	Exogenous
165	PPW	Procurement Price of Wheat (₹/Qtl.)	Exogenous
166	PSER	Implicit Price Deflator for Gross Domestic Product from Services (Index, 1993–94 = 100)	Endogenous
167	PSTAR	Index of International Non-crude Oil Prices	Exogenous
168	PTSC	Implicit Price Deflator for Gross Domestic Product from Transport, Storage and Communication (Index, 1993–94 = 100)	Endogenous
169	QCOTTONI	Production of Cotton (Index, Triennium Ending 1993–94 = 100)	Endogenous
170	QFG	Production of Foodgrain (Million Tonne)	Endogenous
171	QNFGI	Production of Non-Foodgrain (Index, Triennium Ending 1993–94 = 100)	Endogenous
172	QOILSI	Production of Non-Foodgrain (Index, Triennium Ending 1993–94 = 100)	Endogenous
173	QOTFOOD	Production of Pulses and Coarse Cereals (Million Tonne)	Endogenous
174	QOTNFGI	Production of Other Non-Foodgrain (Index, Triennium Ending 1993–94 = 100)	Endogenous
175	QRICE	Production of Rice (Million Tonne)	Endogenous
176	QSUGARI	Production of Sugarcane (Million Tonne)	Endogenous
177	QWHEAT	Production of Wheat (Million Tonne)	Endogenous
178	RAIN	Rainfall during Monsoon Period (mm)	Exogenous
179	RBCC	Real Bank Credit to Commercial Sector (₹ Crore)	Endogenous
180	RBSE_avg	Index of Real Bombay Stock Exchange	Endogenous
181	RCFCAGR	Real Consumption of Fixed Capital in Agriculture (₹ Crore)	Endogenous
182	RCFCCON	Real Consumption of Fixed Capital in Construction (₹ Crore)	Endogenous
183	RCFCEGW	Real Consumption of Fixed Capital in Electricity, Gas and Water Supply (₹ Crore)	Endogenous
184	RCFCMQM	Real Consumption of Fixed Capital in Mining, Quarrying and Manufacturing (₹ Crore)	Endogenous
185	RCFCSER	Real Consumption of Fixed Capital in Services (₹ Crore)	Endogenous
186	RCFCTSC	Real Consumption of Fixed Capital in Transport, Storage and Communication (₹ Crore)	Endogenous
187	RDEF_C	Revenue Deficit—Center (₹ Crore)	Endogenous
188	RDEF_T	Revenue Deficit—All India (₹ Crore)	Endogenous
189	RECLOAN_C	Recovery of Loans—Center (₹ Crore)	Exogenous
190	REVEXP_T	Revenue Expenditure—Center (₹ Crore)	Endogenous
191	REVEXPEDN_C	Public Expenditure on Education-Centre (₹ Crore)	Exogenous
192	REVEXPEDN_T	Public Expenditure on Education-All India (₹ Crore)	Exogenous
193	REVEXPH_C	Public Expenditure on Health-Centre (₹ Crore)	Exogenous
194	REVEXPH_T	Public Expenditure on Health-All India (₹ Crore)	Exogenous
195	REVOEXP_T	Other Current Expenditure-All India (₹ Crore)	Exogenous
196	REXP_C	Revenue Expenditure—Center (₹ Crore)	Endogenous
197	REXPEGW	Real Private Final Consumption Expenditure on Electricity, Gas and Water Supply (₹ Crore)	Endogenous
198	REXPFOOD	Real Private Final Consumption Expenditure on Food (₹ Crore)	Endogenous
199	REXPMQM	Real Private Final Consumption Expenditure on Mining, Quarrying and Manufacturing (₹ Crore)	Endogenous
200	REXPSER	Real Private Final Consumption Expenditure on Services (₹ Crore)	Endogenous
201	REXPTSC	Real Private Final Consumption Expenditure on Transport, Storage and Communication (₹ Crore)	Endogenous
202	RGFCFAGR	Real Fiscal Deficit (₹ Crore)	Endogenous
203	RGFCFGAGR	Real Gross Fixed Capital Formation in Infrastructure (₹ Crore)	Endogenous
204	RGFCFG_INFRA	Real Gross Fixed Capital Formation in Infrastructure-Public (₹ Crore)	Endogenous
205	RGFCFGAGR	Real Gross Fixed Capital Formation on Agriculture-Pub Sector (₹ Crore)	Endogenous
206	RGFCFGCON	Real Gross Fixed Capital Formation on Construction-Pub Sector (₹ Crore)	Endogenous
207	RGFCFGEGW	Real Gross Fixed Capital Formation on Eletricity, Gas & Water Supply-Pvt Sector (₹ Crore)	Endogenous
208	RGFCFGMQM	Real Gross Fixed Capital Formation on Mining, Quarrying & Manufacturing-Pvt Sector (₹ Crore)	Endogenous
209	RGFCFGSER	Real Gross Fixed Capital Formation on Services. Pvt Sector (₹ Crore)	Endogenous
210	RGFCFGTOT	Real Gross Fixed Capital Formation Overall-Private Sector (₹ Crore)	Endogenous
211	RGFCFGTSC	Real Gross Fixed Capital Formation on Transport, Storage & Communication-Pvt Sector (₹ Crore)	Endogenous
212	RGFCFP_INFRA	Real Gross Fixed Capital Formation in Infrastructure-Private (₹ Crore)	Endogenous
213	RGFCFPAGR	Real Gross Fixed Capital Formation in Agriculture-Private (₹ Crore)	Endogenous
214	RGFCFPCON	Real Gross Fixed Capital Formation in Construction-Private (₹ Crore)	Endogenous
215	RGFCFPEGW	Real Gross Fixed Capital Formation in Electricity, Gas and Water Supply-Private (₹ Crore)	Endogenous
216	RGFCFPMQM	Real Gross Fixed Capital Formation in Mining, Quaryying and Manufacturing-Private (₹ Crore)	Endogenous
217	RGFCFPSER	Real Gross Fixed Capital Formation in Other Services-Private (₹ Crore)	Endogenous
218	RGFCFPTOT	Real Gross Fixed Capital Formation-Private (₹ Crore)	Endogenous
219	RGFCFPTSC	Real Gross Fixed Capital Formation in Transport, Storage and Communication-Private (₹ Crore)	Endogenous
220	RGFCFTAGR	Real Gross Fixed Capital Formation in Agriculture-Total (₹ Crore)	Endogenous
221	RGFCFTCON	Real Gross Fixed Capital Formation in Construction-Total (₹ Crore)	Endogenous
222	RGFCFTEGW	Real Gross Fixed Capital Formation in Electricity, Gas and Water Supply-Total (₹ Crore)	Endogenous
223	RGFCFTMQM	Real Gross Fixed Capital Formation in Mining, Quarrying and Manufacturing-Total (₹ Crore)	Endogenous
224	RGFCFTOT	Real Gross Fixed Capital Formation-Total (₹ Crore)	Endogenous
225	RGFCFTOT_INFRA	Real Gross Fixed Capital Formation in Infrastructure-Total (₹ Crore)	Endogenous
226	RGFCFTSER	Real Gross Fixed Capital Formation in Services-Total (₹ Crore)	Endogenous
227	RGFCFTTSC	Real Gross Fixed Capital Formation in Transport, Storage and Communication-Total (₹ Crore)	Endogenous
228	RGNPFC	Real Gross National Product at Factor Cost (₹ Crore)	Endogenous
229	RGNPMP	Real Gross National Product at Market Cost (₹ Crore)	Endogenous
230	RK_INFRA	Real Capital Stock in Infrastructure (₹ Crore)	Endogenous
231	RKAGR	Real Capital Stock in Agriculture (₹ Crore)	Endogenous
232	RKCON	Real Capital Stock in Construction (₹ Crore)	Endogenous
233	RKEGW	Real Capital Stock in Electricity, Gas and Water Supply (₹ Crore)	Endogenous
234	RKMQM	Real Capital Stock in Mining, Quarrying and Manufacturing (₹ Crore)	Endogenous
235	RKSER	Real Capital Stock in Other Services (₹ Crore)	Endogenous
236	RKTOT	Real Capital Stock-Total (₹ Crore)	Endogenous
237	RKTSC	Real Capital Stock in Transport, Storage and Communication (₹ Crore)	Endogenous
238	RMD	Real Money Demand (high powered money) ₹ Crore	Endogenous
239	RMS	Reserve Money (₹ Crore)	Endogenous
240	RPDI	Real Personal Disposable Income (₹ Crore)	Endogenous
241	RPVTINCOME	Real Private Income (₹ Crore)	Endogenous
242	RRINT	Real Rate of Interest (per cent)	Endogenous
243	RVAAGR	Real Value Added at Factor Cost in Agriculture (₹ Crore)	Endogenous
244	RVACON	Real Value Added at Factor Cost in Construction (₹ Crore)	Endogenous
245	RVAEGW	Real Value Added at Factor Cost in Electricity, Gas and Water Supply (₹ Crore)	Endogenous
246	RVAMQM	Real Value Added at Factor Cost in Mining, Quarrying and Manufacturing (₹ Crore)	Endogenous
247	RVANAGR	Real Value Added at Factor Cost in Non-Agriculture (₹ Crore)	Endogenous
248	RVASER	Real Value Added at Factor Cost in Services (₹ Crore)	Endogenous
249	RVATOT	Real Value Added at Factor Cost-Total (₹ Crore)	Endogenous
250	RVATSC	Real Value Added at Factor Cost in Transport, Storage and Communication (₹ Crore)	Endogenous
251	RWINC	World Income (Index, 1995–96 = 100)	Exogenous
252	RXNONPETRO	Real Exports DGCI&S (₹ Crore)	Endogenous
253	SFR	Stock of Rice (Million Tonne)	Exogenous
254	SI91	Short-term Rate of Interest (91-day Treasury Bill rate, Per cent)	Endogenous
255	SOYABEAN_US	Price Index of Soyabean-USA (2005 = 100)	Exogenous
256	SUBSIDY_C	Subsidies—Center (₹ Crore)	Exogenous
257	SUBSIDY_T	Subsidies—All India (₹ Crore)	Exogenous
258	TOTEXP_T	Total Expenditure-All India (₹ Crore)	Endogenous
259	TOTREV_C	Total Revenue—Center (₹ Crore)	Endogenous
260	TOTREV_T	Total Revenue—All India (₹ Crore)	Endogenous
261	TREV_C	Tax Revenue—Center (₹ Crore)	Endogenous
262	TREV_T	Tax Revenue—All India (₹ Crore)	Endogenous
263	US_COTTONI	Price Index of Cotton-USA (2005 = 100)	Exogenous
264	UVICRUDE	Unit Value Index of Crude Oil (1993–94 = 100)	Endogenous
265	UVIEXP	Unit Value Index for Exports (Index, 1978–79 = 100)	Endogenous
266	UVIEXP_W	Unit Value Index for Exports-World (2005 = 100)	Exogenous
267	UVIIMPNONPOLOIL	Unit Value Index of non-Petroleum & Edible Oil (19963–94 = 100)	Endogenous
268	WPI	Wholesale Price Index—All Commodities (Index, 1993–94 = 100)	Endogenous
269	WPIAGR	Wholesale Price Index—Agricultural Commodities (Index, 1993–94 = 100)	Endogenous
270	WPICOTTON	Wholesale Price Index—Cotton (Index, 1993–94 = 100)	Endogenous
271	WPIENERGY	Wholesale Price Index of Fuel, Power, Light and Lubricants (Index, 1993–94 = 100)	Exogenous
272	WPIFG	Wholesale Price Index—Foodgrain (Index, 1993–94 = 100)	Endogenous
273	WPIINPUT	Wholesale Price Index of Inputs for Agriculture (Index, 1993–94 = 100)	Exogenous
274	WPIMQM	Wholesale Price Index—Mining, Quarrying and Manufacturing (Index, 1993–94 = 100)	Endogenous
275	WPIOILS	Wholesale Price Index—Oilseeds (Index, 1993–94 = 100)	Endogenous
276	WPIOTFOOD	Wholesale Price Index—Pulses and Coarse Cereals (Index, 1993–94 = 100)	Endogenous
277	WPIOTNFG	Wholesale Price Index—Other Non-Foodgrains (Index, 1993–94 = 100)	Exogenous
278	WPIRICE	Wholesale Price Index—Rice (Index, 1993–94 = 100)	Endogenous
279	WPISUGAR	Wholesale Price Index—Sugar (Index, 1993–94 = 100)	Endogenous
280	WPIWHEAT	Wholesale Price Index—Wheat (Index, 1993–94 = 100)	Endogenous
281	WRATE_C	Public Sector Wage Rate—Center (₹)	Endogenous
282	WRTAE_T	Public Sector Wage Rate—All India (₹)	Endogenous
283	XNONPETRO	Total Exports (₹ Crore) DGCI&S	Endogenous
284	XPETRO_Q	Quantity of Oil Imports (‘000 tonnes)	Endogenous
285	XPETRO_V	Value of Oil Imports (₹ Crore)	Endogenous
286	XTOTAL	Merchandise Exports Total (₹ Crore)	Endogenous
287	XTOTAL$	Merchandise Exports Total (US $ million)	Endogenous
288	XTOTRBI	Total Exports (₹ Crore) RBI	Endogenous
289	YCOTTON	Yield Rate of Cotton (Kg/Hectare)	Endogenous
290	YOILS	Yield Rate of Oilseeds Cereals (Kg/Hectare)	Endogenous
291	YOTFOOD	Yield Rate of Other food (Kg/Hectare)	Endogenous
292	YOTNFG	Yield Rate of Other Non-foodgrains (Kg/Hectare)	Endogenous
293	YRICE	Yield Rate of Rice (Kg/Hectare)	Endogenous
294	YSUGAR	Yield Rate of Sugar (Kg/Hectare)	Endogenous
295	YWHEAT	Yield Rate of Wheat (Kg/Hectare)	Endogenous

Acknowledgements

This article is based on a project ‘Economic modelling of emerging scenarios for India’s Twelfth Five Year Plan’ carried out at NCAER under a grant from the Planning Commission. We also acknowledge the help of Siddhartha Chattopadhyay, Indian Institute of Technology, Kharagpur, in the development of the link between government expenditure on health and education and productivity.

Notes

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