THE ROAD AHEAD The 11th Five-Year Plan will focus on the following

Agriculture: Crop diversification, contract farming, improved irrigation and rural infrastructure Health: Big boost to health facilities, mainly in rural areas Urban Reforms: Funds for cities willing to reform, to showcase infrastructure Power Play: Step up generation and improve distribution. Punishment for power theft Labour Reforms: Consensual approach. If Wal-Mart comes, won't jobs follow?

There's a common complaint running through the corridors of all the central ministries dealing with economic affairs: that no policy guidelines are cleared without the express consent of the Planning Commission or Yojana Bhavan, in Delhi's Parliament Street; and that it has become, virtually, a "super ministry of economic affairs". That's primarily because Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission, is, arguably, Prime Minister Manmohan Singh's closest confidante on all economic issues.

And it is this tried and tested firm of Singh and Ahluwalia that is drawing up a blueprint-aka the 11th Five-Year Plan (2007-2012)- that promises to transform India into an economic powerhouse. "If all goes well, the country will see a 6.5 per cent growth in per capita income and a 10 per cent reduction in people below the poverty line within five years. At this rate, the per capita income should double in 10 years," says Ahluwalia. The new Plan will be "more inclusive" to ensure that reforms benefit the aam admi.

Agriculture is the laggard that is dragging down India's growth curve. It has grown at less than 2 per cent per annum in the first three years of the 10th Plan (2002-2007), against a projected figure of 4 per cent. The 11th Plan proposes to redress this by focussing on crop diversification, increasing the area under irrigation-projects worth Rs 1,72,000 crore have already been announced-and making available high quality seeds to farmers. Ahluwalia is also confident that the Rs 1,74,000-crore Bharat Nirman Project and the Rs 1,00,000-crore National Rural Employment Guarantee Scheme will change the face of rural India. Ahluwalia's other pet priority is infrastructure. There has been some progress on this front, but much is still left to be done. The allocations are: Rs 1,72,000 crore for roads, Rs 50,000 crore for airports, Rs 60,000 crore for ports and Rs 1,00,000 crore for railways. What about leakages and graft that invariably accompany such massive outlays of funds. "In the end, there is no substitute for a watchful citizenry demanding accountability from the government," he says. This means the Plan panel will closely monitor the mega projects it midwifes.

Where will such humungous sums of money come from? Ahluwalia's answer: "From domestic and foreign investors." The government will also set up an SPV (special purpose vehicle)-which will float bonds worth $2 billion (Rs 8,800 crore)-that will meet any funding shortfall. The SPV will be formed by the end of this month; work on drafting a model concession agreement and putting in place a proper regulatory mechanism-crucial for attracting private investors-is already at an advanced stage.

The Plan will also address the issue of lifting sectoral caps on FDI (foreign direct investment), which is holding back the free inflow of funds and focus on upgrading urban infrastructure. And Ahluwalia adds that he will try to ease the flow of FDI into the retail sector.

But can the government actually implement such an ambitious road map? Doubts persist. Says Surjit S. Bhalla, MD, Oxus Research and Investments: "The good intentions are only on paper but the harsh reality is that it is the most populist government in the last three years."

The compulsions of coalition politics and competitive populism have derailed several reform initiatives over the last year. How the Manmohan-Montek duo tackle the politics of economics will, then, determine whether their grand vision can turn into reality.

"We're Not Pegging Our Targets To China's Standards"

Despite poor farm growth and rising oil prices, India's manufacturing sector has just pepped up the economy with a strong showing in the first quarter of 2005-06. The Finance Minister is bullish about outrunning China. In an exclusive interview with BT's Ashish Gupta and K. Sai Srinivas, Planning Commission Deputy Chairman Montek Singh Ahluwalia talks about the 11th Plan and how he proposes to circumvent the pitfalls of the 10th Plan. Excerpts:

The 11th Five-Year Plan kicks off in 2007. How will it be different from the earlier Five-Year Plans?

The Plan is being drafted at a time when India's capacity to sustain an annual growth rate of 8 per cent is not in much doubt. Given a proper policy framework, we can easily achieve a per capita income growth of 6.5 per cent; this will result in a doubling of individual incomes in 10 years. And, the focus of the Plan will be on an inclusive growth.

Can it take India closer to China's level of growth?

Our goal will be to achieve maximum growth and a commensurate improvement in the living standards of our people. We are not pegging our targets to China's standards.

How will you ensure that agriculture does grow at 4 per cent?

It is very clear that bottlenecks in irrigation, water management, crop diversification and rural infrastructure have to be addressed. (The sector has grown at only below 2 per cent so far during the 10th Plan).

What about power sector reforms?

Progress in this area has been disappointing. I think the biggest problem is the inefficient distribution system. This will, obviously, have to be tackled. And punishment for power thefts must be swift.

The privatisation of airports and the public-private partnership model seem to have got stuck. Some foreign consortia have withdrawn because of tough penalty laws...

Only two bidders have withdrawn as they were not willing to give guarantees on their own performance. I have no regrets on that.

What about opposition from trade unions?

I recognise that there is apprehension. Let me say that I have talked personally to a lot of people who actually work in airports and they don't oppose this.

Has the City Challenge Fund made any big difference?

Upgrading of urban infrastructure is mostly viewed as work that has to be done by some departments of local governments. But that's not enough. If a city comes forward saying 'this is the infrastructure we need and these are the reforms we're willing to carry out', the Central government will provide the funds. Money, obviously, is the carrot but there is no punishment for not carrying out reforms.

How will you generate funds for massive infrastructure projects like Bharat Nirman (estimated cost: Rs 1,74,000 crore)?

The Finance Ministry will, hopefully, have a special purpose vehicle in place for this by the end of this month.

What about FDI in retail?

We are modernising every part of the economy; so why should retail be any different? Organised retailing currently makes up only 3 per cent of the overall retail pie in the country. So, clearly, there's massive room for expansion. Wal-Mart sources about $1 billion (Rs 4,400 crore) worth of merchandise from India compared to $20 billion (Rs 88,000 crore) from China. A 20:1 ratio is ridiculous. We will push for a comprehensive policy to close this gap.