There has been constant debate about the state of the Indian economy – how a booming economy till the year 2008-09 has suddenly descended into a gloomy situation where not only domestic investors but even foreign investors are hesitant to invest in India. The budget session of the parliament started with the presidential address highlighting the challenges that India as a nation is facing, such as the health of Indian economy that has been off for the last 2 years, facing stagnation and recession fears.
During the motion to thank the president, Mr. Jaitley broadly highlighted the inaction of the government on various fronts like economic crisis, policy paralysis, corruption scandals, inflation, safety of women, and Tamils in Sri Lanka, Bangladesh terrorism and Pakistan relations. The Prime Minister replied with some aggression (which is unlike him). In his sharp attack the PM displayed GDP figures that averaged at 7.9% during UPA rule from 2004-2013 versus 6% during NDA rule from 1998-2004 and various other figures like agricultural capita growth and per wages, consumer demand to show that the Indian economy is on track although in slow motion.
I was disappointed with the speech because the PM selectively quoted facts and figures without presenting a holistic picture of the economy which is not in sync the “All is well” theme of the government. Let’s analyse the NDA (1998-2004) and UPA (2004-2013) rule in a holistic manner. But before our advent, bear in mind that during NDA rule there was hardly any growth owing to the economic sanctions on us due to the nuclear tests in 1998, followed by Kargil war with Pakistan in 1999. That really set us back a few years and it was only after the sanctions were lifted in 2000 that economic growth returned to India.
1) Annual GDP Growth Rate:
From the data it is clear that the average growth of GDP during NDA regime was 6% while in UPA’s is 7.9% and remained constantly high in many years. But what is hidden is that by the time NDA left, the GDP figure had touched 8.1% which shows that the reforms initiated by the NDA had started to reap benefits. As economic analysts say, the fruits of policy decisions like FDI, IT revolution, Policy Guidelines for telecom, PSU Disinvestment were inherited by the UPA 1. It is clearly visible that the GDP remained at an average of 8.5% during UPA 1 but by the time UPA 2 is winding up, the GDP figures have sharply declined from 9.4% in 2010 to 4.5% in 2013, more than 50%.
Another Important measurement for the health of any economy is the Inflationary trend. The PM conveniently missed this aspect in his speech. A moderate inflation is considered to be good for the economy. Above figures show that inflation during the
NDA regime was 5% which has nearly doubled during the UPA regime to 9% on an average and touching 11% in the year 2010-2011. High Inflation during UPA is attributed to high prices of food items and commodity prices. Constant increase in the price of petroleum products affects in the long run adversely.
3) Current Account Deficit:
Usually, countries recording a strong current account surplus have an economy which is heavily dependent on the exports revenues, with high savings ratings but weak domestic demand. On the other hand, countries recording a current account deficit have strong imports, a low saving rates and high personal consumption rates as a percentage of disposable incomes. This parameter also shows that it was only after NDA took over in 1998, that the exports raised and the deficits started to decrease, Indian economy picked up and we had current account surplus of nearly 1.5% to GDP. As soon as UPA came to power, the current account declined again and deficit increased from 0 to -3.7% to GDP which is again reflective of the mess created in our economy in the last 9 years.
4) Balance Of Trade:
When Exports exceed imports it is “trade surplus” and if vice versa it is “trade deficit”. From the above figure it is evident that during NDA regime, 1998 – 2004, the trade deficit was ranging between 0 to 2 billion dollars, but after the UPA took over in 2004-till date the trade deficit has increased alarmingly with deficit touching nearly 20 Billion Dollars (Rs 1086.12 billion) in 2012-13. This again shows that our domestic demand is not adequately met with by domestic manufacturing or resources available. The consumer spending boom though has led to high oil bills, import of coal for power; but many power plants are suffering from severe coal shortage though coal allocations were made a few years back (now under a cloud due to the CAG Report).
5) India’s External Debt:
Another factor that affects economy is the external debt which is the money a country owes to its creditors. India’s external debt has increased significantly from 2004. This highlights that our borrowing has increased which could signify higher investment in developmental activities but at the same time it also highlights that despite massive rise in forex reserves since 1991, huge FII and FDI inflow and increased domestic savings, we have not been able cut down on our external borrowing.
6) Industrial Production:
|INDUSTRIAL PRODUCTION DURING UPA REGIME – 2004:2013|
Industrial production is often referred to as the engine of economic growth with respect to job creation. The industrial growth during NDA rose from 4% in 1998 to 9% in 2004 (Fig 1), while during UPA’s rule (Fig 2) the industrial production after a touching 20% in November 2006 set a new record low of -7.20% in February 2009 and is now again in negative with -0.6% in 2013. This trend shows that the UPA capitalised on the growth oriented policies and environment which NDA left behind in 2004 and reaped rewards. The recession followed by series of corruption scams in India, policy paralysis, lack of reforms contributed to a steep fall in industrial production during UPA 2.
7) Agricultural Growth:
The prime minister stated that the agricultural growth was 3.3% in the 11th Plan compared to 2.4% of the 10th Plan, agricultural credit has increased 500 times since 2004, agricultural wages increased by 6.8%, minimum support price has increased, and per capita consumption in the rural area has increased. There was one important factor which was left out – the contribution of agriculture (since India was an agro based economy.)
From the Planning Commission data released in 2012, it is revealed that the share of agriculture in the GDP has dropped from 26% in 1998-99 to 13% in 2012-13. Further, the CAG report on Farm Loan Waiver Scheme made by UPA govt in 2008, clearly points at misappropriation of 54,000 Cr which was meant for waiver of farmers. The Scheme was aimed at providing relief to farmers in States like Maharashtra and AP reporting large farmer suicides because of large credit or loans. See this Report on Vidarbha Farmers Rue Loan Waiver scheme. Further it has been reported that there has been 14 million jobs lost in agriculture and 5 million manufacturing jobs lost from period (2004-05 to 2009-10).
The above data show that there is selective quoting of data and bigger picture projects a slowdown in agricultural growth in an agro based economy like India which is a cause for concern.
8) Poverty and Malnutrition:
With respect to poverty, the poverty rate decreased from 45.3% in 1993-94 to 37.2% in 2004-05 to 29.8% in 2009-10 which was a fall of nearly 7 % on an average. Now that the CAG report has been tabled in the Parliament a few days back, we know that, except for Bihar which saw 82% malnutrition, all other states that topped were Congress ruled states like AP (49%), Delhi (50%), Rajasthan and Haryana (43%), while Gujarat, which was most targeted on this front recorded the most improved figures down from 70% in 2007 to 38% in 2011, which shows how BJP has worked in the state. Even the BJP ruled MP which till a decade back was not known for development is now at 28%, NDA ruled Punjab at 33%. Uttarakhand, ruled by the BJP from 2007 to 2012 saw a drop from 45% to 27%. See this article on the “State which improved most in malnutrition: Gujarat”.
From the above facts it can be said that the NDA government did disinvestment of PSU, FDI in print media and laid down various policies and guidelines, fruits of which to played out during UPA I till the corruption scandals broke out during UPA 2 which halted the growth and reforms. Growth has been sliding back again to near stagnation of the economy.
Though there has been increase in per capita income, consumer spending, personal savings but there were selective quotations of statistics in PM’s speech. Inflation, trade deficit, current account deficit, industrial production, contribution of agriculture to GDP and other social indicators like poverty and malnutrition all point out that NDA governments on the whole performed better at centre and also at state level. So as Mr. Jaitley said in Rajya Sabha that there was “Jugglery of facts and figures with no broader message or vision”. But nowadays people are better aware of situation than say 9 years ago.
About the author:
Navroop Singh. A nationalist . He wants to raise the awareness among people about the issues that concern our country.