Which
government – UPA or NDA – has been better for India’s economic and
social indicators? Dismiss the rhetoric and stick to the facts. In this
analysis, I’ve chosen 10 key parameters. They cover both economic and
social criteria.
1.GDP growth: Average GDP growth in 1998-2004 (NDA) was 6% a year. Average annual GDP growth in 2004-13 (UPA), up to June 30, 2013, was 7.9%.
Caveat 1: The
Vajpayee-led NDA battled US-led economic sanctions following the
Pokhran-II nuclear test in May 1998. It faced a short but expensive
Kargil war in 1999 and the dotcom bust in 2000. When it took office, it
had the lag effect of the East Asian financial crisis of 1997-98 to
contend with.
Caveat 2: The
UPA government, in contrast, benefitted from the economic momentum of
the high (8.1%) GDP growth rate of 2003-04 – the NDA government’s final
year – and rode that wave. The global liquidity bubble in 2004-08
bouyed foreign mflows, helping UPA-I achieve a high GDP growth rate in
its first term. The Lehman Brothers collapse in September 2008 did hurt
the Indian economy but the ensuing US Federal Reserve asset buying
programme attracted a steady flow of near-zero interest dollars into
India from 2009.
Despite
these caveats, the UPA government’s average annual GDP growth rate of
7.9% in 2004-13 clearly scores over the NDA government’s average annual
growth
rate of 6%. First strike to UPA.
2. Current Account Deficit:
2004: (+) $7.36 billion (surplus).
2013: (-) $80 billion.
The winner here is clearly NDA. It ran a current account surplus in 2002, 2003 and 2004. Under UPA this dipped into deficit from 2006 and has spun downwards since.
3. Trade deficit:
2004: (-) $13.16 billion.
2013: (-) $180 billion.
Again, advantage NDA.
4. Fiscal deficit:
2004: 4.7% of GDP.
2013: 4.8% of GDP.
Not much to choose between the two.
Caveat: This extract from the Asian Development Bank Institute (ADBI) report, published in 2010, explains why and when the UPA government’s fiscal defict began to spiral out of control.
“The
central budget in 2008–2009, announced in February 2008, seemed to
continue the progress towards FRBM targets by showing a low fiscal
deficit of 2.5% of GDP. However, the 2008–2009 budget quite clearly made
inadequate allowances for rural schemes like the farm loan waiver and
the expansion of social security schemes under the National Rural
Employment Guarantee Act (NREGA), the Sixth Pay Commission award and
subsidies for food, fertilizer, and petroleum.”
“These
together pushed up the fiscal deficit sharply to higher levels. There
were also off-budget items like the issue of oil and fertilizer bonds,
which should be added to give a true picture of fiscal deficit in
2008–2009. The fiscal deficit shot up to 8.9% of GDP (10.7% including
off-budget bonds) against 5.0% in 2007–2008 and the primary surplus
turned into a deficit of 3.5% of GDP.
“The
huge increase in public expenditure in 2008–2009 of 31.2% that followed
a 27.4% increase in 2007–2008 was driven by the electoral cycle with
parliamentary elections scheduled within a year of the announcement of
the budget.”
The recent
announcement of the Seventh Pay Commission comes again, not unexpectedly, at the end of an electoral cycle.
5. Inflation:
1998-2004: 5%.
2004-2013: 9% (Both figures are averaged out over their respective tenures).
Advantage
again to NDA. Inflation under NDA was on average half that under UPA,
leading to the RBI’s controversial tight money policy, high interest
rates and rising EMIs.
6. External Debt:
March 2004: $111.6 billion.
March 2013: $390 billion.
The
UPA suffers badly in this comparision, a result of lack of confidence
in India’s economy and currency following retrospective tax legislation
and other regressive policies, especially during UPA-2.
7. Jobs:
1999-2004: 60 million new jobs created.
2004-11: 14.6 million jobs
created.
Clearly, the UPA’s big failure has been jobless growth – a bad electoral omen.
8. Rupee:
1998-2004: Variation: Rs. 39 to 49 per $.
2004-13: Variation: Rs. 39 to 68 per $.
The
NDA government’s economic and fiscal policies, despite the various
crises of 1998-2000 pointed out earlier, evoked more global confidence,
leading to a relatively stable rupee (Rs. 10 variation) compared to the
Rs. 29 variation during UPA’s tenure.
9. HDI:
2004: India was ranked 123rd globally on the human development index (HDI) in 2004, with a score of 0.453.
2013: India has slipped 13 places to 136th globally on the HDI in 2013 with a score of 0.554.
10. Subsidies:
2004: Rs. 44,327 crore.
2013: Rs. 2,31,584
crore.
Here
again, profligate welfarism, as the ADBI report quoted earlier shows,
has led to a rising subsidy bill. Worse, a significant amount is
siphoned off by a corrupt nexus of politicians, officials and middlemen.
Conclusion: UPA scores above NDA on one of the 10 parameters (GDP growth), is level on one other parameter (fiscal deficit) while NDA does better than UPA on the remaining eight parameters.
The next time Finance Minister P. Chidambaram wishes to stage an encounter with facts, he would do well to be aware of those
facts.
Sources: Economic Survey of India, UNDP, IMF, Planning Commission of India.
