21 Aug State of the Indian Economy and the doling out of Half Truths!
You know that the countdown for 2019 general elections has started when a section of the media starts churning out a specific narrative. Apart from the usual caste and religion divisiveness that’s seen as a pre cursor to any elections, media reporting based on how well or badly the economy has performed is a pet subject for setting a narrative.
The state of the Indian economy is a subject that’s least understood by the common people but most affected by it. This gives a great opportunity for a section of the media to peddle false narratives through misguided and misinterpreted facts and numbers. Very rarely, people like you and me, will delve into economic number crunching, right? So taking advantage of this fact, headlines are made to appear in leading newspapers that give a skewed picture of the Indian economy, sometimes publishing false data, but mostly representing half data! Half knowledge can be dangerous and this is exactly what we, as citizens, end up believing…the half truth!
Thanks to Social media, this misguided and misrepresented facts and figures are being called out and a differing view point is being placed in front of us. A recent article appeared in the Indian Express claiming that the economy was in the pink of health when former PM Manmohan Singh handed over the reigns to the PM Narendra Modi government in 2014. The crux of the article is aimed to show that there was no ‘policy paralysis’ during UPA-2, which all of us can vouch for as untrue. The credibility of an economist as a Prime Minister in UPA is being pushed forward through this article. And the comparative that is being shown is to contrast it, with the non-economist credentials of the current Prime Minister.
But the article is far from truth and this is amply and suitably proved by various sources on Social Media. The following is a summary of statements aim to give a picture of the state of our economy between 1999 and today. It’s more than clear, what the NDA governments did and what they achieved in comparison with the UPA governments.
1. The cumulative growth rate of both UPA-1 and UPA-2 is pegged at 8.3%, which is higher than the cumulative growth rate achieved under NDA-1 (Atal Bihari Vajpayee government) and NDA-2 ( Narendra Modi Government), which is 7.35%. However, remember that this is only the half truth.
2. Looking at the performance of governments, NDA-1 came into power when the GDP was at 3.75% in 1997-98, which was taken to 8.22% in 2003-04. The other side of this story is this was a tenure that saw low inflation, low Current Account Deficit and Fiscal Deficit. Thus, the big jump in the growth rate was achieved, keeping all other aspects of economy stable and reform oriented.
3. The NDA-1 under leadership of Atal Bihari Vajpayee CAD surpluses rose to 2.3% from 1.3% in 1997-98, thus reducing the burden of fiscal deficits. Inflation was brought down from 6.8% to 3.9% during this period, showing that the government was not just focused on growth numbers, but was interested also in systemic reforms required for a healthy economy.
4. It is during this period that the country had more than $100 Billion in Forex reserves.
5. So the UPA-1 under the leadership of Manmohan Singh got a booming economy that’s stable and was showing good signs of a healthy economy poised for further growth. With this economy that was robust in health, was carried forward on its high wave by UPA-2.
6. However, the high growth during this period was a legacy of the systemic reforms initiated by NDA-1 and under the leadership of Atal Bihari Vajpayee and was sustained not on reforms but on the basis of very expensive policies. This led to a more than 6% fiscal deficit which had been contained to 1.3% before. Along with this, we had an unsustainable current account deficit and it is exactly during this period that we mismanaged the banking sector by offering bad loans!
7. This led to a more than $100 billion in bank NPAs and an inflation that knew no bounds. Remember, the high costs of basic amenities? Isn’t that one of the primary reasons that we voted the UPA-2 out of office?
8. As the reform orientation and stability of the Indian economy was systematically removed during UPA-1, the coupling of external global conditions led to a crash, causing the GDP to come down to 7.05% in 2011-12 and subsequently to 6.05% in 2013-14.
9. Remember, this was also the golden time of UPA-2 when the entire country rocked on the massive scams and frauds that were unearthed. While the common man struggled with increasing prices, the rich payouts of the scams wallowed in black money.
10. The price that we have paid as a nation to sustaining high growth during UPA-1 and UPA-2 is huge. Loan waivers, duty cuts and all kind of unsustained spending ended us up in a state that broke the back of the economy that NDA-1 had tried to build. This is very well expressed by R. Jagannath in the article linked below.
11. Looking at the performance of NDA-2, we will have to understand that a broken and wounded state of the economy was handed over to the Narendra Modi government. Despite this, the last four years, through a very diligent reform planning by Finance Minister Arun Jaitley and a very firm leader like Prime Minister Narendra Modi, led to some major recovery of the economy.
12. The fiscal deficit is budgeted at 3.3% in 2018-19, inflation is contained at less than 5%, there is a gross FDI standing at $62 Billion and Forex reserves reaching $404 billion.
13. A quick summary of numbers reveals this:
1999 to 2004 – NDA-1 – % change in GDP +0.3
2004 to 2009 – UPA-1 – % change in GDP -1.1
2009 to 2014 – UPA-2 – % change in GDP -3.3
2014 to now – NDA-2 – % change in GDP -1.2
The following data is compiled on the basis of multiple sources and compilation of Tweets on the same subject by various economists and policy makers like Finance Minister Arun Jaitely @arunjaitely, Dhaval Patel @dhaval241086, Ashish Chandorkar @c_aashish, Sanjeev Sanyal @sanjeevsanyal and R.Jagannath @TheJaggi.
Refer to the following links for more data:
Refer to very detailed posts of Facebook by Finance Minister Arun Jaitley on the performance of economy under NDA and UPA