The Union government, led by Narendra Modi, presented the White Paper on the Indian Economy in the Lok Sabha on Thursday, comparing the economic performance under the UPA and NDA governments. The document highlighted the NDA’s efforts in overcoming challenges inherited from the UPA’s policy paralysis, steering India towards sustainable growth through tough decisions. It noted the transition from the “fragile five” to the world’s top five economies, citing issues like poor public finances and widespread corruption during the UPA era.
What is the White Paper?
The White Paper is a comprehensive document that provides a detailed analysis of the state of the Indian economy before and after 10 years of UPA rule from 2004 to 2014. It also outlines the various reforms and initiatives undertaken by the NDA government since 2014 to revive and transform the economy. The White Paper consists of 90 points, out of which 46 points are devoted to pointing out the major failings of the UPA government in regards to the economy. The other points are devoted to how the NDA “resuscitated” the economy from ‘fragile 5’ to third largest. The White Paper also provides data and evidence to support its claims and arguments. The White Paper aims to inform the public about the true state of the economy and draw lessons from the mismanagement of those years.
UPA’s economic mismanagement
According to the White Paper, the UPA government abandoned the 1991 reforms after coming to power in 2004 and severely undermined the macroeconomic foundations in its quest to maintain high economic growth by any means after the global financial crisis of 2008. Some of the major failings of the UPA government in regards to the economy were:
- High inflation: Over a 5-year period from FY2010 to FY2014, the average annual inflation rate was in double digits. Between FY04 and FY14, average annual inflation was 8.2%.
- Rising NPAs: Gross Non-Performing Assets ratio in Public Sector banks rose from 7.8% in 2004 to 12.3% in 2013. Gross advances by public sector banks were only Rs 6.6 lakh crore in March 2004. In March 2012, it was Rs 39.0 lakh crore.
- External vulnerability: India’s external vulnerability shot up because of over-dependence on external commercial borrowings (ECB). During the UPA government’s tenure, ECB rose at a compounded annual growth rate (CAGR) of 21.1% (FY04 to FY14), whereas in the nine years from FY14 to FY23, they have grown at an annual rate of 4.5%.
- Currency depreciation: From its high to low, against the US dollar between 2011 and 2013, the Indian rupee plunged 36%.
- Fiscal indiscipline: For 6 consecutive years between FY09 to FY14, the ratio of India’s Gross Fiscal Deficit (GFD) to Gross Domestic Product (GDP) was at least 4.5%.
- Poor policy planning and execution: Large unspent funds for many social sector schemes during the UPA years crippled the effectiveness of the government’s schemes. Across 14 major social and rural sector ministries, a cumulative of Rs 94,060 crore of budgeted expenditure was left unspent over the period of UPA government (2004-14), which amounted to 6.4% of the cumulative budget estimate during that period.
NDA’s economic revival
The White Paper stated that with political and policy stability, the Modi government recognized the necessity of making difficult decisions for the overall economic welfare. It also criticized the UPA government for impeding economic activities and leaving behind a severely damaged economy in 2014. Some of the major achievements of the NDA government in regards to the economy were:
- Low inflation: The average annual inflation rate has been brought down to less than half at around 4% since FY15.
- Banking sector reforms: The Insolvency and Bankruptcy Code (IBC) was enacted in 2016 to resolve stressed assets and improve credit discipline. The NPA ratio has declined from a peak of 11.5% in March 2018 to 7.5% in September 2023.
- External stability: India’s current account deficit has been contained at less than 2% of GDP since FY15. India’s foreign exchange reserves have increased from $304 billion in March 2014 to $620 billion in December 2023.
- Currency appreciation: The Indian rupee has appreciated by about 10% against the US dollar since May 2014.
- Fiscal consolidation: The fiscal deficit has been reduced from 4.5% of GDP in FY14 to 3% of GDP in FY23. The revenue deficit has been reduced from 3.2% of GDP in FY14 to 1.8% of GDP in FY23.
- Effective policy implementation: The government has ensured timely and efficient utilization of funds for various social and rural sector schemes such as PM-KISAN, PMAY-G, PMGSY, MGNREGA, etc.
The White Paper concluded that the NDA government has overcome the crisis of those years, and the economy has been put firmly on a high sustainable growth path with all-round development. It said that the government is committed to continue the reform momentum and achieve the vision of a $5 trillion economy by 2025.
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