The 5 years of governance (2009-10 to 2013-14) under UPA II has been an economic disaster. But, Dr Manmohan Singh during his press conference on January 3, 2014 – third during last one decade of his un-interrupted stint as Prime Minister – tried to camouflage it unsuccessfully though.
Having got a mandate to re-govern in 2009, it was only logical that Dr Singh should be doing an introspection on the performance of UPA Government during the last 5 years viz., 2009-10 to 2013-14. Yet, he preferred to amalgamate UPA I & UPA II and exhorted that economy had done consistently well during last one decade.
To even make a reference to the performance under UPA I at current juncture is totally irrelevant and meaningless. It is like a student who has ‘failed’ in 12th standard and being reprimanded by parents/teachers, stubbornly defends that he passed in 11th standard with distinction marks.
This logic is fallacious and untenable. Even so, since the Prime Minister used stellar performance of those years to put up a brave front, it is pertinent to point out that the foundation for this was laid during earlier NDA (National Democratic Alliance) dispensation 1999-2000 to 2003-04.
NDA had inherited a fragile economy with GDP growth of less than 5% . During its tenure, it implemented far reaching policy reforms as also steps to boost infrastructure. As a result, during 2003-04, economy grew at a robust 8.5%. Inflation was much less than 5%. Fiscal deficit too was low around 2.5% of GDP.
When UPA took charge in 2004, apart from rock solid foundation, a favourable global environment gave impetus to foreign investment and export. All this led to GDP growth above 9% for three years viz., 2005-06 to 2007-08. Fiscal deficit was below 4% and inflation less than 5% except 2006-07 when it was close to 7%.
Then, came global financial crisis and Indian economy showed signs of tottering. During 2008-09, growth collapsed to 6.7%. Manufacturing output plummeted to 2.5% and agriculture declined by 2.4%. Fiscal deficit splurged to 6% of GDP and inflation zoomed to 8.1%. Retail inflation was even higher at 9.1%.
Government then, took recourse to indiscriminate monetary expansion to boost demand. Excise duties were drastically slashed to prop up industries. While, there was revival of growth to 8.6% in 2009-10, fiscal deficit expanded to 6.5%. Retail inflation spurted to more than 12%. People paid a price for resurrection of growth by way of fiscal instability & inflation.
In 2010-11, growth of 9.3% was led by spectacular growth in agriculture at 18%. India also benefited from inflow of foreign funds triggered by QE (quantitative easing) program of US Fed board. However, inflation continued to remain in double digit trajectory. Fiscal deficit too was worrisome at close to 5% of GDP.
By this time, economy ran out of steam and from 2011-12 it commenced its downhill journey. GDP growth collapsed to 6.2% in that year and went down further to 5% during 2012-13. During current fiscal, there was further deceleration in growth to 4.4% in the first quarter and 4.8% during second quarter.
Growth in manufacturing took a huge hit. It was 3% in 2011-12 (down from 9% in previous year) and almost scratched the surface during 2012-13 at 1.3%. During current year also, sluggishness has continued. Growth in agriculture too nosedived to 3.1% in 2011-12 and turned ‘negative’ 1.9 during 2012-13.
Fiscal deficit splurged to 5.7% of GDP during 2011-12 (up from 4.8% in previous year). During 2012-13, even though it was brought down to 5.2%, this was largely due to financial engineering that involved compression in planned expenditure and deferment of subsidy payments. But for this, FD would have been higher by 1.6%!
During 2013-14 also, even though Government has fixed a target of 4.8%, it has already exhausted 94% of target during first 8 months. To ensure that situation does not get out of control, as in previous year it proposes to take recourse to window dressing on a much bigger scale. The amount could be Rs 290,000 crores or US$ 47 billion.
Whole sale price index during 2011-12 and 2012-13 moved in the range of 7.5% to 9% whereas retail inflation – as measured by consumer price index hovered in double digit figures. During current fiscal, inflation zoomed led by prices of fruits, vegetables and cereal and was key factor behind drubbing Congress received in assembly elections in 4 major states held in November/December, 2013.
In short, UPA II has sat over an economic disaster. Dr Manmohan Singh could have used opportunity to do a candid and objective analysis of economic trends during his regime. Instead, he indulged in obfuscation of facts aimed at hiding negatives with the exception of inflation especially food inflation.
Here too, Dr Singh passed on the buck to international factors like prices of imported fuel disregarding domestic goof-ups viz., gross mis-management of food economy and in-efficiencies in supply chains. There was not even a whisper about ‘hoarding’ that lies at core of food inflation.
While, blaming global factors for India’s economic ills, he maintained stout silence on the positive impulses (inflow of funds & demand for our exports) emanating from international landscape that helped in achieving high growth rates during 2005-06 to 2007-08 and 2010-11. Clearly, he was not fair and objective either.
Even as Team Dr Singh has all through its tenure talked loud on reforms, action on ground does not bear this out. Indeed, it has suffered from policy haemorrhage. While, it promised to remove subsidies within given time frame, in reality subsidy ballooned! Major reforms in food, fertilizers and oil were put in cold storage.
On expediting approvals & clearances, the Government has woken up only towards the fag end of its current term. Land acquisition issues and environment delays have been dogging industry for long. Yet, it was only in 2013, that it thought through some concrete steps. There is a long way to go.
Economic growth in India is hamstrung by corruption that has permeated in every area viz., land, mineral resources, spectrum etc. Yet, PM has refused to acknowledge this inextricable linkage. As a result, concrete action in this most crucial area is missing.
All through his meet with media, Dr Singh kept on defending the indefensible. His frequent references to ‘historians will judge him’ and that he does not believe in what ‘contemporary media’ say only meant that he is no mood to face the reality.
Clearly, Dr Manmohan Singh, the legendary economist has not left a good impression on conclusion of his innings!