The report of a committee under Dr Sudipto Mundle – set up by the National Statistical Commission [NSC] under the Ministry of Statistics and Program Implementation [MoSPI] – whose task was primarily to generate back-series data on growth in GDP at factor cost using the new base year 2011-12 has sent the grand old national party [read: Congress] into a jubilation mode.
The cause for the outburst is GDP growth in double digit [10.08% to be precise] projected by the committee for the year 2006-07. That happened to be the third year under the first tenure of then UPA – government led by Dr Manmohan Singh. For a party having got jolts elections-after-elections, there is hardly any reason to cheer. This is because 10.08% is marginally higher than the already known figure of 9.57% under the old series using 2004-05 as the base.
But, an unrelenting P Chidambaram [PC] the then finance minister [under UPA – regime] has labored hard to show that the average GDP growth during UPA – I and UPA – II at 8.3% and 7.6% respectively was higher than the average growth during NDA – I [1999-2000 to 2003-04] led by AB Vajpayee at 5.7% and during the first 4 years of NDA – II [2014-15 to 2017-18] led by Narendra Modi at 7.3%.
The statistics is amenable to multiple interpretations. A person can interpret it in a manner so as to reach the conclusion of his/her choice. The ex-finance minister appears to have used this to the hilt in trying to demonstrate that the economy under a decade of UPA – regime had done much better than the performance under NDA. ALAS! he has made an unsuccessful attempt.
To gauge the buoyancy of the economy by merely looking at the average growth in GDP over a period of time can be misleading. To get a realistic picture, it is necessary to look at the yearly growth. Other crucial parameters such as inflation, fiscal deficit [FD], current account deficit [CAD] cannot also be brushed aside.
The NDA – I clocked GDP growth of 6% annually ending up with 8.6% during 2003-04. The inflation was in single digit [<5%] and the twin deficits [FD/CAD] within prudential limits [during 2001-02 to 2003-04, it ran CA surplus even as FD in 2003-04 was 4.7%]. This was despite hostile external environment viz. US-led sanctions following the Pokhran-II nuclear test [1998], the dotcom bust in 2000 and the lag effect of the East Asian financial crisis of 1997-98.
The big thing Vajpayee did was to introduce structural reforms which laid the foundation for rapid growth in times to come.
These reforms included launching the Golden Quadrilateral [a euphemism for highway projects having footprint all over India]; policies for triggering telecomm revolution; rationalization of fertilizer and petroleum subsidies; strategic sale/disinvestment of public sector undertakings [PSUs]; passage of the Fiscal Responsibility and Budget Management [FRBM] Act and launch of the new exploration and licensing policy [NELP] which acted as the springboard for a big boost to production of oil and gas.
Under UPA – I, during 2005-06 and 2006-07, the growth was good at 9.5% and 9.6% [10%/10.08% as per new series]. But, the foundation for this was laid during NDA – I especially the highways and rural road projects boosting demand. Besides, a booming world economy led to surge in exports. However, in the wake of global financial crisis, growth started tapering and plunged to 6.7% in 2008-09.
Meanwhile, beginning 2008-09, the government completely abandoned fiscal discipline even as it indulged in reckless spending including skyrocketing subsidies. As a result FD rose to high of 8.9% [10.7% including off-budget items such as oil and fertilizer bonds]. Even worse, it goaded banks to lend indiscriminately to industrialists favored by corrupt politicians. The loans given during 2008-2014 were more than twice the cumulative amount lent till 2008. A good slice of these turned into NPAs.
The revival during 2009-10/2010-11 to 8.5%/9% [8.6%/9.5%: new series] was due to this artificial boost in demand. It was short-lived. The following three years saw deceleration in growth to 6% in 2011-12 and further to <5% in 2012-13/2013-14 [around 6%: new series]. The inflation was in double digit >10%, high CAD of 4.8%.
As regards jobs, during 1999-2000 to 2003-04, 60 million new jobs were created. Against this, during 2004-05 to 2011-12 only 14.6 million jobs created. This translates to 1.8 million per annum under UPA against 12 million per annum under NDA – I.
Under NDA – II, GDP growth was 2014-15:7.4%; 2015-16:8.2%; 2016-17:7.1%; 2017-18:6.7% [during the current year, it is projected to be 7.5%]. This is a splendid achievement considering that Modi inherited a fragile economy and was confronted with global slowdown. With these growth rates, India has got the tag of fastest growing economy and scaled up to the sixth largest in world ranking.
Much ado has been about the alleged detrimental effect of demonetization [Dr Manmohan Singh had predicted a decline of 2% in GDP growth due to this alone] and GST. The doomsayers have been proved wrong. The last two years when their impact ought to have been felt the most have recorded growth of around 7%. With this short-term disruptive effect [albeit marginal] over, the economy is now well poised on a sustainable high growth path.
During the first 4 years of NDA – II, inflation has consistently remained below 5% and FD in sync with the target for first 3 years; in 2017-18, this was 3.5% – a slight deviation from the target 3.2%. The CAD has remained well below 2%.
Even in regard to jobs, as amply demonstrated – with full facts – by Modi during his reply to the debate on no-confidence motion on July 20, 2018, over 10 million jobs were added during 2017-18 alone as against about 15 million under entire UPA tenure.
The biggest contribution of Modi – regime is a massive clean-up of the governance system and overhauling of institutions to galvanize them for rapid growth in a sustainable manner for all time to come.
To sum up, all through, NDA had a distinct edge over UPA. This reality cannot be camouflaged by sheer window-dressing of numbers. The Congress has made a failed attempt to hoodwink the public.