The BJP-led National Democratic Alliance (NDA) government tabled a ‘White Paper’, a detailed analysis on the Indian economy, in the Parliament today. The White Paper by the Centre aims to highlight the state of the economy during the Congress-led UPA years.
The ‘White Paper’ says that “In 2014, when we (NDA) formed the government the economy was in a fragile state; public finances were in bad shape; there was economic mismanagement and financial indiscipline, and there was widespread corruption. It was a crisis situation.” NDTV accessed the White Paper tabled by the Centre.
The white paper uses the term “UPA Government” for the government led by Dr. Manmohan Singh was elected to office in 2004, and “our Government” for the NDA Government led by Narendra Modi, elected to office in 2014
Here are the key focus areas of the White Paper:
The UPA Government inherited a healthy economy ready for more reforms, but made it non-performing in its ten years
Ironically, the UPA leadership, which seldom fails to take credit for the 1991 reforms, abandoned them after coming to power in 2004.
Worse, the UPA government, in its quest to maintain high economic growth by any means after the global financial crisis of 2008, severely undermined the macroeconomic foundations.
One such foundation that was severely weakened by the UPA government was price stability.
The banking crisis was one of the most important and infamous legacies of the UPA government.
The banking crisis in 2014 was massive, and the absolute sum at stake was too large.
In an era where capital flows dominate, India’s external vulnerability shot up because of over-dependence on external commercial borrowings (ECB).
The famous Foreign Currency Non-Resident (FCNR(B)) deposit window for NRIs was actually a call for help when there was a large depletion of the foreign exchange reserves.
The costly solution to the above self-created predicament reeked of a re-run of 1991 when India had to approach the IMF for assistance during a Balance of Payments crisis.
The UPA Government’s response to the 2008 Global Financial – a fiscal stimulus package to combat the spill-over effects -was much worse than the problem it sought to address.
Under the UPA government, public finances were brought to a perilous state.
Run-away fiscal deficits led the economy to the fiscal precipice.
If what we saw as concerning, what we could not see was more troublesome.
As a result of its fiscal mismanagement, the UPA government’s fiscal deficit ended up being far higher than it had expected, and it subsequently ended up borrowing 27 per cent more from the market than what it had budgeted for in 2011-12
The fiscal deficit burden became too big to bear, for the economy.
In the pretext of responding to the impact of the global financial and economic crisis (while arguing, at the same time, that India was not affected by the crisis), the UPA government expanded its borrowing and did not relent at all.
Not only did the UPA Government borrow heavily from the market, but the funds raised were applied unproductively.
The conspicuous neglect of infrastructure creation and challenges of the logistical constraints caused industrial and economic growth to stumble.
The Reserve Bank’s reports also pointed towards excessive revenue expenditure by the UPA government.
Poor policy planning and execution also resulted in large unspent funds for many social sector schemes during the UPA years
Health expenditure remained a pain point for Indian households under the UPA government.
The government’s prioritisation of unproductive spending meant that significant funds were allocated towards consumption rather than productive investment.
Such was the lack of consideration for long-term national development that even the critical issue of defence preparedness was hampered by policy paralysis.
Ban on industrial development in coastal districts.
The UPA government’s decade of governance (or its absence) was marked by policy misadventures and scams
The coal scam shook the conscience of the nation in 2014.
The UPA government will always be remembered for the largest power outage in our history, in July 2012, leaving 62 crore people in darkness and putting national security at risk.
The electricity shortages under the UPA government were also repeatedly pointed out by international agencies.
India’s telecom sector lost a precious decade due to the 2G scam and policy paralysis.
The 80:20 gold export-import scheme launched by the UPA government exemplifies how government systems and procedures were subverted to serve particular interests for obtaining illegitimate pecuniary gains.
The UPA government’s term was replete with examples of decision stasis.
The UPA government capitalised on the reforms brought in by the previous government but fell short of delivering on crucial reforms promised by them.
Aadhar in India, a symbol of digital empowerment, too has suffered at the hands of UPA.
In the UPA government, decision-making came to a standstill due to corruption and scandals in defence , compromising defence preparedness.
A large number of development programmes and projects were implemented poorly
The economic affairs were in dire straits, which was not lost on public commentators.
While investors across the world sought ease of doing business, the UPA government provided policy uncertainty and hostility.
The demotivating investment climate under the UPA government led to domestic investors moving abroad.
The decade of the UPA government was a lost decade because it failed to capitalise on the strong foundational economy and pace of reforms left behind by the Vajpayee government. The potential of compounding growth never happened.
It was a lost decade as the UPA government failed to gasp opportunities for technology-led innovation, efficiency and growth
Time and again, there was a crisis of leadership in the UPA government
The Economic Survey of 2012-13 noted, “While India’s recent slowdown is partly rooted in external causes, domestic causes are also important.
The UPA government’s economic and fiscal mismanagement had ultimately hollowed the growth potential of India by the end of its term.
The economic mismanagement choked the growth potential and India became a “fragile” economy.
Ultimately, what the UPA Government bequeathed in 2014 was an unenviable legacy of a structurally weaker economy and a pervasive atmosphere of despondency.
There was pervasive corruption in various government activities, including in procurement, allocation of natural resources, and regulatory approvals.
When our government assumed office, the economy was on a road to nowhere, exhibiting tell-tale signs of deep distress emanating from multiple ‘wrong turns’ in economic policy.
As soon as our government took over in 2014, we recognized the urgent need to revamp and overhaul systems and processes, to help India advance on the path of development while also bolstering its macroeconomic foundations
Right from spearheading the digital revolution to the elimination of open defecation, and from successfully vaccinating the entire eligible population using indigenous vaccines to substantially diversifying exports, India has achieved remarkable milestones under our new governance paradigm
We constituted an expenditure Reform Commission
We continue to undertake measures to unearth black money and to discourage recourse to it.
In parallel, we have also strengthened the health of the economy and the business sector.
The initiation of the reform process started yielding positive results in the early years of our government, by improving the investor climate and creating a favourable outlook for the economy.
This section of the paper discusses in detail how our government rescued, recovered and rejuvenated the economy from policy stasis, paralysis and misgovernance by the UPA government and infused it with dynamism and growth, and hope in the people.
Since the time our government assumed power in 2014, the Indian economy has undergone many structural reforms that have strengthened the macroeconomic fundamentals of the economy.
These reforms resulted in the transition of India from the league of ‘Fragile Five’ to the league of ‘Top Five’ in just about a decade as the economy was transformed into a far more resilient avatar amidst a challenging global environment.
In the past ten years, the government has revitalised the stagnant financial sector and overhauled the credit ecosystem within the economy, bringing about significant improvements.
Our government’s vision of “Nation First” has transformed the quality of India’s infrastructure and logistics ecosystem, which will be key for the country to attract investments and expand its presence in global value chains.
For instance, when our government took charge in FY15, the pace of national highway construction languished at 12 km/day. The pace of construction rose more than 2.3X to 28 km/day in FY23.
In addition, the procurement of critical equipment for the defence sector, paramount for national security was not prioritised by the UPA government. These have been emphasised by our government.
Our Government understands the true spirit of balancing ‘Prakriti’ and ‘Pragati’ which was wholly missing in the regulations of 2011.
The reform measures undertaken by our government have significantly elevated the medium-term investment prospects of the economy.
Empowerment through welfare has been the leitmotif for our government. We adopted the philosophy “sabka sath, sabka vikas” prioritising universal access to basic amenities, and a participatory, mission-mode approach in actualising this philosophy.
Our government has resolved the execution challenges that plagued the UPA government by implementing technology-based targeting and monitoring mechanisms.
Besides physical and digital efficiency of implementation, this Government also utilised behavioural change and social capital through “Swachh Bharat”, “Beti Bachao Beti Padhao”, and a pro-active communication of schemes and programmes.
Our government has innovated the delivery infrastructure besides widening the social security net.
The PM-Kisan Samman Nidhi empowered farmers and improved their incomes without hurting the borrower-lender relationship.
To tackle the enduring challenge of high inflation inherited from the UPA government in 2014, our government strategically addressed the root cause of the problem by implementing responsible fiscal and monetary policies.
Our government has made concerted efforts to control the high external sector vulnerability inherited from the UPA Government.
Due to the economy’s strong fundamentals restored by our government, Rupee demonstrated resilience during global shocks such as the Russia-Ukraine conflict and taper tantrum of 2021-22 by major central banks.
Not only did our government manage the current account prudently, but it ensured its smooth and comfortable funding via more stable foreign direct investment (FDI).
As a result, India’s external sector is much safer, with forex reserves increasing from USD 303 billion (equivalent to 7.8 months of imports)58 in March 2014 to USD 617 billion (10.6 months of imports)59 in January 2024.
When our government came to office, public finances were not in a healthy state. To restore public finances to good health, our government went to great lengths to transform India’s fiscal system into a reformed tax and spending ecosystem.
Moving away from the past practice, below-the-line financing is now being transparently Disclosed.
The market borrowings of the Central Government, which had grown at phenomenal rates during the UPA years, were controlled by our government.
Improvement in the quality of expenditure by our government has been the cornerstone of our fiscal policy.
In absolute numbers, the budgeted capital expenditure has increased over five-folds from FY14 to FY24 (RE), without any heating-up of the economy.
Contrary to the UPA Government’s approach of expanding the budgets during the high growth periods (pro-cyclical), the present government has followed a prudent fiscal policy of containing the budget size during peak cycle of GDP growth to generate adequate fiscal space for handling any unforeseen events (counter-cyclical).
The introduction of the GST regime was a much-needed structural reform.
The new tax structure is characterised by political consensus building and pooled sovereignty of the GST Council, both salient examples of cooperative federalism.
Far-reaching tax reforms over-past decade have put in place effective systems that have improved revenue collection and compliances.
Acknowledging that States are equal partners in development, our government, in the true spirit of cooperative federalism, accepted the recommendations of the 14th and 15th Finance Commission
Moreover, the Centre has stood firm by the States in times of a changing environment.
In order to address the inefficiencies and enhance the competition and transparency in the coal sector, multiple reforms were taken up by our government in the last ten years.
Our government has addressed the multiple issues plaguing the power sector of the country, thus transforming it from power-deficient to power-sufficient.
Since 2014, our government has taken several steps to correct the situation in the telecom market and to effectively handle the failures that resulted from the lack of clarity in policy in the sector.
The UPA Government failed miserably to facilitate economic activities. Instead the UPA Government created hurdles that held back economy.
Conclusion
“Our government, armed with political and policy stability, recognised the need to make tough decisions for the greater economic good.”
The Amrit Kaal has just begun and our destination is “India a developed nation by 2047”. It is our Kartavya Kaal.
