Friday, April 04, 2014

UPA's economic performance: it's the world economy, stupid

I wrote yesterday that it is hard to argue that the current downturn is on account of serious policy errors committed by UPA-II. I said global factors and non-policy factors are more important.

Today, Ruchir Sharma, writing in TOI, points out that India's performance on growth and inflation has not changed between the NDA and UPA governments. Any change in growth is linked to the fortunes of the world economy. The boom in UPA-I and the downturn in UPA-I are both explained largely by the ups and downs of the world economy. He corroborates my view that the significant failure of UPA-II is in respect of inflation (which, I said, was parlty because correct economic data was not available to the government on time): 
The last BJP-led government took power in 1999 and presided over a five-year period of rather standard Indian performance. India posted average annual GDP growth of 5.8% — ranking 50th in the emerging world — with inflation of 3.9% — ranking 70th in the emerging world. This record represented little change from the previous 20 years, so it is hard to see why it should provoke much criticism, or bragging....
After 2003, with international trade booming and easy money pouring out of central banks in the West, growth started to accelerate sharply across the emerging nations, and India was no exception. Its GDP growth rate accelerated to 8% over the next five years, under the Congress government, but its place in the ranks did not improve much. From 2004 to 2008, India ranked 39th in the emerging world for average GDP growth and 73rd for inflation. ....
  Over the past five years, India's average annual GDP growth rate has slowed to 6.5% on average but its global ranking is still basically unchanged at 45th as growth has faltered in many emerging nations...
India's inflation rate has risen from 6.5% in its first term to 10.5% in the second, while its inflation ranking has fallen from 73 rd in the world to a near bottom decile rank of 130th  

2 comments:

Kushal Upendra Kothari said...

" It is hard to understand why Modi and even Rahul Gandhi are spending so much time talking about the mediocre records of governments in which neither ostensibly played a decisive part, rather than focusing more on the future."
We'd love to see more discussions on future plans, of course without too much focus on what Rahul Gandhi thinks about Rahul Gandhi's role in empowering the women and the youth :)

Anonymous said...

Hi Prof,

Donot know if the two periods can be compared. Although I am no fan of Vajpayee government, I felt that the background in which NDA assumed power (fiscal situation of 90s, most banks turning to red, industrial units getting sick) was far graver than the one during which UPA enjoyed.

Although there is little to demarcate between their neo-liberal policies, it does seem that in infrastructure led economic activity NDA government was ahead than UPA.

- Deeps