Why UPA was better than NDA - Here's proof!

Last Updated: Tue, Apr 15, 2014 08:42 hrs
BJP follows divisive ideology: PM

The Bharatiya Janata Party (BJP) calls Manmohan Singh's 10 years as prime minister for the United Progressive Alliance a "dark decade of governance" but a recent paper by three economists concludes the economy did considerably well.

The paper, Growth in the time of UPA: Myths and Reality, says "compared to the NDA (BJP-led National Democratic Alliance) regime, the UPA period has been characterised by faster growth, higher savings and investment, growing foreign trade and capital inflows, and increased infrastructure spending in partnership with private capital."

Written by Maitreesh Ghatak of the London School of Economics, Parikshit Ghosh of the Delhi School of Economics and Ashok Kotwal of the University of British Columbia, the article will be published in the April 19 issue of the Economic and Political Weekly.

Manmohan Singh entered office at a time when global growth simply took off. Average growth in emerging nations between 2003 and 2007 almost doubled from what it was in the prior two decades. "Given that global shocks affect national economies, one way to make a fairer comparison of growth performance under different political regimes is to look at how much faster or slower India has grown relative to the world economy. In the NDA period, India's growth lead over the world was 2.5 percentage points, which increased to about 3.5 percentage points under the UPA," the paper observes.

This helped improve public finances. The paper says that while public debt under the NDA grew from 50 per cent of the gross domestic product to 61 per cent, during the UPA regime it came down to 48 per cent. Extra spending on the UPA's welfare schemes did not damage the government's finances. The UPA's record in reducing poverty has been impressive, the authors of the paper point out.

And contrary to popular perception, infrastructure did better. During the NDA regime, investment on infrastructure was five per cent of the GDP, which grew to seven to eight during the UPA years. The average annual foreign direct investment (FDI) inflow over the UPA's second term at $26.2 billion was a 10-fold increase over the NDA era's $2.8 billion. Gujarat's share in the cumulative FDI inflow into the country has remained static at four per cent and has started falling in recent years.

The UPA embraced globalisation, resulting in a surge in trade. Exports jumped from 15 per cent of the GDP in the NDA years to nearly 25 per cent in 2012-14 and imports grew from 17 per cent of GDP to 35 per cent in the same period.

The authors list several factors why a government with so many positives in its balance sheet lost the perception game. The Congress, they sum up, suffers from a "leadership crisis" that "couldn't even dispel the notion that in economic terms, its rule is a 'wasted decade' for the country."

"The UPA has been very friendly towards private investment in the infrastructure sector and this is what increased the flow of funds and boosted growth. But, if you open up mining, drilling and big construction projects to private corporations, there will obviously be a rush to grab the contracts or increase profit margins by bribing officials or politicians. You have to put other safeguards in place to stop that and this is where the UPA failed," Maitreesh Ghatak explained in an emailed response to Business Standard.

"Infrastructure building will naturally encroach on farmland and displace people, and unless you can devise a mechanism for just compensation and rehabilitation, growth will produce a lot of very angry people who have personally paid a price for it. This has happened in all corners of the country in the last decade," he added.

The crux of the argument is that the "wasted decade" suffered because of high growth whose consequences were not anticipated and, hence, not managed well. An area where the UPA's record is dismal is inflation. "A notable feature is that though food prices were rising at a slower rate than the general price level during the NDA years, this trend reversed soon after the UPA came to power," the authors argue. What has also contributed to the UPA's misery is rising inequality. Data suggest the rich-poor gap is at the highest in cities and at the highest since 1993-94 in the countryside.

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