New Delhi: The Modi government has often been targeted by the Congress for crony capitalism, but the Economic Survey has said the practice was all-pervasive earlier after after 2014, it has been stopped.
The BJP under the leadership of Prime Minister Narendra Modi came to power in May, 2014, and was elected for the second five-year term in 2019.
"Pro-crony policies as reflected in discretionary allocation of natural resources till 2011 led to rent-seeking by beneficiaries while competitive allocation of the same resources post 2014 have put an end to such rent extraction," the Survey said.
Referring to indiscriminate lending in the UPA era, the Survey said "crony lending" led to wilful default and piling up of non-performing assets (NPAs). It said the practice led to wilful default and promoters of the companies siphoning off wealth from banks. This led to losses that dwarfed subsidies directed towards rural development.
The pre-Budget document that captures the health of economy said that India's aspiration to become a $5 trillion economy depends critically on promoting "pro-business" policy that unleashes the power of competitive markets to generate wealth.
"Viewed from the lens of the stock market, which captures the pulse of any economy, creative destruction has increased significantly after reform. Before liberalization, a Sensex firm expected to stay in it for 60 years, which decreased to only 12 years after liberalization," the Economic Survey said.
"Every five years, one-third of Sensex firms are churned out, reflecting the continuous influx of new firms, products and technologies into the economy. Despite impressive progress in enabling competitive markets, pro-crony has destroyed value in the economy," it added.
Citing example of trends at bourses, the Economic Survey authored by Chief Economic Adviser (CEA) Krishnamurthy Subramanian said that an equity index of connected firms significantly outperformed the market by 7 per cent a year from 2007 to 2010, reflecting abnormal profits extracted at common citizens' expense.
"In contrast, the index underperformed the market by 7.5 per cent from 2011, reflecting the inefficiency and value destruction inherent in such firms," it said.