INSUBCONTINENT EXCLUSIVE:
Ten years are a long time in Indian economy
A study of its fortunes during 2009-19 is a reminder that much water has indeed flowed under the bridge
To be sure, equities broke new ground as investor expectations soared
This marks a decisive phase in India's history as the country goes to polls this week, results of which will be out on May 23.
Close to 90
crore Indians are slated to cast their ballot, which kicks off on April 11
While most opinion polls are giving the ruling BJP the upperhand, the turf is still wide open, which is being perceived as a clash of
We tried to put this high-octane fight in perspective
Here is how the Narendra Modi-led NDA (2014-19) goes head to head with Manmohan Singh's UPA II (2009-14).
The 12 charts that follow next
encapsulate the Indian economy during these past 10 years under the two governments in question.
Growth takes a knockBoth the governments
saw moderation in growth towards the second half of their respective five-year terms
According to Elara Capital, the UPA rule suffered from policy paralysis while growth under NDA was adversely affected by demonetisation and
In the short term, the cash economy and unorganised sectors were the hardest hit.
In the long term, however, Indian economy may see
tailwinds by way of higher organised sector growth stemming from these policy steps.
Tax-GDP ratio shinesThere has been a 200-basis point
increase in tax-to-GDP ratio in the past five years amid higher compliance
“There has been an increase in compliance as reflected in the ratio of the number of returns filed to the number of persons filing returns
This ratio shows returns filed per person in a year
The higher number indicates past returns that were filed, suggesting improvement in compliance,” said Elara Capital.
Spending turns
stickyCapital expenditure saw solid growth in the first two years of the Modi government
However, it lost momentum later
More importantly, the NDA government continues to push the burden of capex on extra-budgetary resources, with internal and extra budgetary
resources (IEBR) rising to Rs 6 trillion in FY20, from less than Rs 3 trillion in FY14 under the UPA dispensation.
Dividend and
DisinvestmentThis is where the Modi government chose policy continuity
The government increased reliance on dividend receipts in continuation with the policy adopted by the UPA towards the end of its tenure
RBI’s surplus transfer policy in particular has been put under scrutiny under the NDA, with the RBI paying interim dividend in FY18 as
well as FY19 -- Rs 10,000 crore and Rs 28,000 crore, respectively.
“Reliance on unconventional and off-market disinvestments rose
Receipts worth Rs 7,472 crore were in the form of buybacks and cross-holdings of central public sector enterprises under the entire regime
of UPA-2 as against Rs 65,698 crore under the NDA till date, suggesting greater reliance on unconventional measures for raising revenue,”
Elara said in its report.
SubsidiesAccording to revised estimates (RE) for 2017-18, food subsidy declined by Rs 40,000 crore to Rs 1 lakh
crore, from the earlier Rs 1.4 lakh crore
Food Corporation of India raised Rs 1.4 lakh crore in FY18 (RE) via other sources, up from estimated Rs 72,000 crore
This has further gone up to Rs 1.96 lakh crore in FY19, from Rs 72,000 crore (budgeted estimates), suggesting greater reliance on borrowings
by FCI due to delayed payment by the government.
State fiscal cloudsA greater share of untied funds under 14th Finance Commission and
compensation under GST for losses accrued prompted the NDA to bring down the centrally sponsored schemes, from 72 to 27 in 2015
However, lack of ability to spend efficiently amid loan waivers granted by some states means there is an overall decline in fiscal
discipline of the states.
Inflation managementThis is one front where NDA is letting the numbers speak for themselves
Record high food production for kharif as well as rabi crops led to a significant decline in food prices 2017-18 onwards, especially for
However, UPA had seen one of the worst droughts in India’s history in 2009 when the Southwest Monsoon was recorded at 22 per cent below
its long-period average.
“While UPA dealt with shortages, NDA had to deal with excesses
This primarily determined the difference in approach of the two regimes towards food policy management,” Elara Capital noted.
Food
inflation stings lessA pro-active food management policy, along with higher food production and imports, brought about a sharp fall in food
As a result, this affected realisation of farmers, suppressing wage growth and terms of trade for the sector.
MSP hikes and food
pricesDespite an average 24 per cent hike in minimum support price for kharif crops in 2018, the prices remain subdued
The wholesale price to MSP ratio continuously declined under NDA, suggesting limited impact of higher MSP on wholesale market
prices.
Highways in top gear Road conn ectivity stood out, a key policy focus of the NDA government
National Highways network expanded to 1,20,543 km over 2017-18, from 92,851 km in 2013-14
Highway construction is reported to be 12 km per day during 2013-14 as against 27 km per day over 2017-18
In FY19, NDA spent 0.42 per cent of GDP on road construction compared to 0.25 per cent in FY14.
The rural focusThe Rural Development
Ministry saw a steady increase in spending under the NDA regime
PM Awas Yojana, MGNREGA, Swachh Bharat and PM Gram Sadak Yojana got top billing
Compared to 2014 when only 56 per cent of villages had road connectivity, more than 82 per cent currently have been connected through
roads.
Financial inclusion picks upDemonetisation and direct benefit transfer (DBT) have ensured a leg-up to bank penetration in India, say
However, after the initial boost, the number of accounts and deposits have hit a plateau
The challenge is in the form of inactive accounts
According to the World Bank, 48 per cent of accounts were found to be inactive in India -- about twice the average of 25 per cent for
