On Thursday, Nirmala Sitharaman, the Finance Minister, presented a "White Paper" that described the economic conditions of the UPA government, which was governed by the Congress, from 2004 to 2014. According to the document, the UPA government established obstacles that hindered economic activity and failed miserably to assist economic activities. "It basked in the after-glory of the lagged effects of the reforms of the Vajpayee-led NDA government and benign global conditions and proceeded to exploit the resultant fast economic growth for narrow political purposes without much concern for long-term economic consequences," according to a newspaper.
It goes on to say that the outcome included a mountain of bad loans, a huge current account deficit, double-digit inflation for five years that hurt many Indians financially, and membership in the "Fragile Five" group in 2013. "They not only failed to impart dynamism into the economy but also robbed the economy of it such that our industrialists went on record stating that they would rather invest abroad than in India," it continues.
"Investors are easy to alienate, but difficult to win back. The UPA government has demonstrated that weakening the economy is easier than strengthening it. They inherited a strong economy, but they left us with a fragile one. It has a new life thanks to us. We hope to expand on the progress made in the last ten years, which is represented in the box below, during the next twenty-five years."
Stability of Prices, Inflation
The study claims that the macroeconomic underpinnings were seriously weakened by the UPA government's attempt to preserve rapid economic development following the 2008 global financial crisis. Furthermore, it adds, economic commentators claim that severe mismanagement and apathy caused the economy to collapse.
It adds that price stability was "one such foundation that was severely weakened by the UPA government" and that the average person suffered the most from the ensuing inflation between 2009 and 2014. Six years of significant fiscal deficits between FY09 and FY14 caused hardship for average and lower-class households. The average annual inflation rate throughout the five-year period between FY10 and FY14 was double digits. The economy experienced 8.2% annual average inflation between FY04 and FY14."
In the Banking System, Bad Debts
One of the most significant and notorious consequences of the UPA government, according to the paper, was the financial crisis. The Gross Non-Performing Assets (GNPA) ratio in Public Sector banks was 16.0% when the Vajpayee-led NDA administration began office and decreased to 7.8% when they left.
In September 2013, due in large part to political meddling by the UPA government in public sector banks' commercial lending choices, this ratio - - which includes restructured loans - - rose to 12.3% (Chart 2); far that high proportion of problematic debts was understated, which is far worse.
Furthermore, the study observes that the economy was in good shape when the UPA government took control, and that during its ten years in office, it failed to grow. It further states that the economy was developing at an 8 per cent clip in 2004—the year the UPA administration took office—against a stable global economic backdrop, with growth in the industry and services sectors exceeding 7 per cent each and the agriculture sector rebounding beyond 9 per cent in FY04.
The Economic Survey of 2003–04 reported that "the economy appears to be in a resilient mode in terms of growth, inflation, and balance of payments, a combination that offers large scope for consolidation of the growth momentum with continued macroeconomic stability."
The document claims that the 2014 banking crisis was severe and that there was an excessive amount at risk. In March 2004, public sector banks' gross advances amounted to a mere Rs 6.6 lakh crore. It was Rs 39.0 lakh crore in March of 2012. Moreover, not every loan with issues was identified. There was a lot going on underneath."
A research released in March 2014 by Credit Suisse stated that around Rs 8.6 lakh crore was outstanding debt due by the top 200 corporations with an interest coverage ratio of less than one. Rs 3.8 lakh crore, or over 44% of those loans, had not yet been classified as problem assets. The GNPA ratio would have increased by an additional 6.7% only from that. 2018 saw a former Reserve Bank of India governor write in response to a Parliamentary Panel, stating, "A larger number of the bad loans originated in the period 2006-2008."
External Susceptibility
The paper claims that India's over-reliance on external commercial borrowings (ECB) is the reason for the country's increased external vulnerability. It also notes that during the UPA government's tenure, ECB increased at a compound annual growth rate (CAGR) of 21.1 percent (FY04 to FY14), but in the nine years between FY14 and FY23, they increased at an annual rate of 4.5%.
It should come as no surprise, then, that when the US currency appreciated dramatically in 2013, our economy was in jeopardy. Because the UPA government had jeopardized macroeconomic and external stability, the value of the currency fell in 2013. The Indian rupee fell 36% against the US dollar between 2011 and 2013, when it was at its highest point.
