NDA v UPA: Close encounters with facts

Minhaz Merchant in Times of India

Which government – UPA or NDA – has been better for India’s economic and social indicators? Dismiss the rhetoric and stick to the facts. In this analysis, I’ve chosen 10 key parameters. They cover both economic and social criteria.

1.GDP growth: Average GDP growth in 1998-2004 (NDA) was 6% a year. Average annual GDP growth in 2004-13 (UPA), up to June 30, 2013, was 7.9%.

Caveat 1: The Vajpayee-led NDA battled US-led economic sanctions following the Pokhran-II nuclear test in May 1998. It faced a short but expensive Kargil war in 1999 and the dotcom bust in 2000. When it took office, it had the lag effect of the East Asian financial crisis of 1997-98 to contend with.

Caveat 2: The UPA government, in contrast, benefitted from the economic momentum of the high (8.1%) GDP growth rate of 2003-04 – the NDA government’s final year – and rode that wave. The global liquidity bubble in 2004-08 bouyed foreign mflows, helping UPA-I achieve a high GDP growth rate in its first term. The Lehman Brothers collapse in September 2008 did hurt the Indian economy but the ensuing US Federal Reserve asset buying programme attracted a steady flow of near-zero interest dollars into India from 2009.

Despite these caveats, the UPA government’s average annual GDP growth rate of 7.9% in 2004-13 clearly scores over the NDA government’s average annual growth rate of 6% (though high inflation boosted the former significantly). First strike to UPA.

2. Current Account Deficit:

2004:  (+) $7.36 billion (surplus).

2013: (-) $80 billion.

The winner here is clearly NDA. It ran a current account surplus in 2002, 2003 and 2004. Under UPA this dipped into deficit from 2006 and has spun downwards since.

3. Trade deficit:

2004: (-) $13.16 billion.

2013: (-) $180 billion.

Again, advantage NDA.

4. Fiscal deficit:

2004: 4.7% of GDP.

2013: 4.8% of GDP.

Not much to choose between the two.

Caveat: This extract from the Asian Development Bank Institute (ADBI) report, published in 2010, explains why and when the UPA government’s fiscal defict began to spiral out of control.

“The central budget in 2008–2009, announced in February 2008, seemed to continue the progress towards FRBM targets by showing a low fiscal deficit of 2.5% of GDP. However, the 2008–2009 budget quite clearly made inadequate allowances for rural schemes like the farm loan waiver and the expansion of social security schemes under the National Rural Employment Guarantee Act (NREGA), the Sixth Pay Commission award and subsidies for food, fertilizer, and petroleum.”

“These together pushed up the fiscal deficit sharply to higher levels. There were also off-budget items like the issue of oil and fertilizer bonds, which should be added to give a true picture of fiscal deficit in 2008–2009. The fiscal deficit shot up to 8.9% of GDP (10.7% including off-budget bonds) against 5.0% in 2007–2008 and the primary surplus turned into a deficit of 3.5% of GDP.

“The huge increase in public expenditure in 2008–2009 of 31.2% that followed a 27.4% increase in 2007–2008 was driven by the electoral cycle with parliamentary elections scheduled within a year of the announcement of the budget.”

The recent announcement of the Seventh Pay Commission comes again, not unexpectedly, at the end of an electoral cycle.

5. Inflation:

1998-2004: 5%.

2004-2013: 9% (Both figures are averaged out over their respective tenures).

Advantage again to NDA. Inflation under NDA was on average half that under UPA, leading to the RBI’s controversial tight money policy, high interest rates and rising EMIs.

6. External Debt:

March 2004: $111.6 billion.

March 2013: $390 billion.

The UPA suffers badly in this comparision, a result of lack of confidence in India’s economy and currency following retrospective tax legislation and other regressive policies, especially during UPA-2.

7. Jobs:

1999-2004:  60 million new jobs created.

2004-11: 14.6 million jobs created.

Clearly, the UPA’s big failure has been jobless growth – a bad electoral omen.

8. Rupee:

1998-2004: Variation: Rs. 39 to 49 per $.

2004-13: Variation: Rs. 39 to 68 per $.

(Rupee rose from 40-plus to 39 between October 2007 and April 2008.)

The NDA government’s economic and fiscal policies, despite the various crises of 1998-2000 pointed out earlier, evoked more  global confidence, leading to a relatively stable rupee (Rs. 10 variation) compared to the Rs. 29 variation during UPA’s tenure.

9. HDI:

2004: India was ranked 123^rd globally on the human development index (HDI) in 2004, with a score of 0.453.

2013: India has slipped 13 places to 136^th globally on the HDI in 2013 with a score of 0.554.

10. Subsidies:

2004: Rs. 44,327 crore.

2013: Rs. 2,31,584 crore.

Here again, profligate welfarism, as the ADBI report quoted earlier shows, has led to a rising subsidy bill. Worse, a significant amount is siphoned off by a corrupt nexus of politicians, officials and middlemen.

Conclusion: UPA scores above NDA on one of the 10 parameters (GDP growth), is level on one other parameter (fiscal deficit) while NDA does better than UPA on the remaining eight parameters.

The next time Finance Minister P. Chidambaram wishes to stage an encounter with facts, he would do well to be aware of those facts.

Sources: Economic Survey of India, UNDP, IMF, Planning Commission of India.

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Gujarat vs Bihar: settling the development debate

Minhaz Merchant in Times of India
02 August 2013,

A rational analysis of the “Gujarat and Bihar models” of development must not mix apples with oranges. Critics put India’s 35 states and union territories – big and tiny – in the same empirical basket. 

But comparing, for example, Goa’s indices with Uttar Pradesh’s is misleading on account of size, population and demographics.    

A more logical way to address the Gujarat vs. Bihar development model debate is to compare the indices of India’s 10 largest states (by population) and rank them accordingly.   

All data is from the Planning Commission of India except population data which is from the 2011 census, education data which is collated from published sources, and city GDP data which is drawn from the International Monetary Fund (IMF). 

In this study, I have chosen the following indices:

1. Per capita income;
2. Human Development Index (HDI);
3. Poverty levels;
4. Education.  

Taken together, ranking India’s 10 largest states by population across these four parameters will give us a good idea of where each state stands on income, malnutrition and social infrastructure.   

Start with the 10 largest states in descending order of population: 

State               Population (2011 census)

1. Uttar Pradesh: 199 million
2. Maharashtra: 112 million
3. Bihar: 104 million
4. West Bengal: 91 million
5. Andhra Pradesh: 85 million
6. Madhya Pradesh: 73 million
7. Tamil Nadu: 72 million
8. Rajasthan: 69 million
9. Karnataka: 61 million
10. Gujarat: 60 million 

Now rank these 10 states by per capita income – a critical indicator of prosperity.  

State            Per capita income (FY 2012)

1. Maharashtra: Rs. 1,01,314
2. Gujarat: Rs. 89,668
3. Tamil Nadu: Rs. 84,496
4. Karnataka: Rs. 69,055
5. Andhra Pradesh: Rs. 68,970
6. West Bengal: Rs. 55,222
7. Rajasthan: Rs. 53,735
8. Madhya Pradesh: Rs. 37,994
9. Uttar Pradesh: Rs. 30,051
10. Bihar: Rs. 22,691

All-India: Rs. 61,564  

Maharashtra ranks no. 1, Gujarat no. 2 and Tamil Nadu no. 3. But Maharashtra has an unfair advantage because Mumbai, India’s wealthiest city, increases its average per capita income significantly. Let’s compute the precise impact.  

The GDPs of India’s richest cities are: 

City GDPs (PPP)                                  

1. Mumbai: $209 billion                          
2. Delhi: $167 billion
3. Kolkata: $150 billion                           
4. Bangalore: $84 billion
5. Hyderabad: $74 billion                                   
6. Chennai: $66 billion
7. Ahmedabad: $52 billion                      
8. Pune: $47 billion                         

 (PPP: Purchasing Power Parity)  

If we exclude Mumbai’s $209 billion GDP from Maharashtra’s GDP (adjusting PPP GDP for exchange rate nominal GDP to align with Planning Commission figures) but keep Pune (whose $47-billion GDP is not dissimilar to the GDP of the capitals of other key states), Maharashtra’s per capita income falls from Rs. 1,01,314 to around Rs. 78,000.  

So without Mumbai (but including Pune), Maharashtra would slip to no. 3 in our per capita income chart. Gujarat would move up to no. 1, Tamil Nadu to no. 2. Bihar, with per capita income of Rs. 22,691, would stay at no. 10.  

As Rahul Sachitanand wrote in The Economic Times on August 1, 2013: “In the five years before Modi took charge, (Gujarat's) average growth in GDP was 2.8%. Under him, between 2002-03 and 2011-12, it was 10.3%. Only three small states – Sikkim, Uttarakhand  and Delhi – have grown faster. Gujarat is ahead of the national average (7.9%), as well as the two states it is pitted against in today’s discourse, Bihar (8.4%) and Madhya Pradesh (7.1%). It has leapfrogged Maharashtra to lead in factory output, grown well in agriculture, and been a leader in electricity reform and the spread of irrigation.”  

Sachitanand goes on to point out, rightly, that Gujarat "has struggled to engineer similar breakouts in its social indicators – women, health, education, poverty, wages." 

Turn now, therefore, to our second criterion – Human Development Index (HDI). 

State             HDI (2011)

1. Maharashtra: .572
2. Tamil Nadu: .570
3. Gujarat: .527
4. Karnataka: .519
5. West Bengal: .492
6. Andhra Pradesh: .473 
7. Rajasthan: .434
8. Uttar Pradesh: .380
9. Madhya Pradesh: .375
10. Bihar: .367

All-India HDI: .467 

HDI is a composite of life expectancy, education and income indices. It was created in 1990 by Amartya Sen and Pakistani economist Mahbub ul Haq. Life expectancy is correlated to social indicators such as healthcare, malnutrition, infant mortality, etc.  

Maharashtra emerges as no. 1, Tamil Nadu no. 2 and Gujarat no. 3. HDI is also correlated (though not linearly) to prosperity. Not surprisingly, therefore, these three states top the per capita income charts as well. Clearly, however, despite being ranked third among India’s 10 largest states on HDI, Gujarat needs to improve further. Bihar though is ranked last again and needs to do a lot more.

                                                          * * *

Gujarat also needs to increase its expenditure on education. It currently spends only 13.9% of total expenditure on education and is ranked a low eighth among India’s 10 largest states. In comparison, Bihar spends a higher proportion (18%) of its overall expenditure on education. Of course, Gujarat’s outlays are larger in absolute terms because of its larger overall budget but it hasn’t paid enough attention to education – and that could hurt growth in the long term unless corrected quickly.  

Education expense as a ratio of total expenditure  

1. Maharashtra: 21.0%
2. Rajasthan: 19.1%
3. West Bengal: 18.3%
4. Bihar: 18.0%
5. Uttar Pradesh: 15.9%
6. Karnataka: 15.6%
7. Tamil Nadu: 14.7%
8. Gujarat: 13.9%
9. Madhya Pradesh: 13.1%
10. Andhra Pradesh: 11.5%  

Gujarat has also been criticised for neglecting healthcare and malnutrition. While HDI, where Gujarat is ranked no. 3, captures some social indicators like infant mortality, healthcare and malnutrition, poverty levels are another important pointer to the overall quality of social infrastructure.  

Here Gujarat, while better than the all-India average, fares poorly in comparison with a state like Rajasthan. Bihar though continues to suffer twice the level of poverty of Gujarat.  

Poverty ratio (2011-12)

1. Bihar: 33.5%
2. Madhya Pradesh: 31.7%
3. Uttar Pradesh: 29.4%
4. Gujarat: 16.6%%
5. Rajasthan: 14.7% 

All-India: 21.9%

                                                                        * * *

The overall verdict:

1. Gujarat has the highest per capita income among India’s 10 largest states (when Mumbai is excluded from Maharashtra).
2. It has the third best HDI score among these large states. This is contrary to the popular belief that Gujarat favours manufacturing, industry and infrastructure at the cost of the social sector.
3. Bihar does abysmally on all criteria – per capita income, HDI, poverty levels – except education where it spends more as a ratio of its small overall expenditure than Gujarat. 

Going forward, Gujarat needs to focus on education and healthcare and further improve its HDI score. And it must focus on more equable income distribution to bring poverty levels down even faster from 16.6%, even though this is significantly better than the all-India level of 21.9% and half Bihar’s poverty level of 33.5%.  

Gujarat’s annual agricultural growth over the past decade has averaged more than 10% – triple India’s average – and it still has the country’s highest manufacturing/industry ratio-to-GDP.  

Bihar’s task is tougher. It needs to improve on all fronts. Its per capita income is one-fourth Gujarat’s and its poverty levels twice Gujarat’s. Though its annual GDP growth rate is roughly similar to Gujarat's, its low base will make it hard for it to bridge the gap for decades. It is ranked last on HDI. Its only silver lining is education – but here too, as the Chapra midday meal tragedy demonstrated, much more needs to be done to improve school infrastructure despite eight years of Nitish Kumar’s chief ministership.  

In conclusion, the Gujarat vs Bihar development model debate is a sterile one. Both states should be aiming at meeting absolute standards on economic and social criteria, not engaging in political one-upmanship.  

Narendra Modi - The man who would rule India

 Ramachandra Guha in The Hindu

 

  

Like Indira Gandhi once did, Narendra Modi seeks to make his party,his government, his administration and his country into an extension of his personality.

A journalist who recently interviewed Narendra Modi reported their conversation as follows: “Gujarat, he told me, merely has a seafront. It has no raw materials — no iron ore for steel, no coal for power and no diamond mines. Yet it has made huge strides in these fields. Imagine, he added, if we had the natural resources of an Assam, a Jharkhand and a West Bengal: I would have changed the face of India.”(see The Telegraph, January 18, 2013). 

Tall claims

This conversation (and that claim) underlines much of what Narendra Modi has sought to do these past five years — remake himself as a man who gets things done, a man who gets the economy moving. With Mr. Modi in power in New Delhi, says or suggests Mr. Modi, India will be placed smoothly on the 8 per cent to 10 per cent growth trajectory, bureaucrats will clear files overnight, there will be no administrative and political corruption, poverty levels will sink rapidly towards zero and — lest we forget — trains and aeroplanes shall run on time. These claims are taken at face value by his admirers, who include sundry CEOs, owner-capitalists, western ambassadors and —lest we forget — columnists in the pink papers, the white papers, and (above all) cyber-space.

Mr. Modi’s detractors — who too are very numerous, and very vocal — seek to puncture these claims in two different ways. The unreconstructed Nehruvians and Congress apologists (not always the same thing) say he will forever be marked by the pogrom against Muslims in 2002, which was enabled and orchestrated by the State government. Even if his personal culpability remains unproven, the fact that as the head of the administration he bears ultimate responsibility for the pogrom, and the further fact that he has shown no remorse whatsoever, marks Mr. Modi out as unfit to lead the country.

The secularist case against Mr. Modi always had one flaw — namely, that what happened in Gujarat in 2002 was preceded in all fundamental respects by what happened in Delhi in 1984. Successive Congress governments have done nothing to bring justice to the survivors, while retaining in powerful positions (as Cabinet Ministers even) Congress MPs manifestly involved in those riots.

With every passing year, the charge that Mr. Modi is communal has lost some intensity — because with every passing year it is one more year that the Sikhs of Delhi and other North Indian cities have been denied justice. (They have now waited 28 years, the Muslims of Gujarat a mere 11.) More recently, the burden of the criticism against Mr. Modi has shifted — on to his own terrain of economic development. It has been shown that the development model of Gujarat is uneven, with some districts (in the south, especially) doing very well, but the dryer parts of the State (inland Saurashtra for example) languishing. Environmental degradation is rising, and educational standards are falling, with malnutrition among children abnormally high for a State at this level of GDP per capita.

As a sociologist who treats the aggregate data of economists with scepticism, I myself do not believe that Gujarat is the best developed State in the country. Shortly after Mr. Modi was sworn in for his third full term, I travelled through Saurashtra, whose polluted and arid lands spoke of a hard grind for survival. In the towns, water, sewage, road and transport facilities were in a pathetic state; in the countryside, the scarcity of natural resources was apparent, as pastoralists walked miles and miles in search of stubble for their goats. Both hard numbers and on-the-ground soundings suggest that in terms of social and economic development, Gujarat is better than average, but not among the best. In a lifetime of travel through the States of the Union, my sense is that Kerala, Himachal Pradesh and (despite the corruption) Tamil Nadu are the three States which provide a dignified living to a decent percentage of their population.

To be sure, Mr. Modi is not solely responsible for the unbalanced development. Previous Chief Ministers did not do enough to nurture good schools and hospitals, or enough to prevent the Patels of southern Gujarat from monopolising public resources. Besides, Mr. Modi does have some clear, identifiable achievements — among them a largely corruption-free government, an active search for new investment into Gujarat, some impressive infrastructural projects, and a brave attempt to do away with power subsidies for rich farmers.

Both the secularist case and the welfarist case against Mr. Modi have some merit — as well as some drawbacks. In my view, the real reason that Narendra Modi is unfit to be Prime Minister of India is that he is instinctively and aggressively authoritarian. Consider that line quoted in my first paragraph: “I would have changed the face of India.” Not ‘we,’ but ‘I’. In Mr. Modi’s Gujarat, there are no collaborators, no co-workers. He has a chappan inch chaati — a 56-inch chest — as he loudly boasts, and therefore all other men (if not women) in Gujarat must bow down to his power and his authority.

Mr. Modi’s desire to dominate is manifest in his manner of speaking. Social scientists don’t tend to analyse auditory affect, but you have only to listen to the Gujarat Chief Minister for 15 minutes to know that this is a man who will push aside anyone who comes in his way. The intent of his voice is to force his audience into following him on account of fearing him.

The proclamation of his physical masculinity is not the sole example of Mr. Modi’s authoritarianism. Like all political bullies he despises free speech and artistic creativity — thus he has banned books and films he thinks Gujaratis should not read or watch (characteristically, without reading or viewing these books and films himself). He has harassed independent-minded writers, intellectuals and artists (leading to the veritable destruction of India’s greatest school of art, in Vadodara). His refusal to the spontaneous offer of a skull cap during his so-called ‘Sadbhavana Yatra,’ while read as an example of his congenital communalism, could also be seen as illustrating his congenital arrogance.

The most revealing public display of Mr. Modi’s character, however, may have been a yoga camp he once held for the IAS officers of his State. They all lined up in front of him — DMs, DCs, Secretaries, Under-Secretaries, of various sizes, shapes, ages, and genders — and followed the exercise routine he had laid down for them. Utthak-baithak, utthak-baithak, 10 or perhaps 20 times, before a diverting Surya Namaskar was thrown in by the Master.

I do not know whether that yoga camp was held again (it was supposed to be an annual show), and do not know either how Mr. Modi appears to these IAS officers when they confront him one-on-one. But that the event was held, and that the Chief Minister’s office sought proudly to broadcast it to the world, tells us rather more than we would rather wish to know about this man who wishes to rule India.

To be sure, Mr. Modi is not the only authoritarian around in Indian politics. Mamata Banerjee, J. Jayalalithaa, and Mayawati (when she is Chief Minister) also run their States in a somewhat overbearing manner. Naveen Patnaik and Nitish Kumar are intolerant of criticism too. However, the authoritarianism of these other State leaders is erratic and capricious, not focused or dogmatic. This, and the further fact that Mr. Modi has made his national ambitions far more explicit, makes them lesser devils when it comes to the future of our country.

 

Resemblance to Indira Gandhi

Neither Mr. Modi’s admirers nor his critics may like this, but the truth is that of all Indian politicians past and present, the person Gujarat Chief Minister most resembles is Indira Gandhi of the period 1971-77. Like Mrs. Gandhi once did, Mr. Modi seeks to make his party, his government, his administration and his country an extension of his personality. The political practice of both demonstrates the psychological truth that inside every political authoritarian lies a desperately paranoid human being. Mr. Modi talks, in a frenetic and fearful way, of ‘Rome Raj’ and ‘Mian Musharraf’ (lately modified to ‘Mian Ahmed Patel’); Mrs Gandhi spoke in likewise shrill tones of the ‘foreign hand’ and of ‘my enemies.’

There is something of Indira Gandhi in Narendra Modi, and perhaps just a touch of Sanjay Gandhi too — as in the brash, bullying, hyper-masculine style, the suspicion (and occasional targeting) of Muslims. Either way, Mr. Modi is conspicuously unfitted to be the reconciling, accommodating, plural, democratic Prime Minister that India needs and deserves. He loves power far too much. On the other hand, his presumed rival, Rahul Gandhi, shirks responsibility entirely (as in his reluctance, even now, to assume a ministerial position). Indian democracy must, and shall in time, see off both.