Inflation and corruption have become the hallmarks of the UPA government. The country also has to suffer the ignominy of experiencing economic downslide under the leadership of an economist Prime Minister under whom every economic macro-parameter has steadily declined. The BJP expresses its serious concern over the rapidly deteriorating state of the Indian economy where untold sufferings are inflicted on the common man. The BJP holds the Congress led UPA government guilty of non performance, policy paralysis and lack of direction.
Negation of Economic Robustness - Back to Square One
The BJP led National Democratic Alliance inherited a lowly growth rate of 4% in 1998, but due to its commitment to make India an economic superpower, it had put the economy on a fast growth trajectory. As a result of the visionary leadership of Shri Atal Bihari Vajpayee, India for the first time in decades witnessed 8.25% growth rate in 2004 when the BJP led NDA government demitted office.
The Congress led UPA could not have hoped for a better dream start towards economic growth and consolidation. A high growth rate with a healthy balance of payment situation coupled with low inflation and low interest rates was ideal to achieve robust economic development and macro-economic stability.
However, much to the dismay of all, the Congress led UPA government hastily embarked on a path of economic reversals. Instead of working towards a 10% percent growth rate with 5% inflation rate, in its 9 year tenure the UPA has achieved the exact opposite – a 10% inflation rate and a 5% growth rate! Even by conservative estimates, the mess of economic mismanagement under the Congress led UPA government has taken the country many decades backward. This contrast needs to be noted that NDA started with 4% of GDP growth and took the country on the 8+% growth trajectory, while the UPA inherited 8+% GDP growth rate and brought it down to nearly 4%.
The Macro Picture
The situation is even more worrisome since along with declining economic growth rate, all the sectors of the economy are showing a downward trend. Overall, the IIP index is consistently declining with a current index at 0.6% for the month of December 2012. Core sectors like Coal, Mining, Power, Fertilizer and Natural Gas are all in the negative zone.
Consistently rising Fiscal Deficit has acquired a critical proportion. Currently, the fiscal deficit is now hovering around 5.3% but one should not be surprised if it rises further. This is happening despite the government’s annual solemn assurance in every budget to reduce the fiscal deficit. It is interesting to note that aggregate fiscal deficit of the states is going down. Thus, the Central Government is principally and solely responsible for rising fiscal deficit and it cannot seek to incorrectly apportion blame towards the state governments.
The BJP led NDA government had put in place the historic economic legislation – the Fiscal Responsibility and Budgetary Management (FRBM) Act which sought to rein in the fiscal deficit below 3%. Ironically, under the Congress leadership, it is the central government that has shown scant commitment towards this resolve while the state governments are instead broadly adhering to the FRBM targets which is reflected in their financial numbers.
A greater concern arises on account of the Current Account Deficit (CAD) which is at an unacceptable level of 5.4% of the GDP. One of the key factors responsible for this current situation is the sharp drop in savings and investment rates which have not only lowered the economic growth but unfortunately exacerbated the current imbalances in CAD and fiscal deficit. What is worse is that the short term debt and borrowing of the government is rising fast and is actually financing the CAD. Even a young student of economics knows that such a situation is akin to consuming the resources of the future generations to meet one’s current liabilities.
Ever increasing CAD and fiscal deficit has resulted in the unprecedented devaluation of the rupee by more than 20% primarily in the last 12 months. In contrast to this many other international currencies have in fact appreciated against the US dollars.
India’s external debt has risen by 30% from 260 billion dollars to 340 billion dollars. This is for the first time that the external debt is more than the foreign reserves.
In a response to possible international downgrade the government hastily decided to go for many decisions having an impact of price hikes in many sectors and went ahead to cut plan expenditure. BJP condemns these regressive steps.
Even FDI in rupee terms has declined by a whopping 43% in the last quarter, even after tweaking the rules of 30% sourcing under the pressure of IEKA. We are confronted by a piquant situation where domestic investors are also seeking investment opportunities outside. In the year 2000 outflow of domestic investment amounted to 10 % of inward FDI. In 2011-12 the same stands at 50% of inward FDI.
The fiscal response to correct the situation is also skewed. The UPA instead of harping upon compliance and efficiency in revenue generation has depended solely on raising taxes and prices, which is further burdening the common man.
Inflation: The Real Killer
The biggest failure of the UPA government is its failure to tame inflation and bring down the prices. Unfortunately, inflation is not the result of any natural disaster but is purely a gift of this government. Bad food stock management and distribution anomalies triggered the inflationary pressure in the first place. When the country is required to stock only 30 million tons of food grains in the godowns, the UPA has stocked a huge quantity of more than 70 million tons of food grains thereby creating shortages in the market and fuelling prices. Ironically, the excess food grains are not fed to the millions of malnourished children of India but are instead left to rot in godowns and then exported to feed cattle in foreign lands and to produce liquor.
The UPA government has addressed only the demand side of inflation by quizzing money supply through raising interest rates 13 times so far but has till date never bothered to address the more important supply side issues. Edible oil which was not an item on the import list in 2003 has now become a US $ 10 billion dollar import. Today, 50% of the country’s edible oil requirements are met through imports.
When people are reeling under unprecedented inflation, they expect relief. Instead the government is offering them deregulation of fuel products and a further dose of higher prices, taxes and service charges. Diesel prices have been raised by Rs. 5 in one go and then by Rs. 10 in monthly installments of 50 paise each. The government has also created a new category of bulk users and increased their rate by Rupees 11 per litre in a shot. Within 48 hours of presenting the Budget Government raised Petrol rates by Rs. 1.50 and bulk Diesel by Rs. 1.25 per liter. In the meantime, the government ignoring ground realities decided on the capping of gas cylinders resulting in confusion and fueled a backdoor price hike. This has a cascading effect on the overall price line besides raising all transport costs immediately. The global experience has shown that the speculative market for essential commodities through forward exchange also fuels inflation. Yet the government has ignored even this aspect.
Inflation decreases the real wages of the working and middle classes whose salaries and wages are not indexed to rising prices. It also adversely impacts the standard of living and makes survival difficult. Women have suffer the most on account inflation as they have to take hard decision. Inflation is also a process that reverses socio-economic justice since it facilitates transfer of real assets from poor sections to the non-poor sections.
The BJP demands an immediate roll back of hike in all administrative prices from diesel, gas, petrol, rail and other services as the common man is reeling under unprecedented economic burden.
The pain of the same was reflected when more than 50 million workers and employees observed a two days nation-wide strike mainly to resent this unabated price rise and anti-labour policies of the UPA government. The Government has neither wage – price policy nor a rational supply side regime. BJP demands job, wage and social security for all workers who do not get it.
The Loot Continues
The Congress led UPA government has become synonymous with corruption. The VVIP Chopper Scam and the Farm Loan Waiver scams are the latest additions in this government’s unending list of corruption. It is fascinating to note that Italy, which was to benefit from the helicopter deal, went after the bribe givers immediately when they got the wind of corruption, while India, the sufferer of this scam is not ready to trace the bribe takers. Mystery still shrouds over the mention of the recipients as “the family”. The government has ordered a CBI probe but is not ready to have it monitored by the court. It has neither registered FIR nor issued LR. It is offering JPC knowing full well that it cannot investigate and come to conclusion. This fuels speculation that the government is more interested in ensuring a white wash to protect the bribe receivers rather than unearth the truth and punish the guilty.
A massive farm loan waiver scam has been unearthed by C&AG. More than 34 lakh farmers who were eligible for loan waiver did not get benefited on account of the faulty implementation of the scheme. Instead, more than 24 lakh ineligible farmers became beneficiaries of a windfall benefit through the tardy implementation. Corruption also is an important trigger for inflation, a dampener for honest investment and also a reason for growing fiscal deficit. The Government by design attacked the CAG and disturbed the PAC proceedings with a motive to cover up their scams. The BJP demands that both these scams should be investigated under court monitoring and also demands that the eligible farmers should immediately be given the waiver benefit.
Lack of Governance
The UPA government excels at offering excuses and constantly blames external factors for its internal failures. Its policy flip-flops, indecision and mis-governance are responsible for the current situation. The Congress led UPA distributed huge natural resources for free or at fraction of its real cost thereby, could not generate potential revenues. Coal and Spectrum are few such examples. The Coal distribution was not even linked to an assured supply of cheaper power. That is why these are considered examples of monumental corruption.
Indecision is galore in all segments of the economy. The PM formed a committee to monitor seamless coal supply to power plants which is yet to succeed. He tried to form a National Investment Board for faster clearances which was torpedoed by his political masters in the Congress party. Ultimately he settled for a Cabinet Committee for Investment which has cleared only a small number of projects over the last four months. The PM’s dream project of two dedicated freight corridors are in eternal limbo and even his proposal for fast tracking incomplete projects is yet to become a starter in itself. Even the power purchase agreements of many projects are not concluded. The PM’s ineptitude was at its classical best when he informed the country that “money doesn’t grow on trees”.
This is nothing but economic chaos caused by internal contradiction and confusion with in government and the ruling party. The same is evident in diametrically opposite views expressed by Planning Commission on one hand and NAC on other; the same is the story with the finance ministry and RBI heading in different direction. This was also reflected in last year’s budget of announcing retrospective taxes and GAAR and its subsequent withdrawal and postponement.
BJP led NDA v/s UPA
The NDA’s major thrust on infrastructural development has taken a backseat on account of the UPA’s visionless governance over the past decade. During the NDA regime, construction of highways achieved a level of 11 KMs per day. Today it stands at an abysmal low of just 3 KMs per day despite their tall promise of building 22 KMs highway every day. The East-West and North-South corridors still remain a distant dream. Even the Gram Sadak Yojana has slowed down.
Power generation which was targeted at 78,000 MW in the 11th Five Year Plan actually achieved 54,000 MW only. The performance of other sectors of infrastructure like rail, ports, oil and gas is also lack luster. The NDA assured additional supply of gas connections to 40 million families in 4 years while the UPA is yet to match this figure in its last 9 years tenure. PSUs like MTNL, BSNL, NTPC, and Air India are in deep trouble with huge losses on account of their misuse and mismanagement by the political masters. This has also resulted in a decline in the gross investments.
The UPA has so far offered the country “Jobless Growth”. While the BJP led NDA could create 12 million jobs in its tenure, the UPA could create only 2 million jobs. The government’s flagship scheme of MGNREGA is essentially a social welfare scheme and not a regular employment generation scheme. To overcome the above situation the country requires structural reforms at all levels which cannot be expected from this Congress led UPA government.
The approach of the UPA government to the poverty alleviation is entitlement and not empowerment. While empowerment is a productive and sustaining strategy, entitlement makes people permanently government depended.
Plight of Farmers
Agriculture in India which employs more than 60% of the population is in a state of deep distress. Rising suicide graphs is just one such indicator of this distress. Terms of trade in UPA regime have always gone against farmers. They are consistently denied their right to get real remunerative prices for their produce. The MSP calculations are skewed and are at variance with reality. The NDA government appointed the Swaminanthan Commission to suggest a feasible formula of calculating remunerative prices, which they suggested as 50% above the MSP. The UPA government has consistently rejected this formula and denied real remunerative prices to the farmers.
The UPA government claims to have increased MSP substantially. However in reality, it is the input costs that have increased more than the increase in MSP. This has resulted in a reduction of margin between MSP and input costs continuously. Procurement Centers are not functional at many places when the farmers bring their produce. They are forced to go for distress sales. Even at many centers Government fails to supply necessary quantity of jute bags resulting in huge losses.
The latest calculation of Commission for Agricultural Costs & Prices (CACP) is testimony to this reducing margin for the farmers. The difference between MSP and cost of production for paddy has gone down from 35% of 2010-11 to 8% of cost in 2012-13. Differences in the margins in wheat have also declined from 33% to 13% during last 3 years. Cost of seeds, pesticides, fertilizer, diesel, power, water has all gone up. Farmers are being forced to face a losing battle. The exploitative system as perpetuated by the UPA government offers little remuneration to the producers (farmers) while the consumers have to pay much higher prices.
BJP demands immediate adoption of Swaminathan committee formula of calculating remunerative prices and also restart the assured minimum income guarantee scheme launched by NDA government.
The BJP also warns the Congress led UPA government about the imperative dangers of pursuing such a policy towards agriculture that can actual reverse India’s gains in achieving food security over the last few decades.
The UPA’s Nutrient Based Subsidy scheme (NBS) for fertilizers has fuelled the prices of all non-subsidized fertilizers thereby defeating the very purpose of the scheme. As prices of non urea fertilizers have sky rocketed which has resulted in an excessive use of urea. Farmers are experiencing short supply of fertilizers and resultant black market. Every year farmers are resorting to demonstrations to protest this at hundreds of places across the country.
The government has completely neglected irrigation which is the only key to make our rain dependent agriculture into a more sustainable activity. In 1989, when Dr. Manmohan Singh was in Planning Commission, it decided to lower the allocation for irrigation in the back drop of bumper crop during some of the previous years. This one disastrous decision has caused the nation 20 years of back log in irrigation and caused irreparable loss to the agriculture sector.
Drought and Unseasonal Rains
Large parts of Karnataka, Maharashtra, Gujarat, Madhya Pradesh, Tamil Nadu, Andhra Pradesh and Rajasthan are experiencing severe drought. More than 100 districts in the country are severely affected. Crops have been lost. Debts are mounting. Farmers are in acute trouble. Water scarcity has created problems even for drinking water and many power plants are closed due to shortage of water. In absence of water and fodder, public cattle camps have had to be organized. Even as economic activity has slowed down in rural areas, the central government has failed to take immediate action for helping farmers.
The unseasonal rains in the month of January-February and a long spell of winter have also caused irreparable damage to the standing crops in North India. The Rabi output can be expected to be adversely affected and farmers could incur huge losses.
The BJP demands immediate waiver of loans of the affected farmers and all the needed help to the affected states.
BJP Led NDAs Contribution to National Development
The BJP is proud of its state governments for their splendid performance in agriculture, over all development and carrying out pro-people reforms.
If the country’s agriculture is growing at 3.5% for which the President Mr. Pranab Mukherjee patted the Central Government, it must be noted that the average of agriculture development in BJP and NDA ruled states is double of national average.
The Congress party’s is linking its political fortunes on the issue of food security and direct cash transfer schemes. The Chhattisgarh Government has already successfully enacted and implemented a food security scheme covering 90% of the people in the state. This successful model is constantly being appreciated for its near universal coverage. Many of NDA ruled states are already following direct cash transfer of scholarships, pension and many other welfare schemes through banks.
The BJP and NDA ruled states have set an example of faster progress with good governance practices. If country is registering 5% growth it is only because NDA ruled states are growing on an average of 10% consistently.
In the absence of the congress led UPA government being able to manage the economy, they would serve the country better if they merely emulated and even copied the innovative and successful programs of the BJP and NDA state governments.
The Central Government knowing fully well this performance of NDA Governments, targets them on mining and discriminates in many other schemes. The taxes proposed on non-AC restaurants is encroachment on State domain.
The Budget – 2013
The Union Budget presented before the parliament on 28th February has very little to offer to the Indian Economy. It makes certain cosmetic changes in the policy and taxation structure. Though verbose in content the budget is low in ambition. It does very little to boost Indian Manufacturing. Agriculture continues to be neglected. Even a ritual of reference to the AAM AADMI has been abandoned. It contains no steps which could boost exports, inflation contained and Rupee strengthened. Having brought down the economy to a 5% growth rate the UPA in its latest budget fails to lay down even an initial road map for walking back to 9% growth rate destination.
There is a warning in the Budget. The petroleum subsidy of Rs. 96,980 Crores is intended to bring down to Rs 65,000 Crores. It is an indication that petrol, diesel and gas prices will further increase.
This budget is not a policy statement. It brings no directional change. It is merely an accounting exercise wherein expenditure has been cut with no prospect of increase. This may not spur growth. The poor and the weaker sections along with the middle classes will be hit the most.
The worst betrayal has come in form of a cut in State outlays by whooping Rs. 60,000 Crores in Revised Estimates (RE) for 2012 – 13. This is done without any discussion or announcement.
The Finance Minister referred about our requirement of 75 billion USD for next couple of years to finance the CAD. According to him there are only three ways to do this FDI, FII and ECB. This explains that the economic reform path adopted by Congress led UPA Government is not as per the national needs but is influenced by global prescription. Every Country has to discover its own path of reforms which is sustainable and suitable to its local needs. In this regard BJP has a proven track record of taking the country on the fast growth trajectory and we are committed and capable to do it again.
In short, with its anti people policies, Congress has inflicted heavy losses on farmers and poorer sections of the society. The hopes and aspirations of middle class stands shattered. Both urban and rural economy has equally suffered and jobs and growth has taken a nosedive.
Therefore BJP demands,
- Immediate roll back of all hikes in administered prices of petrol, diesel and capping of gas cylinders.
- Bringing down prices of all essential commodities by necessary policy revamp.
- Increase MSP based on Cost + 50% formula.
- Restart the assured minimum income guarantee scheme for farmers.
- Waiver of loan for drought and unseasonal rain affected farmers.
- Give Loan waiver benefit to those eligible farmers who have been left out in implementation of farm loan waiver scheme.
- Take immediate steps to bring down Fertilizer Prices.
- BJP demands job, wage and social security for all workers who do not get it.
If these demands are not met, BJP will launch nationwide public agitation against these anti-people and anti-development economic policies of the UPA government.
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