The Hindu : Mediocre report card on economy

Online edition of India's National Newspaper
Wednesday, Mar 17, 2004

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Mediocre report card on economy

By C. Rammanohar Reddy

By no conceivable standard can the NDA claim to have taken the economy to a new and higher path of growth.

Period GDP GDP- GDP- Merchan- Invisi-

Agricul- Industry dise bles'

ture Exports Exports

1992-93/ 6.6 3.4 8.2 13.1 18.9

1997-98

(Congress/UF)

1998-99/ 5.3 1.9 5.4 10 11.1

2003-04

(BJP/NDA)

Source: (i) GDP growth rates based on CSO data of output at factor cost, constant prices; Exports on RBI payment statistics.

(ii) 2003-04: GDP are advance estimates, Exports based on six months RBI data.

IF WE are to believe the spin doctors, the National Democratic Alliance Government has done an outstanding job in accelerating India's development. However, forget what the advertisements tell us. How well has the Indian economy really done under the NDA Government? It should be possible to answer this question by using official statistics to compare economic performance during the NDA Government's tenure with that in the previous five years. The difficulty is of course in choosing the most appropriate set of criteria to assess the record since 1999. No one set would satisfy everyone. One can, however, look at the trends in the more important economic outcomes and social indicators where up-to-date information is available.

To begin with, the changes in the gross domestic product (GDP). The accompanying table compares the trend rate of growth in what one can call the more important sectors: overall GDP, net output in agriculture and industry, and, in the external sector, merchandise exports and that success story of the 1990s, invisibles (which comprise software exports, remittances and many services). Two identical periods have been chosen for analysis: 1998-99 to 2003-04 (a six-year period that covers the first BJP-led Government of 1998-99 and the NDA Government of 1999-2004) and 1992-93 to 1997-98, which spans the Congress and United Front regimes.

The trend rates of growth tell a story without any ambivalence. The performance of the Indian economy has deteriorated under the BJP-NDA. GDP growth has been slower, industry and agriculture have done much more poorly during the past six years and so too have exports of goods. The biggest surprise is that even gross receipts in invisibles — which the NDA Government loses no opportunity to flaunt as one of its remarkable achievements — have registered a noticeably slower pace of increase in 1998-2004. The comparison does not change if we exclude 1998-99 from the analysis, or if we measure growth rates differently.

Even if we measure growth in the pre-NDA period by including 1991-92 (when the economy expanded by a mere 1.1 per cent), the performance of the NDA Government still does not turn out be better than before. The BJP may speak about its record in economic governance, but that record is actually a mediocre one. Even the scorching 8 per cent plus growth rate of 2003-04 does not dramatically improve the average for 1998-2004.

Another important yardstick by which to measure the NDA Government's performance is what it has done to promote balanced regional growth in the country. A disparity in growth has been the bane of the Indian development experience, and there was a widening of inter-State inequalities during the first half of the 1990s. States such as Gujarat, Tamil Nadu, Karnataka, Maharashtra, Kerala and West Bengal did much better than the larger and poorer States such as Bihar, Madhya Pradesh, Orissa and Uttar Pradesh. Unfortunately, inter-State inequalities widened further during the late 1990s. A recent analysis by S.L. Shetty of the EPW Research Foundation of State GDP up to 2000-01 shows that growth continued to be concentrated in a handful of States. In other words, the NDA rule has not brought about a narrowing of the gap between the better off and the poorer States.

The pace of output growth is not the only thing that matters for economic well-being. Changes in prices, the quality of social services and, most critically, employment, are far more important issues for people. Here the report card of the NDA Government is a mixed one. (i) Prices: Wholesale price inflation, which averaged 8 per cent a year during 1992-98 did come down to 4.8 per cent a year in 1998-2004 (up to mid-February 2004). There has been a similar decline in consumer prices as well. This is one definite plus, though it must be said that the downward movement in inflation had started in 1996-97, two years before the BJP came to office (ii) Health: Up-to-date information is not available to capture all the changes in the state of health during the 1990s. However, the limited data we do have show divergent trends in two important indicators. What was earlier a moderate improvement in life expectancy has slowed down further in recent years. The official Economic Survey says that in 1991-92, girls at birth could expect to live up to 60 years, and in 1997-98 up to 65 years. But by 2000-01, female life expectancy had increased by only an additional two years. Infant mortality, however, appears to have been brought down more quickly. According to the Sample Registration Surveys, the all-India IMR fell from 72 to 64 deaths for every 1,000 births between 1998 and 2002. This was a noticeable improvement from the marginal decline between 1993 and 1997 (from 74 to 72 deaths for every 1,000 births) (iii) Education: This is an area where the NDA Government is supposed to have notched up noticeable successes. It was after all the outgoing Government that inscribed the right to education into law, even if it was not able to follow up with adequate funding. Yet the statistics (in the Economic Survey) say something else. The 1990s saw a rapid growth in literacy, but there were two different phases. The increase was very rapid between 1990-91 and 1998-99: from 52 per cent to 63 per cent. However, between 1998-99 and 2000-01, the change was barely noticeable: a mere two percentage point increase to 65 per cent.

Organised statistics are not available to throw light on what has happened to either employment or poverty over the past five to six years. What we do have are very inconsistent estimates emerging from "small sample surveys" of the National Sample Survey Organisation. These show that poverty actually worsened between 1999-2000 and 2002, but that over the same period employment increased rapidly in rural areas (only for men) even as the performance of the farm sector deteriorated! These trends in poverty and employment are both unlikely to be true at the same time. We will therefore have to wait for the results of the NSS full sample surveys of 2004 to arrive at a more accurate assessment in these two important areas. The information that is available about employment trends in the organised sector until 2000-01 shows that there has been no growth in jobs. The decline in job opportunities in the public sector has not been compensated by a growth in the organised private sector. In fact, there was a marginal fall (by 100,000) in private sector employment between 1997-98 and 2000-01.

It says so much about the effectiveness of the BJP's propaganda machine that a mediocre economic record has been sold as the high-point of India's development over the past 50 years. This actually reflects more on the ineffectiveness of the Opposition and the uncritical attitude of the media than about the true pace of development. Of course, there has been a tremendous transformation in a few publicised areas — highways and mobile phones are the most obvious examples and we have the $100 billion-plus foreign exchange reserves to remind us about how far we have travelled since the era of shortages. However, this is not the only story in the economy since 1998-99. The point is not that the Congress presided over a golden age or that the NDA Government has been the worst since 1947. The argument here is a more limited one: By no conceivable standard can the NDA claim to have taken the economy to a new and higher path of growth. The trend, if anything, is in the opposite direction. Of course, the more intelligent apologists of the NDA would argue that while the past five years had their ups and downs, it is the superior economic management of the past year (2003-04) that has laid the foundation for a period of sustained rapid growth. And that there is a new mood of self-confidence in the Indian economy. But we do know that we are in the midst of what can still only be described with some certainty as a year of recovery. Just six months ago, the dominant mood was one of listlessness. A good monsoon and a favourable global climate have in the intervening period unleashed a measure of economic dynamism. There is no evidence at all that these forces have become embedded in the Indian economy.

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