The White Paper on Indian Economy tabled in the Parliament by the NDA government on Thursday lambasted the Congress-led UPA government for pushing the economy in a “crisis situation” in its ten year tenure between 2004 and 2014.

The White Paper, laid by finance minister Nirmala Sitharaman, said that in the ten year rule of the UPA government the public finances were in bad shape, with economic mismanagement and financial indiscipline, widespread corruption, price instability, and banking crisis. The White Paper also pointed out that the economic stimulus in the wake of the global financial crisis in 2008 was “misguided”.

Stressing that the responsibility to mend the economy step by step and to put the governance systems in order was enormous, the White Paper said, “Now that we have stabilised the economy and set it on a recovery and growth path, it is necessary to place in the public domain the seemingly insurmountable challenges – left behind as a legacy by the UPA government”.  

Inheritance of Loss

The paper said for BJP, the economy in 2014 was akin to “An Inheritance of Loss” and the economy turned from being healthy in 2004 to a stagnant one in 2014.  

“The UPA government inherited a healthy economy ready for more reforms, but made it non-performing in its ten years. In 2004, when the UPA government began its term, the economy was growing at 8 per cent (with industry and services sector growth above 7 per cent each and a resuscitating agriculture sector growth above 9 per cent in FY04) amidst a benign world economic environment,” the paper said.

“Ironically, the UPA leadership, which seldom fails to take credit for the 1991 reforms, abandoned them after coming to power in 2004. Even as the country was standing at the cusp of emerging as a powerful economy, little was done by the UPA government to build upon the strong foundation laid by the previous NDA government. In the years between 2004 and 2008, the economy grew fast, thanks to the lagged effects of the reforms of the NDA government and favourable global conditions,” it said.  

“The UPA government took credit for the high growth but did little to consolidate it,” it said adding that the UPA decade failed to undertake economic, social, and administrative reforms to strengthen India's long-term economic potential.

High Inflation

The white paper said price stability was one such foundation that was weakened by the UPA government. “Inflation raged between 2009 and 2014 and the common man bore the brunt. High fiscal deficits for six years between FY09 and FY14 heaped misery on ordinary and  poorer households. Over the five-year period from FY10 to FY14, the average annual inflation rate was in double digits. Between FY04 and FY14, average annual inflation in the  economy was 8.2 per cent.”

 Banking Crisis

Cleansing the bank balance sheets has remained one of the key endeavours of the BJP led NDA government. It was one of the first initiatives taken by the government after coming to power in 2014. The White Paper now points out, “Banking crisis was one of the most important and infamous legacies of the UPA government. When the Vajpayee-led NDA government took office, the Gross Non-Performing Assets (GNPA) ratio in Public Sector banks was 16.0 per cent, and when they left office, it was 7.8 per cent. In September 2013, this ratio, including restructured loans, had climbed to 12.3 per cent largely because of political interference by the UPA government in the commercial lending decisions of public sector banks. Worse, even that high percentage of bad debts was an underestimate.”

Misguided Stimulus

The white paper also pointed out that the fiscal stimulus that was rolled out by the then UPA government in response to the 2008 Global Financial Crisis was much worse than the problem it sought to address. “It was way beyond the capacity of the Union Government to finance and sustain. Interestingly, the stimulus did not seem to bear any correlation with the outcomes it sought to achieve because our economy was not unduly affected by the crisis. During the GFC, India’s growth slowed to 3.1 per cent in FY09 but recovered swiftly to 7.9 per cent in FY10. A cross-country analysis using IMF data on real GDP growth during and after the GFC corroborates the fact that the impact on the Indian economy was relatively limited compared to other developed and developing economies. There was no need for continuation of the misguided stimulus beyond one year,” the paper said.

Meanwhile, ahead of the general elections, the white paper on the economy has kicked off a political storm, with the Congress too coming out with a Black Paper on the Modi government today. “Congress is frustrated that in the last ten years the flailing economy it left in 2014 has become the world’s fifth largest economy and is going on to become the third largest economy,” I&B minister Anurag Singh Thakur said. 

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.