When it comes to performance appraisal, however, the only notable success of UPA II as compared to UPA I is that the Congress won more seats in the later combine. However, the UPA II returned the favour for the faith reposed on them by the electorate by being serially corrupt. No other government has been known to have been hit by so many corruption scandals as this. A list of some high profile cases brings forth the point.
On the economic front, UPA II is essentially a story of economic mismanagement and their single biggest failure is their inability to tame inflation – which is the worst form of taxation on the poor. Between 2010 and 2012, the country experienced three continuous years of near 9 per cent inflation, something that is unheard of. While the average monthly inflation (annualized rate) during the 5 year UPA I tenure was 4.8 per cent, the average inflation during the four year UPA II tenure was high as 8.1 per cent (see table below).
Despite having the architects of 1991 reforms in the fray, this government has failed miserably in ushering in of the next generation reforms. India has far outlived the benefits of 1991 reforms. The economy now is in desperate need of reforms in policies connected to factors of production – land, labour and natural resources and, in all these, the government has failed to deliver. Be it land acquisition, labour reforms or for that matter coal block and 2G telecom spectrum allocation – the failure is evident. As a result, India’s stock in the world market has been on a perennial slide. What to talk of an equally big policy mistake – that of retrospective GAAR. While that is now being sought to be reversed, the damage has already been done. On the other hand, important measures that can provide a new lease of life to the faltering economy, be it the GST, DTC, Land acquisition bill, insurance sector reforms, new companies bill, enacting the NMP into law etc continue to be held in abeyance. In fact the Prime Minister has announced today that GST cannot be rolled out before the 2014 elections.
What is more glaring is that, even in cases where minor tinkering (here I am referring to executive decisions rather than legislative decisions) would have benefited the economy, the morally and politically weak government was in no position take these through to logical conclusion. The best example of this is the way in which FDI was finally allowed in multi-brand retail. As their ‘so-much-in-evidence’ moral bankruptcy weakened their political clout (and hence leading to policy paralysis), they framed a ‘please all’ (from the perspective of their political opponents and opposing allies) policy of FDI in multi-brand retail that was as draconian as it can get from the business perspective. Not surprisingly, the policy bombed as not a single global retailer has evinced interest in India, save for a few queries here and there.
Another legacy of UPA II would be that India’s financial position has been virtually decimated. While UPA I pushed the economy towards financial abyss (talk of 6th pay commission, farmers debt waiver, continuous and inexplicable rise in MSP and what not), UPA II only hastened the process. Under UPA I, official fiscal deficit number remained relatively under control since the government issued various bonds (oil bond, food bond, fertilizer bond), UPA II kept the legacy going by resorting to policy of delaying payment of subsidies to the next year and MSPs rose even further . Unfortunately, while innovative accounting helped to keep deficit under check during UPA I, it did not help during UPA II.
While one does agree that external factors are also to be blamed for poor performance, but that’s only a small part of the story. Most of the blame lies within. Take for example the sharply rising current account deficit. Blaming gold import is a convenient excuse. If the faulty policies of the government lead to debasement of the currency and elevated levels of inflation, it is but natural that gold will score over financial assets as far as savings is concerned. Agreed, economic problems in Europe and in the US did play a part in falling exports. But the inability of the government to untangle the problems faced by the mining sector also led to sharp fall in raw material exports. Similarly, rising oil imports when the economy is slowing and oil prices remaining relatively stable points to the fact that India’s power generation is in shambles. If industries (especially in the South) are forced to generate their own power just to remain in business as they are faced with increasing prospects of power cuts, it is not a surprise the demand for diesel will go up. Not surprisingly, industrial production suffered and economy faltered.