UPA @ 9
Story of economic mismanagement
Corruption,Policy Paralysis In Last Four Years Have Hit Growth Big Time
Surojit Gupta TNN
New Delhi: The second tenure of the UPA coalition has witnessed a sharp slowdown in growth,stubborn prices,high interest rates and faltering business confidence.
While there are some tentative signs of a revival on the horizon,the Indian economy is still not out of the woods and experts say sustained policy and governance reforms are needed to lift Asias third-largest economy back to its potential growth rate of 7%.
India staged a smart recovery from the crushing impact of the global financial crisis in 2008-09.Powered by a modest fiscal stimulus,it roared back to life and for the next two years notched up growth rates which sparked hopes of sustained rally.But that was short lived as a string of factors ranging from corruption scandals,a sustained bout of policy paralysis and the Euro zone debt crisis knocked the wind out of the sails of one of the fastest growing economies in the world.
Growth has slowed to a decade-low of 5% while industrial output has slowed to a 20-year low of 1% in 2012-13 and exports have slumped.While inflation has moderated in recent months,the stinging impact of stubborn prices for the past three years has hurt the common man.Food prices continue to hover in double-digits,prompting calls for urgent and deep supply-side reforms to calm prices.
While the global economy was not very supportive,the sharp slowdown in growth was largely home-grown, said D K Joshi,chief economist at rating agency Crisil.
The 2012 Union Budget dealt a debilitating blow to investor confidence.Controversial changes in tax laws scared the foreign investors to the sidelines while foreign governments complained about the sudden and unexpected policy changes.The outcry forced the government to dilute some of the stringent provisions of the General Anti-Avoidance Rules (GAAR) aimed at plugging tax evasion to calm jittery foreign investors.
The policy paralysis which set in after a series of scandals starting with the 2G spectrum scam hurt the economy as civil servants postponed decisions.Issues related to land acquisition and environmental clearances delayed projects and stalled investments.The industry suffered and monthly data poured more pain for policymakers.Several crucial legislations needed to boost growth are stuck in Parliament.
On the economic front,UPA-II is essentially a story of economic mismanagement and their single biggest failure is their inability to tame inflation.Persistently high inflation for three continuous years is unheard of, said Kunal Kundu,an independent economist.
Despite having the architects of 1991 reforms in the fray,this government has failed miserably in ushering in the next generation reforms.India has far outlived the benefits of 1991 reforms, said Kundu.
P Chidambaram,who returned as finance minister last year has launched a recovery drive unveiling several measures to nurse the economy back to health.The results have started showing some feeble signs of recovery but experts say more steps are needed to lift the economy out of the present phase.
While the economy seems to have bottomed out,sharp recovery is not expected.India would be lucky to grow at 6% during the current financial year.
Better performance will only be visible post the general elections.An early election would be positive from the point of view of the economy.Else,the economy will just strut along, Kundu said.
