Did bad politics do UPA in or bad economics? Or both?

The UPA-Congress debacle in this election has been blamed on the miserable economic growth rate post 2011 by many observers. Economists certainly think that when the economy is tanking and inflation is high, voters are unlikely to favour the government in power.

But was it economics that did the Congress in? ,Questioning this piece of accepted wisdom is James Manor in the Indian Express.TheUPA's economic record - especially when it involves benefits for the poor - was not as bad as was being made out. He points out that where rural India is concerned, the UPA government did succeed to a large extent in proving inclusive growth.

He uses data from a study done by the National Council of Applied Economic Research and the University of Maryland to make his case. The group, he says, surveyed "just under 42,000 households across India in 2011-12, a massive sample. Crucially, these were the same households that they had surveyed in 2004-05, so they could track changes that were experienced over the first seven years of UPA rule."

Prime Minister Manmohan Singh. AP

Prime Minister Manmohan Singh. AP

According to Manor, the study revealed that "real average household incomes in rural areas had increased by 5 percent annually, which was almost twice the increase of 2.6 per cent in towns and cities."

He adds, "when they adjusted their calculations using the numbers of members of households, the growth of incomes in rural India was even more impressive: an annual average of 7.2 percent."

Where some of the poorest groups such as Dalits, Other Backward Classes, Adivasis, Muslims were concerned, they too saw a increase in their income, according to the survey. Manor also notes that UPA was able to spend on programmes to aid inclusive growth, but it lost the elections despite economics being on its side.

He concludes by saying that it was political factors that caused the UPA's doom, including all-pervasive petty corruption, scams, and bureaucratic paralysis. He adds that UPA's demise had a lot to do with the kind of politics they played with instead of their economics.

Manor is not the first one to point out that UPA was failed not by its economics but by its politics. According to this MoneyControl article, Maitreesh Ghatak of the London School of Economics, Parikshit Ghosh of the Delhi School of Economics and Ashok Kotwal of the University of British Columbia pointed out that UPA's economic underperformance.

They had noted that, “Growth tends to create corruption by generating new wealth, the claims on which are not properly established," and added that"where UPA failed was not the quest for productivity but the need to put in place a sound mechanism for keeping mischief at bay. The mega scandals that now plague the party, especially ones having to do with coal and spectrum allocations, derive from the expansion of infrastructure, not its stagnation."

According to the paper, when UPA and NDA were compared, the former fared better on all economic parameters. They pointed out that, "average real GDP growth over UPA 1 and 2 were 8 percent and 7 percent respectively (average 7.6 percent) while for NDA it stood at 5.9 percent. The average fiscal deficit for UPA 1 and 2 stood at 3.9 percent and 5.5 percent (average 4.6 percent) while under the NDA, deficit stood at 5.5 percent."

The authors also noted in their paper, "Growth afforded UPA the luxury of launching new welfare schemes like NREGA – a vote winner perhaps after its first term. It lacked the wherewithal to run these schemes effectively by plugging the leakages and stopping the graft."

However, the analyses by Manor and Maithreesh Ghatak & Co do not take note of the following economic factors while claiming that bad politics rather than bad economics did the UPA in.

First, inflation has been elevated throughout UPA-2. If we assume that inflation is really a tax on the poor, then clearly this is one economic factor that UPA goofed up on. It had nothing to do with bad politics.

Second, job growth has been poor all through UPA-1 and UPA-2. While some economists have explained this as being the result of more women extending their education and dropping out of the job market, the fact is UPA presided over fairly jobless growth. This cannot but be seen as another economic failure - and not just bad politics.

Third, the NCAER study quoted by Manor relates to the 2011-12. However, it is the two years after that (2012-13 and 2013-14) which saw growth collapsing without inflation subsiding. It may be the impact of bad economic management during the last two years of the UPA that may have had a major impact on its electoral prospects in April-May 2014. It is human to remember current misfortunes more clearly than good things from the distant past.

The jury should still be out on whether bad economics, or bad politics, or a combination of both sent the Congress packing.


Published Date: May 24, 2014 04:26 pm | Updated Date: May 24, 2014 04:27 pm

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