Dumb politics, dumb economics: UPA's binge years of 2009-11 killed growth in 2011-14

If the Central Statistical Organisation’s (CSO’s) advance estimates for GDP growth this year are correct, the UPA will have recorded a first: this will be the first time since the 1991 reforms when we would have had two consecutive years of sub-5 percent growth, with 2012-13 giving us 4.5 percent and 2013-14 with a projected 4.9 percent.

With this the average growth rate for UPA-2 will now be 6.7 percent - hardly the spectacular increase from the 6 percent achieved with the NDA. Take out the two stimulus-driven surges of 2009-10 and 2010-11, and what you get is an average of 5.4 percent over the last three years. Put another way, no stimulus, no performance. Take away the steroids, and UPA-2 has been a growth deflator.

But thanks to the unwarranted stimulus, UPA-2 leaves behind a gigantic legacy of high inflation and slow growth. The stimulus package improved the UPA-2 growth performance by a notch, but with massive side-effects on inflation and subsequent growth reduction.

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Consider the inflation performance. For the four years from 2009-10 to 2012-13 (with the latest year still an open question), CPI (Industrial workers) inflation has been averaging at 10.4 percent, with 2011-12 being the only one below double-digits. In 2012-13, a new CPI was introduced, but it didn’t change things much. Rural and urban inflation together were at 10.2 percent. (The figures in the chart refer to CPI (IW) and not the new CPI since we don’t have time series data for the new index).