The policies of the UPA government to promote growth led to macro instability as they left office with high fiscal deficit and current account deficit, rising non performing assets and banking system that went in for reckless lending, Union Minister Arun Jaitley said on Sunday.
Jaitley’s comments come a day after the National Statistical Commission (NSC) sub-committee’s back series estimates of GDP growth with 2011-12 base came to light. These estimates showed that the Indian economy grew at a faster clip in two terms of the UPA government against the average growth in the first four years of the NDA government.
“The policies of the UPA to promote growth led to macro instability thus producing a poor quality of growth,” Jaitley said in a Facebook post, citing data on fiscal deficit, bank credit, inflation and current account balance from 1999 to 2017-18. During the UPA regime, “fiscal discipline was compromised and the banking system was advised to go in for reckless lending notwithstanding the fact that it would eventually put the banks at a risk. And yet when the UPA moved out of power in 2014, the last three year record, even in terms of growth, was less than modest,” he said.
He said 2003-04 witnessed the boom period for the global economy. The result was that global growth picked up. Most economies were doing well and all emerging economies started showing a high growth rate. “This period continued till 2008 when the global crisis started. For India to grow at a high rate during 2003-08 was quite obvious.”
Jaitley further said that the global tailwinds strongly supported growth.
Since demand was high, exports were growing, and, therefore, for an emerging economy like India it was a great opportunity. There were no significant domestic reforms carried out during this period, said the minister, who is recuperating after a kidney transplant operation.
“However, when this honeymoon ended, growth started slipping down and to ensure that growth is maintained, two significant steps were taken.
“Firstly, fiscal discipline was compromised and the banking system was advised to go in for reckless lending notwithstanding the fact that it would eventually put the banks at a risk,” he said.
And yet when the UPA moved out of power in 2014, the last three year record, even in terms of growth, was less than modest, Jaitley argued.
The Current Account Balance was positive under NDA 1, went back to negative under UPA 1 and went all-time highs under UPA 2, he added.
He said the lending during UPA-1 and certain period of UPA-2 was excessively high.
“Many of these loans have been given as a part of the reckless lending policy without assessing the bankability of the projects. Unnecessary surplus capacities were created, many of which are still lying unused,” he said.