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Four years of the UPA: Mixed bag of hits and misses

	May 26, 2008

The UPA government’s report card released last week by the Prime Minister on its four years in office has revealed mixed bag of achievement and failures on economic front. The most noteworthy features have been the latest foreign direct investment inflows to India which has risen to touch $25 billion mark in one financial year. This is five times the FDI that India received in 2004-05. On the other hand, inflation, measured by the wholesale price index, has touched an unacceptably high rate of 7.83%. The growth rate of the Indian economy is still the second fastest in the world. Broad analysis of the report card, based on key performance parameters, shows that while there are noteworthy ‘Hits,’ failed performance promises are equally glaring.





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Report Card



Key performance parameters



1. Jawaharlal Nehru urban Renewal Mission

2. National Rural Employment Guarantee Scheme (NREG)

3. Airport infrastructure & upgradation

4. Special Economic Zones

5. universal education

6. Inflation

7. Financial sector reforms

8. Fuel pricing policy

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Hit: It’s a policy aimed at modernizing Indian cities’ infrastructure, but structured in a way that it would end up sprucing up the functioning of local administrations by making them accountable for every penny spent. The Jawaharlal Nehru National urban Renewal Mission will grant up to 90% of project costs for cities willing to undertake a range of sweeping reforms and clean up their books in order to raise debt for the markets. However, the Centre is yet to figure out how to make some of the states move faster.



Miss: The UPA had grand plans to spend as much as 6% of GDP annually on education, with at least half being spent on primary and secondary schools to ensure that all children receive an education. It also talked of autonomy for all institutions of higher learning. But while the UPA’s ministers have tried several attempts to meddle in the functioning of higher learning institutions like IITs, IIMs and AlIMS, the UPA’s actual expenditure on education has merely grown from 2.74% of GDP in its first year to a proposed 3% of GDP in its last year. To put that in context, the allocation made in 1985 was 4 of GDP.



Hit: While the jury is still out on the impact of the National Rural Employment Guarantee Scheme (NREGS), it makes a significant turning point in India’s anti-poverty measures, as it guaranteed by law 100 days of manual labour to each rural household and put the onus on state governments to provide unemployment allowance if they fail to provide wage employment. Since its launch, a staggering 17.93 lakh works, mostly related to water conservation and rural connectivity, have been taken up. However, BJP-ruled states like Madhya Pradesh and Rajasthan have topped the NREGS expenditure charts.



Miss: Inflation has been a bugbear for the UPA and the way global prices are moving this year, it seems it will haunt them to the day they go to the polls. While global price cycles have contributed to the UPA’s inflationary discomfort, a significant push may also have come by the regime’s single-minded pursuit of economic growth, analysts observe.



Hit: While the modernization of Indian ports and expansion of the road network are areas where the UPA has under-delivered, it has made significant progress in upgrading airports by setting in motion a Rs 50,000-crore airport infrastructure upgradation programme.



Four years on, Mumbai and Delhi have been handed over to private developers, while modernizing 30 smaller airports is underway.



Miss: According to analysts, financial sector reforms have been a complete non-starter under the UPA. The BSE Sensex climbed as high as 20,000 points, from the 5,000-lelvels in May 2004 but whether it is pension reforms, increasing foreign investment in banking and insurance or moving towards capital account convertibility, there has been simply no progress thanks to the Left allies’ constant opposition. However, that hasn’t stopped the UPA from dreaming about making Mumbai an international financial hub.



Hit: It may have spurred sporadic protests from activists (over land acquisition) and the government’s own (over revenue losses), but the Special Economic Zones policy has been the UPA’s lynchpin to tackle three chronic problems in the Indian economy: massive unemployment, pathetic infrastructure and grueling red-tape. SEZs, with their USP of single-window clearance, have clicked – at last count, the policy brought in Rs. 70,416 crore of new investment, created 1.5 lakh jobs and led to exports worth Rs 67,088 crore (2007-08). Ironically, the NDA had first toyed with the idea of SEZs.



Miss: Global crude prices more than tripled on the UPA’s watch to the current level of $135 a barrel. As the UPA tried to ‘protect’ the common man from the impact of high oil prices, oil companies bled profusely; in 2007-08 alone, they lost over Rs 77,000 crore, partially offset by the issue of oil bonds.