India’s GDP grew faster under UPA than NDA

In my previous posts in this series looking at the economic development performance of BJP and Congress, I have analyzed the performance of Gujarat under Narendra Modi. This post focuses on India’s GDP growth rates under the Congress government since it took office in 2004. Similar analysis of Gujarat’s GDP growth rates under Narendra Modi can be found in another post.

Identifying peer states for Gujarat is easy but identifying peers for India is difficult. This is because India is ranked very high (among the top 5 among around 200 countries) in terms of GDP at purchasing power parity (PPP), while it is ranked very low in terms of per-capita GDP at PPP. It is instinctively not fair to compare India’s growth to that of large economies like the United States and Japan, because those rich countries cannot grow at the rate at which low-income India ought to grow. It is also difficult to compare India to small countries like Sri Lanka and Ghana, countries that do not face the complex set of challenges India faces. I have chosen peers in the same broad range of per-capita GDP, trying to choose larger countries rather than smaller ones. I have identified the following countries as peers for India for this analysis: Brazil, Mexico, South Africa, China, Indonesia, the Philippines, Vietnam, Bangladesh, Pakistan, and Sri Lanka.

The chart below shows the compounded annual growth rate of GDPs of these countries between 2004 and 2012.

countries-gdp-growth-cagrs

The chart is sorted in ascending order of GDP at PPP in 2012. That is, the smallest economy on the chart is Sri Lanka and China is the largest. As you can see, India’s GDP CAGR is dwarfed by China’s. India did better than all other potentially comparable peers in the same period. However, the only real peer India has in its size is China, and India’s growth falls significantly short. The only countries that are within two percentage points of India’s growth are Vietnam, Bangladesh, and Sri Lanka, all of which are less than a tenth of India’s size. The chart below shows the same growth with a different visual: initial value of GDP in 2004 and improvement until 2012. It excludes slow-growing small economies like the Philippines, Pakistan, and South Africa.

countries-gdp-growth

Given India’s low per-capita income and large size, it is important to check the trends on per-capita GDP growth as well. The chart below shows the growth rates of per-capita GDP at purchasing power parity.

countries-gdp-pc-cagrs

Again, India has grown GDP per capita faster than every comparable country other than China. China was richer than India in 2004, and it extended its lead over India in this period. Here is another way of looking at the same growth, with the per-capita income in 2004 and the improvement since then.

countries-gdp-pc-growth

This chart shows that between 2004 and 2012, India doubled its per capita income. China started at a bigger base, and still increased its per capita income by two-and-a-half times.  India did better than all other comparable countries, both those richer and poorer than India in 2004.

It is clear from these charts that India clearly grew faster than all other comparable countries, and China outdid India by far. The persistent gap in growth with China is not just an economic matter, but is also a long-term national security concern. I analyze the trend in this growth gap in another post.

Now, how does India’s growth in this period compare with its growth under previous governments?

The chart below shows India’s real GDP growth rate under each Prime Minister since liberalization in 1991. Growth rates under Deve Gowda and Inder Gujral are shown together due to their brief tenures.

india-gdp-cagr-by-pm

It is clear from this picture that GDP growth under Manmohan Singh has been clearly higher than that under any previous Prime Minister. This is after considering the recent slowdown in growth.

Finally, here is the granular, year-over-year variation in growth rates that resulted in the above chart by Prime Minister.

india-gdp-yoy

Based on all the data presented here, it clear that Manmohan Singh delivered the highest GDP CAGR of all post-liberalization governments. In five of his nine years, growth exceeded the maximum year-over-year growth rate ever achieved by BJP. Even with the recent slowing of growth, India’s growth rate exceeds the rates achieved during two years of BJP’s six-year term in office. During Manmohan Singh’s tenure, India grew GDP overall, and GDP per capita, at rates faster than every comparable country other than China. On the whole, this indicates robust economic performance for India as a whole under the UPA government. 

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2 Comments

  1. Thanks for the detailed analysis. I am looking for growth vs. deficit. that is what is the RoI? Proxy for Investment of a nation is its deficit. Please map a GDP growth to deficit growth ratio under all these years.
    PS: I am not pushing any political agenda.thanks.

  2. I second Kalyan’s comment above. When the growth of a country is considered, the cost of growth also has to be considered to understand how sustainable the growth is. For example Europe could have had great GDP growth and when it became un-sustainable (predominantly due to debt) it lead to contraction.

    Another classic example is the case, where we can print lot of money and show growth, but have difficulty in managing the inflation that would eventually show up later.

    In fact the trend can already be seen for UPA, where Growth peaked at 9.5-9.6 and now is at an abysmal 5%. Ratio of Foreign Exchange reserves to Short Term external debt has ballooned.

    Infact, it has been long suspected that Chinese growth has very low RoI, because they are heavily financed by Stimulus and a Shadow banking system with huge NPA’s. China can do this because they have fantastic foreign exchange reserves.

    Thus Including the data on debts/deficits (internal and external, short and long term), would make the analysis more comprehensive and meaningful.

    Also, let us also not forget that during NDA’s term there were some sanctions on India due to Nuclear test and a discriminatory trade regime, although it was self-inflicted, because it was NDA’s decision to go with it. The adverse environment like those and other event like the impact of financial crisis in 2008 is something that unfortunately cannot be factored in easily during any analysis.

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