 "Finance Minister Nirmala Sitharaman speaks in the Rajya Sabha during the Winter session of Parliament, in New Delhi, Thursday, Dec. 7, 2023. (PTI Photo)")
The United Progressive Alliance (UPA) government had compromised India’s external and macroeconomic stability whereas the National Democratic Alliance (NDA) regime has been able to control the “inherited external vulnerability”, the finance ministry has said in a white paper on the Indian economy.
The white paper, tabled in Parliament on Thursday, compared the UPA government’s two consecutive terms, starting 2004, vis-a-vis the NDA’s tenure, beginning 2014, with respect to various macroeconomic parameters.
Under the current government, investment inflows have become more stable, the currency has been able to withstand the global shocks, and forex reserves have seen a substantial jump, according to the paper.
During the UPA government’s tenure, India’s external vulnerability shot up because of over-dependence on external commercial borrowing (ECB), which rose at a compound annual growth rate (CAGR) of 21.1 per cent during FY04-FY14. On the other hand, under the NDA, during the nine-year period ended FY23, ECB grew at an annual rate of 4.5 per cent.
“No surprise, therefore, that our economy was in a vulnerable position in 2013 when the US dollar rose sharply … the currency plunged in 2013. From its high to low, against the US dollar between 2011 and 2013, the Indian rupee plunged 36 per cent,” the paper said.
India’s average current account deficit (CAD) to gross domestic product (GDP) came down significantly to 1.1 per cent between FY15 and FY23, relative to an average of 2.3 per cent of GDP between FY05 and FY14 mainly due to robust growth in goods and services exports.
This, according to the paper, was because the current government was able to create an ecosystem to boost manufacturing and foreign trade.
As a result, India’s merchandise exports saw 41 per cent growth during 2014-22 (calendar year) and services exports increased 97 per cent -- substantially higher than global growth in both cases.
The paper pointed out the rupee remained resilient during global shocks such as the Russia-Ukraine conflict, which started in February 2022, and the “taper tantrum” of 2021-22 by major central banks. Within four months of the US Federal Reserve’s announcement in 2013, the rupee had depreciated by 14.9 per cent against the dollar while the domestic currency depreciated only 0.7 per cent in 2021 within the four months following the second taper tantrum.
The NDA government ensured more stable foreign direct investment (FDI) through liberalisation in most sectors, barring strategically crucial ones, brought to enhance the competitiveness of Indian industry. “As against the gross FDI of USD 305.3 billion mobilised between FY05 and FY14, our government garnered almost double that amount (USD 596.5 billion) in nine years between FY15 and FY23,” it said, adding that India’s external sector was much safer, with forex reserves increasing from $303 billion (equivalent to 7.8 months of imports) in March 2014 to $617 billion (10.6 months of imports) in January 2024.
The paper pointed out how the 80:20 gold export-import scheme launched by the UPA government exemplified “how government systems and procedures were subverted to serve particular interests for obtaining illegitimate pecuniary gains”.
