The general perception in the country is that due to its imprudent
fiscal policy, the UPA has driven our economy to the ground. While it
would be fair to say that the central government could have done a
better job, one should avoid getting carried away while judging them. In
order to better understand their performance we need to be cognizant of
the fact that the UPA has battled a once-in-lifetime near-depression,
for almost half of its tenure. And,to get a more holistic picture we
need to compare India’s performance with the rest of the world, during
the same period. Once we do that, it becomes quite obvious that while
things could have been better, they could have very easily been worse.
During his speeches, Narendra Modi often claims that once he becomes
the Prime Minister of the country, he would revive the economy that has
been severely ‘mismanaged’ by Dr Manmohan Singh and P Chidambaram. The
general elections are just a month away and Modi is yet to share his
detailed economic plan with us, highlighting how exactly he plans to
‘fix’ the economy (which according to many economists is still
fundamentally strong).
After assessing Modi’s performance in managing the finances of his
state, I for one am not inclined to believe that he is in possession of a
panacea, which could cure anything and everything. (Read: Arvind
Kejriwal is right. Narendra Modi’s Gujarat growth story is the biggest
public relations con-job of our time)
As on March 2012, Gujarat’s debt was Rs 138,978 cr (projected to
reach Rs 176,000 cr in 2013–14), only West Bengal (Rs 192,000 cr) and
Uttar Pradesh (Rs 158,000 cr) have a higher debt than Gujarat. The
state’s debt when divided among its six crore populace gives a per
capita debt of approximately Rs 23,000, the highest among all major
states. What is interesting to note is the fact that Gujarat’s debt has
increased by more than three times since Modi became chief minister, it
was Rs 45,301 cr in 2001–02.
Economists would tell us that high debt on its own may not be a bad
thing; several good companies are highly leveraged because they borrow
money to invest and create capital assets which in turn contribute to
higher revenue. But, in case of Gujarat, a lot of spending has been done
on ‘showpiece’ infrastructure projects – while spending on key sectors
(such as health and education) has been low.
According to the CAG report on state finances (for the year ending
March 2011), the average return on state government’s investments in
statutory corporations, rural banks, joint stock companies and
co-operatives was 0.25 per cent in the last three years; while the
government paid an average 7.67 per cent as interest on its borrowings
during 2008–09 to 2010–11.
The CAG report also talks about the poor debt management of the
Gujarat government; the state has incurred 41% higher debt than the last
financial year and burdened the exchequer with heavy interest liability
at a higher rate.The report criticizes the entire state government,
but, it is particularly harsh on the finance and public sectors – which
are found to be the least efficient.
The financial woes of the state government are further highlighted by
their stance on the seventh pay commission. Gujarat is one of the only
two states (the other being West Bengal) that have expressed discomfort
over implementing the seventh pay commission.The state government has
stated that the seventh pay commission would lead to an unsolicited
financial strain on the state, which they cannot afford.
When the finances of the state, where Narendra Modi has been the
chief minister for the past 12 years, are in dire straits; wouldn’t it
be foolish on our part, to expect him to have a magic wand that can
‘fix’ the country’s economy.
Source: India.com
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