Numbers don’t lie

A reality check on the Modi government’s achievements in five years in comparison with the 60-month periods of the previous three administrations: NDA I, UPA I and UPA II.

Published : Mar 27, 2019 12:30 IST

Rahul Dandwate, a 26-year-old bachelor of engineering graduate who has been unemployed for one year, at a job fair in Chinchwad, Maharashtra, on February 7.

Rahul Dandwate, a 26-year-old bachelor of engineering graduate who has been unemployed for one year, at a job fair in Chinchwad, Maharashtra, on February 7.

A rational populace must make logical rather than emotional decisions on who is to govern them on the basis of objective measures of the performance of the current and past governments. It is to aid this goal that this comparison of the performance of the current Bharatiya Janata Party (BJP) government (the “Modi Sarkar”) with that of past governments, the United Pogressive Alliance I and UPA II governments and the National Democratic Alliance (NDA I) government headed by Atal Bihari Vajpayee, has been made.

To inform this article, two key sources of unimpeachable data are used. One is the “Handbook of Statistics on the Indian Economy”, published by the Reserve Bank of India, and the other is DataBank of the World Bank, which mostly collates economic data from various governments, including the Indian government.

The performance analysis is split into three parts:

1. Productivity and infrastructure generation

2. Tax revenues, Fiscal deficits and debt

3. External trade

Productivity and infrastructure generation

Figure 1 shows the annual gross domestic product (GDP) growth rates for each of the four regimes. The x-axis of the graph shows the progression of each regime and is marked Year 1 to Year 5. So, for the Vajpayee government, Year 1 is 2000 and Year 5 is 2004. We can see from this graph that the average annual growth rate of GDP for the NDA I, the UPA I, the UPA II governments and the Modi Sarkar are 4.6 per cent, 7.5 per cent, 7.8 per cent and 8.1 per cent, respectively. From a superficial analysis, one might be tempted to say that the Modi Sarkar has outperformed all previous administrations. However, it should be pointed out that the GDP numbers put out by the government are quite controversial, to say the least, and so we must turn to other parameters to get a complete picture.

The portion of the GDP that is invested in the creation of new capital is known as Gross Capital Formation (GCF). The higher the percentage of the GDP that the GCF is, the more the development (“vikas”) that is possible in the future. An investigation into the GCF of the four regimes (Figure 2) shows that on average, NDA I had the lowest GCF as a percentage of the GDP, at 25.3 per cent. For UPA I it was 36.6 per cent, UPA II 38 per cent, and the figure slipped to 32.2 per cent in the four years of the Modi Sarkar.

Another key metric of development is the Index of Industrial Production (IIP). The IIP consists of three parts: one for mining and quarrying, one for electricity, and one for manufacturing. The three indices are weighted together to obtain the IIP, and the highest weight is given to manufacturing (75-80 per cent). In a developing country like India, the IIP should constantly be increasing. The averages of the growth rate in manufacturing IIP (Figure 3) are 5.8 per cent (NDA I), 11.9 per cent (UPA I), 5.0 per cent (UPA II), and 3.9 per cent (Modi Sarkar.)

Another important parameter determining effective governance is employment data. The government has not released employment data for several years, making an evaluation difficult. However, leaked reports suggest that unemployment has risen to 6.1 per cent, its highest value in 45 years (



Tax revenues, fiscal deficits, debt and inflation

Let us first consider tax revenues. There are two kinds of taxes: direct taxes such as income tax and indirect taxes such as excise, customs, valued added tax (VAT) and goods and services tax (GST). India has a large informal economy and therefore a problem with tax compliance. A government that is able to effect better collection of direct taxes therefore does better.

Indirect taxes, on the other hand, apply not to people but to goods and services. They do not depend on the income of the person paying the tax and therefore have a tendency to hurt the lowest income sections of the population disproportionately. Hence, a lower figure for indirect tax collection is considered a positive for a government because it can reduce poverty.

An examination of the direct tax collection as a percentage of the GDP reveals that the NDA I government was able to collect 2.3 per cent of the GDP as direct taxes on average; the corresponding figures for UPA I, UPA II and the Modi Sarkar are 3.9, 4.1 and 3.6. Thus the real direct tax collection by the Modi Sarkar is lower than that in the UPA years.

The indirect tax collections for the four regimes, again as a percentage of the GDP, were 3.9 (NDA I), 4 (UPA I), 3.2 (UPA II) and 3.6 (Modi Sarkar). So, we see that a regime of high indirect taxes had begun to come down in UPA II but has gone up again in the Modi Sarkar, making life for those on the bottom rung of society harder.

Fiscal deficit is the difference between the government’s expenditures and its revenues. When expenditures exceed revenues, then the government is forced to borrow to make ends meet. This is a cost to the country, and so, a low figure for the gross fiscal deficit (GFD) is desirable.

Here, the Modi government’s performance is better than the other three governments. The average numbers for the GFD, as a percentage of the GDP, are 5.3 (NDA I), 4 (UPA I), 5.4 (UPA II) and 3 (Modi Sarkar).

An accumulation of deficits leads to debt. As with the fiscal deficit, it is desirable to have a low debt. There are two measures of debt. One is called the debt-to-GDP ratio (self-explanatory), and the other is called the debt service ratio. The debt service ratio is the ratio of debt service payments (principal plus interest) on all the debt that a country owes to its total export earnings. A low figure is desirable.

Figure 4 shows that the debt-to-GDP ratio went down significantly during UPA I (as low as 16.8 per cent in 2006) before starting to rise again and ending at 23.9 per cent at the end of UPA II. The ratio has been coming down in the four years of the Modi Sarkar.

The debt service ratio tells a different story. The average numbers for the four regimes are: 15.9 per cent (NDA I), 6 per cent (UPA I), 5.6 per cent (UPA II) and 8.1 per cent (Modi Sarkar). The higher debt service ratio for the Modi Sarkar even as the debt-to-GDP ratio is lower is because exports performance during the Modi Sarkar has been abysmal. Inflation, calculated from the GDP deflator for India, went from an average value of 4 per cent (NDA I) to 6.2 per cent (UPA I) to 7 per cent (UPA II) down to 2.8 per cent (Modi Sarkar).

External trade

The one most disastrous metric of performance for the Modi Sarkar is undoubtedly its exports performance. For a developing country like India to improve, its exports must at least increase in tandem with its GDP, and preferably grow faster. However, as we can see in Figure 5, whereas NDA I, UPA I and UPA II all had reasonably good exports performance, the first two years of the Modi Sarkar were an absolute disaster, with the figure for 2015-16 reaching a value of nearly -13 per cent. The average annual growth percentages for the four regimes are 11.9 (NDA I), 16 (UPA I), 10.5 (UPA II) and -1.7 (Modi Sarkar).

Declining exports lead to a negative trade balance, where we import more than we export. India has always had a negative trade balance, so the objective is to increase exports to remedy this. When we add money flows in and out of the country due to individuals—for example due to tourism, foreign investments, overseas operations, etc. (known as “Invisibles”)—to the trade balance, we get what is known as the Current Account. It is desirable to have a current account surplus. Unfortunately, we have a current account deficit (CAD); so it is desirable to keep this as low as possible. Figure 6 shows the CAD as a percentage of the GDP. It is seen that the CAD rose almost continuously throughout UPA I and UPA II, before starting to decline in the last year of UPA II and at the start of the Modi Sarkar. One major reason for this is that crude oil prices were very high during the UPA years and fell dramatically towards the end of UPA II and the start of the Modi Sarkar. This can be seen from the trade deficit in oil-related products, which, as a percentage of the GDP, went from 2.7 (NDA I) to 4.2 (UPA I) to 5 (UPA II) to 2.9 (Modi Sarkar).

There are two components to international trade: the Current Account and the Capital Account. The Capital Account looks at the currency flows into and out of the country which affect capital, such as foreign direct investment (FDI) (where foreign entities invest in companies and projects in the country), foreign portfolio investment (where foreign entities invest in the country’s equity markets), non-resident Indian (NRI) deposits, commercial borrowings, and external assistance. Fortunately for India, for most of the last 20 years at least, the deficits in the Current Account are more than offset by the surpluses in the Capital Account. The sum of the Current Account and the Capital Account is called the Balance of Payments (BoP).

The surpluses in the BoP are added to the country’s foreign exchange (forex) reserves, and 20 years of mostly forex surpluses have greatly increased India’s forex reserves. India’s forex reserves today stand at about $424 billion ($370 billion in 2010 dollars); they rose from $41 billion in 1999 to $128 billion in 2004 to $255 billion in 2009 to $283 billion in 2014 (all in constant 2010 dollars). The average annual percentage growth in forex was 26.3 (NDA I), 17.3 (UPA I), 2.2 (UPA II), and 7 (Modi Sarkar).

A big part of the capital account is FDI, which totalled $19 billion (NDA I), $54 billion (UPA I), $90 billion (UPA II) and $120 billion (Modi Sarkar) (all in constant 2010 dollars). However, it should be noted that FDI inflows have been declining for the past three years.


In comparing the performance of the Modi Sarkar with previous governments, it is seen that the GCF and manufacturing output are well below what have been in previous governments; exports are drastically down; direct tax collection is below the bar set by the UPA; and indirect taxes are rising, which is not desirable.

On the positive side, the fiscal deficit is down; the debt is coming down; inflation is low; FDI inflows are the highest ever; and the forex reserve accumulation, while not as robust as during the NDA I or UPA I years, still is very healthy.

Seshadri Kumar is an R&D chemical engineer with a BTech from IIT Bombay and an M.S. and a PhD from the University of Utah, U.S. He writes regularly on political, social, economic, and cultural affairs at

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