Opinion | White Paper: What the govt did and didn't say on 5 key economic parameters

The government’s white paper looks to expose the economic mismanagement, financial indiscipline, and widespread corruption of the Congress-led UPA government.

White papers are not common in Indian politics. Essentially a document that explains a complex subject, Opposition parties have often demanded that the government in power present a white paper in an attempt to lay bare deficiencies in governance and policy ineffectiveness.

However, the Narendra Modi-led government's decision to table a white paper on the Indian economy on February 8 has come from a position of strength and without any asking from political rivals.

Also Read: FM tables white paper, blames UPA for NPAs, high inflation

Quite clearly, a white paper has been on the government's mind for a while now.

"In 2014 when we formed the government, the economy was in a fragile state… Our government refrained from bringing out a white paper on the poor state of affairs then. That would have given a negative narrative and shaken the confidence of all, including investors," the white paper said.

"The government believed in 'nation-first' and not in scoring political points. Now that we have stabilised the economy and set it on a recovery and growth path, it is necessary to place in the public domain the seemingly insurmountable challenges – left behind as a legacy by the UPA government," it added.

With the Lok Sabha elections just a few months away, the time to score political points has come. Narratives, however, can be torn down and rebuilt; numbers are a bit less malleable. What, then, does the white paper say, and doesn't, on five key macroeconomic parameters?

Inflation

There is only one clear winner when it comes to controlling prices. Under successive Narendra Modi governments, headline retail inflation has come down sharply from 9.9 percent in 2013 to 5.7 percent in 2023. And even 5.7 percent is not low enough, with the policy repo rate at its highest in almost eight years despite the Reserve Bank of India (RBI) forecasting that inflation will fall to 4 percent within a few months.

"But for the geopolitical developments that significantly escalated global commodity prices, the average inflation in the last 10 years would have been even lower. Yet the government had inflation in control through diversifying supply sources and strengthening buffers of key food items," the white paper said.

A few words to provide some context are needed here: before 2014, the RBI did not target retail inflation.

External stability

The handing over of the reins of power from Manmohan Singh to Narendra Modi came at a time of huge instability on the external front, with the RBI rapidly utilising its foreign exchange reserves to contain the rupee's fall. Now, they stand at nearly $625 billion compared to almost $250 billion in August 2013.

"Due to the economy's strong fundamentals restored by our government, Rupee demonstrated resilience during global shocks such as the Russia-Ukraine conflict and taper tantrum of 2021-22 by major central banks," the paper said.

Again, while there is no doubt that India's capacity to handle external shocks is greater now, it is worth mentioning that the taper tantrum of mid-2013 caused by the US Federal Reserve was a different animal than that of 2021-22.

Deficit debate

Another stick the white paper uses to beat the 10 years of the UPA government is the high fiscal deficits it maintained, with the six years starting 2008-09 all posting numbers greater than 4.5 percent of GDP.

"If what we saw as concerning, what we could not see was more troublesome," the paper said, criticising the issuance of special bonds to oil marketing and fertiliser companies and the Food Corporation of India (FCI) in lieu of cash subsidy. This helped keep a check on the headline fiscal deficit number.

The problem here is that the current government has done precisely the same, forcing the FCI to take loans from the National Small Savings Fund – instead of transferring food subsidy – starting 2016-17. This practice continued for nearly half a decade until all the FCI's dues were wiped out by the Centre in 2020-21 at one go, which propelled the food subsidy bill to a huge Rs 5.41 lakh crore and the fiscal deficit to an eye-watering 9.2 percent of GDP. As such, the peak pandemic fiscal deficit could have been a lot lower – and prior years' higher.

The fiscal deficit – and the Centre's market borrowing to finance it – remains high, although the interim Budget surprised by targeting a deficit of 5.1 percent for 2024-25, lower than expectations of 5.3 percent.

No capex conundrum

One area where the Modi government's focus cannot be doubted is capital expenditure. Record after record has been created in recent years as the government has sought to push growth through the investment route, hoping to crowd in the private sector and stimulate high growth in the long term.

As for pre-2014, the white paper says the UPA "deprioritised" capex.

"…capital expenditure as a percent of total expenditure (excluding interest payments) halved from 31 percent in 2003-04 to 16 percent in 2013-14. The economy remained supply-constrained during the UPA government's tenure," it said.

GDP growth

The white paper mentions how India's per capita GDP in purchasing power parity terms has grown under the current government. But interestingly, at no point does it make a straightforward comparison between the GDP growth rates before and after 2014 – even though the Indian economy is, at the moment, the world's fastest growing large economy.

This is probably because India grew at a faster rate before 2014 than it has since. According to data from the statistics ministry, the average GDP growth from 2014-15 to 2023-24 has been 5.9 percent. Meanwhile, as per the government's own official GDP back-series, the Indian economy grew at an average rate of 6.7 percent from 2005-06 to 2013-14. There is no comparable growth number available for 2004-05.

Of course, the GDP growth rate does not always tell the whole story. But it is rather conspicuous by its complete absence from the white paper.