India's GDP growth and UPA's economic record

In a recent thread, I analyzed the economic development performance of Gujarat under Narendra Modi. The key comparisons I performed are:
1. GDP growth CAGR of Gujarat and its comparable peers
2. GDP growth CAGR of Gujarat under different CMs since liberalization began in 1991 
3. HDI improvement of Gujarat and its comparable peers

In this thread, I will share the findings of similar analyses for the federal government headed by the UPA. The comparisons I will post are:
1. GDP growth CAGR of India and its comparable peers
2. GDP growth CAGR of India under different PMs since liberalization began in 1991 
3. HDI improvement of India and its comparable peers

As I begin this analysis, I do not know what the findings will be. My guess is that the UPA will underperform compared to India under other PMs, and that India under UPA government will underperform its peers in the rest of the world. 

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 out of ~200 countries) in terms of PPP GDP, while it is ranked very low in terms of per-capita GDP. It is instinctively not fair to compare India's growth to that of large economies like the US 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 am open to suggestions for other countries to include. At this point, I have identified the following countries as peers for India for this analysis: Brazil, China, Indonesia, Vietnam, the Philippines, Pakistan, Bangladesh, Sri Lanka, and Ghana. If you think I ought to include other countries, please say so here. 

My plan is to post the results for each of the three items here in separate posts over the next day or two.

Here are my findings for analysis #2: comparing India's real GDP growth under different governments since the beginning of liberalization. 

The chart below shows the compounded annual growth rate (CAGR) of real GDP at constant 2004 prices. India has had four different governments during this period: a Congress government led by P.V. Narasimha Rao, two third front governments led by H.D. Deve Gowda and I.K. Gujral, an NDA government led by A.B. Vajpayee, and a UPA government led by M.M. Singh. Given the short tenures of Gowda and Gujral and the nature of their coalitions, I have combined their tenure into one for this analysis. The last year for which RBI provides data is the fiscal year 2011-12. 


As you can see, the UPA government has delivered the highest CAGR of any since liberalization began. I was surprised by this outcome of the analysis, as I expected to see NDA demonstrate a higher CAGR than UPA. 

Source: Reserve Bank of India, Handbook of Statistics on the Indian Economy, Table 2, Macroeconomic Aggregates at Constant Prices [url="http://www.rbi.org.in/scripts/AnnualPublications.aspx?head=Handbook of Statistics on Indian Economy"]here[/url].

Next, I will post the year-over-year growth rates since 1991 that go into those CAGRs. The colors in the chart above and below are: red for Congress or UPA, green for BJP, and blue for third parties. 



The source for these data is the same RBI handbook.

Without even winking, I will give the award to PVN...bcz his 5.1% came on the heels of near bankrupt Indian economy.

Next ABV - one has to take into account the Nuke explosion economic sanctions, isolation, followed by dotcom bust in 200-2001. Still he managed 6.1%. commendable. established India as a truly BRIC category.

MMS did ok but slipped badly in the last 4 years... With the acceleration he got in 2004, he should have done a lot better in the 2008 - 2009 to counter the 2010-2013 slump. Would others have done any better? may be or may be not.

But, that is only Economy which no PM has absolute control - what with Commie brakes and JJ/CBN/Nitish brakes.

PVN got rid of the license raj. it all started with him. you have to factor that in while making these comparisons.

The first chart is incorrectly labeled; under Manmohan Singh, it should say 2004-2012 instead of 2004-2011. This is the fixed chart:

MaxEntropy_Man wrote:PVN got rid of the license raj. it all started with him. you have to factor that in while making these comparisons.

Yes, I think PVNR was the best Prime Minister we've had in a while. But my purpose here is to show the numbers as they are, without going too much into reasons/excuses/factors that are not on the chart. I will do any of my own theorizing in separate posts, so the numbers stand by themselves.

I am looking for GDP timeseries numbers at constant $ numbers (real, not nominal GDP) adjusted for purchasing power parity. This is, to my surprise, not that readily available. The World Bank published GDP at current $ not adjusted for PPP. If anyone knows a source for real PPP-adjusted GDP by country and year, please do let me know.

Here are the results of analysis #1, comparing India's growth under UPA to its peers. The chart is sorted in ascending order of GDP at purchasing power parity (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.

Notes: The source of this data is International Monetary Fund, World Economic Outlook Database April 2013, here. Provided in summary form in this Wikipedia page. I decided to not use Ghana or Kenya because are too small, even smaller than Sri Lanka whose GDP is a tiny 3% of India's.

This is another way to visualize the same GDP growth comparison, showing the base value in 2004 and the increase since. I have removed South Africa to create more space on the chart, because it was the slowest-growing of the comparison set I had picked. 


The percentage numbers in parentheses are the cumulative GDP growth numbers over the eight-year period. As you can see, India registered the highest growth of all countries except China, and China's growth far outstripped India's.

Thanks for the charts. I will study them later tonight.

Just out of curiosity, what would the chart look like for these countries if you used GDP at PPP per capita? Wouldn't that be more reflective of the standard of living in these countries for valid comparison since it would eliminate the population advantage of larger countries?

The ranking is drastically different when you consider GDP per Capita at PPP as shown in the following link:
 
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html
 
Out of 229 countries, $ per capita and world ranking is as follows:
 
Brazil                   $12,500  106
S. Africa               $11,600  109
China                   $ 9,300   123
Sri Lanka              $ 6,200   147
Indonesia              $ 5,100   158
Philippines             $ 4,500   165
India                    $ 3,900   168
Vietnam                $ 3,600   170
Pakistan                $ 2,900   179
Bangladesh            $ 2,100   193
 
This is more reflective of the standard of living. India's economic performance is nothing to write home about.

Qatar at $103,900 is ranked #1. Singapore at $61,400 is ranked #7. U.S. at $50,700 is ranked #14.

Idefix,
You cannot look at Gdp numbers in isolation.
Pvn turned the boat. His numbers were remarkable for early 90 considering the circumstances.
Nda went through a post nuclear economic sanctions period and did an outstanding job of pulling out of it through some deft negotiations of jaswant singh.
the pick in economy in 2003 was clearly visible and led India shining. India gained a powerful economic ally at that time.
at the time of upa victory I wrote on sulekha forum that ups will benefit from nda groundwork for 2 to 3 years. Congress could be in harvest mode in product portfolio terminology.

goodcitizn wrote:Thanks for the charts. I will study them later tonight.

Just out of curiosity, what would the chart look like for these countries if you used GDP at PPP per capita? Wouldn't that be more reflective of the standard of living in these countries for valid comparison since it would eliminate the population advantage of larger countries?

I will do a similar comparison with GDP at PPP per capita.

truthbetold wrote:Idefix,
You cannot look at Gdp numbers in isolation.
Pvn turned the boat. His numbers were remarkable for early 90 considering the circumstances.
Nda went through a post nuclear economic sanctions period and did an outstanding job of pulling out of it through some deft negotiations of jaswant singh.
the pick in economy in 2003 was clearly visible and led India shining. India gained a powerful economic ally at that time.
at the time of upa victory I wrote on sulekha forum that ups will benefit from nda groundwork for 2 to 3 years. Congress could be in harvest mode in product portfolio terminology.

As I said before to Max, I am not offering my theories on the underlying reasons for the numbers -- yet. Once I am done with the HDI and GDP per capita analyses, I will state my own conclusions from all these data. 

I don't buy your thesis on "harvest mode." In your theory, how do you explain the dip in GDP growth in the first year of UPA rule, and then a two percentage point increase in the growth rate year after that? I have a feeling that when there is any ambiguity of interpretation allowed by the numbers, you are inclined to give the benefit of doubt to Modi but ding the UPA in similar circumstances.

truthbetold wrote:Idefix,
You cannot look at Gdp numbers in isolation.
Pvn turned the boat. His numbers were remarkable for early 90 considering the circumstances.
Nda went through a post nuclear economic sanctions period and did an outstanding job of pulling out of it through some deft negotiations of jaswant singh.
the pick in economy in 2003 was clearly visible and led India shining. India gained a powerful economic ally at that time.
at the time of upa victory I wrote on sulekha forum that ups will benefit from nda groundwork for 2 to 3 years. Congress could be in harvest mode in product portfolio terminology.

hahaha.. I remember day in and day out Rev Flimmy iyer also known as Mbururu AKA Jebi Achaachan, and Maulana Merlot making fun of "India Shining" slogan of BJP. BJP did a poor marketing job.

Marathadi-Saamiyaar wrote:hahaha.. I remember day in and day out Rev Flimmy iyer also known as Mbururu AKA Jebi Achaachan, and Maulana Merlot making fun of "India Shining" slogan of BJP. BJP did a poor marketing job.

The marketing job was better than the numbers they were trying to market. Hence the problem.

truthbetold wrote:Idefix,
You cannot look at Gdp numbers in isolation.
Pvn turned the boat. His numbers were remarkable for early 90 considering the circumstances.
Nda went through a post nuclear economic sanctions period and did an outstanding job of pulling out of it through some deft negotiations of jaswant singh.
the pick in economy in 2003 was clearly visible and led India shining. India gained a powerful economic ally at that time.
at the time of upa victory I wrote on sulekha forum that ups will benefit from nda groundwork for 2 to 3 years. Congress could be in harvest mode in product portfolio terminology.

For someone aspiring for a balanced opinion, you are not trying hard enough. If you cite economic sanctions as a challenge for NDA, you should also consider the GFC and the sinking of the global economy post 2009 when you review the UPA's performance.

Here is a chart showing CAGRs of per-capita GDP at PPP between 2004 and 2012, using the same source from IMF. 


As with overall GDP, India grew faster than all compared countries, except China that completely surpassed India. This is what I call exceptional or unmatched growth, by the way. China is richer than India, still grew per-capita income 50% faster than India could in the same period. 

This is another view of the same numbers. 


Here you can see the cumulative growth percentages in parentheses; India doubled its per-capita income, while China grew it by 2.5 times in the same period.

Marathadi-Saamiyaar wrote:

truthbetold wrote:Idefix,
You cannot look at Gdp numbers in isolation.
Pvn turned the boat. His numbers were remarkable for early 90 considering the circumstances.
Nda went through a post nuclear economic sanctions period and did an outstanding job of pulling out of it through some deft negotiations of jaswant singh.
the pick in economy in 2003 was clearly visible and led India shining. India gained a powerful economic ally at that time.
at the time of upa victory I wrote on sulekha forum that ups will benefit from nda groundwork for 2 to 3 years. Congress could be in harvest mode in product portfolio terminology.

hahaha.. I remember day in and day out Rev Flimmy iyer also known as Mbururu AKA Jebi Achaachan, and Maulana Merlot making fun of "India Shining" slogan of BJP. BJP did a poor marketing job.

Upps Aunty, I was not on CH when BJP was campaigning with "India Shining". But as it happens, I don't fault them at all on that slogan. For their core constituency i.e. the urban trader class, this was an absolutely apt slogan. Only, in the mass democracy that is India, you can't win elections ignoring the agriculatural hinterlands. The BJP has never had a mass base there, so even if they had a different, less-gloating campaign platform, I doubt if that would have made a material difference to the electoral outcomes.

Carvaka: Looked into ICRIER report to check out the fiscal deficit picture in India over the last several years. Here's what I found and it is quite interesting.
 
http://www.icrier.org/page.asp?MenuID=24&SubCatId=177&SubSubCatId=308
 

Fiscal Deficit and Economic Growth in India   This financial year, the budget (2009-10) has a fiscal deficit of 6.8 per cent of the GDP (and this does not include the fiscal deficit of the states). The fiscal deficit will be financed mainly by market borrowings of nearly Rs.400,000 cr. There have been concerns about the high fiscal deficit. The IMF, while praising India’s ability to face the global crisis, has warned that India's debt as a percentage of GDP was too high and, therefore, a sharp rise in the deficit could raise concerns about fiscal sustainability. The RBI governor too has underlined the need for returning to the path of fiscal consolidation to contain borrowing requirements. And the finance minister came out with the statement that the high fiscal deficit was not sustainable and in the fiscal responsibility and budget management document for 2009-10, the government plans to bring down the fiscal deficit to 5.5 per cent in 2010-11 and further to 4 per cent in 2011-12. Is the concern over the high fiscal deficit justified? Though a large fiscal deficit by itself is not bad, it can affect the country’s economic growth adversely. A large fiscal deficit implies high government borrowing and high debt servicing (the total debt servicing will be 37 per cent of revenue expenditure in 2009-10), which in turn could mean a cut back in spending on critical sectors like health, education and infrastructure. This reduces growth in human and physical capital, both of which have a long-term impact on economic growth. Large public borrowing can also lead to crowding out of private investment, inflation and exchange rate fluctuations (impacting exports). However, if productive public investments increase and if public and private investments are complementary, then the negative impact of high public borrowings on private investments and economic growth may be offset. How has increase in fiscal deficits impacted India’s economic growth over the years? As public debt is normally the accumulation of liabilities created to finance the government’s budget deficit, the fiscal deficit in absolute terms should be approximately equal to the annual increase in public debt. Though this has been the case up until the year 1998-99, there seems to be a widening gap between the two thereafter (Figure 1). Figure1: Gross Fiscal Deficit and Increase in Public Debt-Centre Taking the annual change in public debt as a better indicator of the size of gross fiscal deficit(GFD), India’s economic growth rate has been plotted against this GFD to GDP ratio for the period 1981-82 to 2007-08. We see that the rate of growth is lower when the GFD-GDP ratio of the Central government is high. (Figure 2) Figure 2: Fiscal Deficit-GDP Growth Rate Relationship A simple regression shows that growth in public debt too has an adverse impact on India’s economic growth. Gross domestic capital formation is included in the regression as it is one of the most important determinants of economic growth rate. y= 9.542 +0.095gfc -0.277pd                          R2=0.378       (5.75)   (2.04)       (-3.26) where, y= growth in real Gross Domestic Product gfc= growth in Gross Domestic Capital Formation (proxy for domestic real investment) pd= growth in Centre’s Public Debt The coefficient for public debt is negative and statistically significant at 1% level of significance. (Figures in brackets are the t-statistics) Therefore, it can be said that the present disquiet in India about the rising fiscal deficit is justified. Given that high deficits have an adverse impact on India’s growth, it is imperative that the government draw up a clear roadmap to reduce fiscal deficits if it wants the economy to return to 9 per cent growth path as it says it does. What needs to be done is restructuring of public expenditure. Merely meeting targets stipulated in the FRBM Act through clever accounting practices such as the transfer of massive subsidies to oil marketing and fertiliser companies as off budget items will not do. Neither will measures like divestment to finance the fiscal deficit.

Idéfix wrote:I am looking for GDP timeseries numbers at constant $ numbers (real, not nominal GDP) adjusted for purchasing power parity. This is, to my surprise, not that readily available. The World Bank published GDP at current $ not adjusted for PPP. If anyone knows a source for real PPP-adjusted GDP by country and year, please do let me know.

try the data available here:
 
 
http://www.nationmaster.com/index.php
 
 
 
here, for example, are what appear to be the most recent, constant (2004)-dollar gdp adjusted for ppp, of about 170 countries. this is a cross-sectional view:
 
 
 
http://www.nationmaster.com/graph/eco_gdp_ppp-economy-gdp-ppp
 
 
i looked briefly for time series, but didn't have enough time, and gave up. i'm fairly sure that you can find them here.
 
it might be interesting to include brazil and mexico in your charts.

Jebediah Mburuburu wrote:

Idéfix wrote:I am looking for GDP timeseries numbers at constant $ numbers (real, not nominal GDP) adjusted for purchasing power parity. This is, to my surprise, not that readily available. The World Bank published GDP at current $ not adjusted for PPP. If anyone knows a source for real PPP-adjusted GDP by country and year, please do let me know.

try the data available here:
 
 
http://www.nationmaster.com/index.php
 
 
 
here, for example, are what appear to be the most recent, constant (2004)-dollar gdp adjusted for ppp, of about 170 countries. this is a cross-sectional view:
 
 
 
http://www.nationmaster.com/graph/eco_gdp_ppp-economy-gdp-ppp
 
 
i looked briefly for time series, but didn't have enough time, and gave up. i'm fairly sure that you can find them here.
 
it might be interesting to include brazil and mexico in your charts.

Thanks for this. I found timeseries data for GDP at PPP, and GDP per capita at PPP on an IMF database. I did some quick reading on the topic of purchasing power parity adjustment, and my understanding is that a PPP adjustment also accounts for relative inflation. This is because the conversion from nominal GDP into $ is not performed at the forex rate, but at a ratio that indicates price parity for a predefined basket of items; so as inflation changes in an economy relative to the US, its adjustment factor changes to account for inflation. 

I already included Brazil in the charts I made so far. Mexico is a good suggestion, I will add it to the charts.

I pulled the data for Mexico but at a CAGR of 5.6%, it showed weaker GDP growth than every country in the chart above. So I won't bother adding another low-performer to the charts I already created. 

My suspicion is that the escalation of the drug-related violence in the second half of the last decade slowed down economic growth there considerably, taking it out of contention as a fast-growing economy.

I poked around the NationMaster website for GDP at PPP numbers. Their data is more limited than the IMF timeseries. I was able to pull snapshots of 2004 and 2010, but that's the latest they have. IMF has coverage until 2012 (which is really 2011-'12 for India). So I am staying with the IMF data for now.

This kind of single point of comparison is NOT the right way at the level of a country. You need to look at various other factors, for the sustainability of any growth

GDP Numbers of any denomination, 
Public Debt (Short and Long term variety) used to fund the Growth, 
Foreign Exchange reserves, 
Employment generation (they key factor in sustainability), Infrastructure development including Power generation, Road generation, Railway,
Inflation,
Non-conventional energy resources (Wind,Solar,Nuclear Power)
Tax Policies
Long term policies to improve Health , Education and telecommunications, which ensures
sustainability of growth.
Monetary policies that support expansion in Manufacturing and Agriculture 
Policies that support exports to fund imports (both capital and other essential goods)

Goodcitizen, pointed out a very good point on Debt, which has been known
a) UPA's callous treatment of public money has caused the Debt to increase from 100 Bn at start of UPA to 374 Bn now. The worst part is that about 170 Bn are due in 2014. A part of this is Corporate Debt, but its interest policies are the reasons 
Companies go abroad to get Debt.

Some additional items 
b) UPA's Road Development is very poor and it did  not build upon the Great Golden Quadrilateral initiative of NDA
c) NDA did a fantastic step of reducing cost of capital for Industries, thus ensuring growth despite sanctions.
d) According to some estimates NDA created 30 Mn + Jobs, UPA is nowhere close to it. Infact there are some studies to indicate that the amount of JOB Growth under UPA is less by the exact number they bankrolled as MNREGA.
e)Ballooning Unfunded Subsidies, with no regard to future revenue to fund it.
f) NDA did a good job on inflation despite crippling sanctions. UPA-2 has done a bad job and its only achievement seems  to be to reduce the buying power of 100 Rs to 10 Rs, if we considering buying power of essential commodities (Groceries). Real Inflation is probably close to 20%. Everyone knows it. Chidu did some fudging in 2006-7, by changing the base year of inflation.
g) Tax Policies now include a service tax which is a new concept
h) Lack of initiatives in getting Black Money, despite massive G-20 and OECD support in 2009 for ability to recover Black money (thanks to financial crisis)

Merlot Daruwala wrote:

truthbetold wrote:Idefix,
You cannot look at Gdp numbers in isolation.
Pvn turned the boat. His numbers were remarkable for early 90 considering the circumstances.
Nda went through a post nuclear economic sanctions period and did an outstanding job of pulling out of it through some deft negotiations of jaswant singh.
the pick in economy in 2003 was clearly visible and led India shining. India gained a powerful economic ally at that time.
at the time of upa victory I wrote on sulekha forum that ups will benefit from nda groundwork for 2 to 3 years. Congress could be in harvest mode in product portfolio terminology.

For someone aspiring for a balanced opinion, you are not trying hard enough. If you cite economic sanctions as a challenge for NDA, you should also consider the GFC and the sinking of the global economy post 2009 when you review the UPA's performance.

Maulane Merlot: For someone trying to act smart and be part of the Elite group in SuCH, you should know that Global downturn has an impact across the world economies. But, the Nuke sanctions were only on India and hence adversely reflects on Indian performance (NDA). Besides, there was Kargil and Bhuj earthquakes, DOTcom bust which cancels with the Global economic downturn for the UPA).

So, in short the NDA had an even uphill task and did quite well. The question ought to be why the UPA squandered the advantages built till 2004 and all the positive signals in 2005? Instead today India may be out of Brics replaced by indonesia.

Here is the last analysis I promised, #3 in my first post: comparison of improvement in HDI scores with other comparable countries. 

First, here is a chart that shows the percentage improvement in HDI score. This chart is sorted in ascending order of 2012 HDI score; i.e. Bangladesh has the worst HDI score and Brazil the best among these countries. I considered adding Mexico, but left it out because its HDI is higher than Brazil's and its improvement is much lower than India's. 


Surprisingly (for me at least), Bangladesh has registered a better percentage improvement on HDI than all other countries in this set; India has done better than everyone else, including China. But India has outperformed China only slightly, while China beat India comprehensively on GDP growth and per-capita GDP growth. 

Here is another view of the same numbers. In this chart, I have excluded South Africa and Philippines, the two worst performers on the chart above.


The percentages in parentheses are the improvements from the chart above. As you can see, Bangladesh and China have the highest absolute increase. India beats China on percentage improvement in HDI. 

Sources: United Nations Development Program, Human Development Report 2013, pages 16-18.
United Nations Development Program, Human Development Report 2010, pages 148-150.

Marathadi-Saamiyaar wrote:Maulane Merlot: For someone trying to act smart and be part of the Elite group in SuCH, you should know that Global downturn has an impact across the world economies.  But, the Nuke sanctions were only on India and hence adversely reflects on Indian performance (NDA).  Besides, there was Kargil and Bhuj earthquakes, DOTcom bust which cancels with the Global economic downturn for the UPA).

So, in short the NDA had an even uphill task and did quite well. The question ought to be why the UPA squandered the advantages built till 2004 and all the positive signals in 2005? Instead today India may be out of Brics replaced by indonesia.

Haha Upps Aunty, the discussion was on the chart comparing PVN vs NDA vs UPA. Other countries don't enter that discussion. If we start factoring in issues that impeded growth under PVN and NDA governments, it is only fair we do the same for the UPA government. But never mind. Let disingenuous MBAs debate those nuances. Why don't you stick to your comfort zone i.e. Isalamis, PIS, PakiSatan etc?

rawemotions wrote:This kind of single point of comparison is NOT the right way at the level of a country.

This is not a single-point comparison. I am considering several metrics, including GDP, per-capita GDP, and HDI which is a composite "standard of living" metric that encompasses health, education, and income. I am doing both internal and external comparisons: between different governments of India, and across a comparable set of countries.

rawemotions wrote:You need to look at various other factors, for the sustainability of any growth

I don't want to get into analysis paralysis, but you are welcome to conduct any other analysis that you think is germane to this discussion and post it here.

Now that I am done with the number-crunching, here are my conclusions from the data.

India has done better under UPA than I expected to see in a couple of areas:

1. It delivered the highest GDP CAGR of all post-liberalization governments. In five of its first eight years for which we have data, it exceeded the maximum year-over-year growth rate ever achieved by NDA. In fact, India's CAGR under UPA exceeds the highest year-over-year growth rate ever achieved by NDA!

2. India's HDI improvement has been better than its peers. It has achieved a higher rate of HDI improvement than China, despite China's greater per-capita income and its higher growth rate of GDP. What China is able to do with more money, India is able to exceed with less. Perhaps India's boisterous populist democracy with its numerous welfare schemes is what makes this possible.

India has not done well at all compared to China. This comparison shows us what exceptional or unmatched growth really means. It is not 10.3% when the next, larger peer is growing at 10.2%; it is 12% when the next, smaller peer is growing at 10%. India has a lot of catching up to do, and some of the measures that allow India to do better on HDI probably prevent it from going all-out on growth. As a representative democracy, it is important to bring the people along, so this is understandable and a rather tough nut to crack.

I have so far crunched the headline economic development numbers -- GDP and HDI -- for both Gujarat under Modi and India under Congress. There is a general perception here and in parts of the Indian media that the former is a lot better at delivering growth than latter. Based on these analyses, my conclusion is that that is not the open-and-shut case it is made out to be. Congress/UPA has done better than it gets credit for based on the numbers, and Modi gets more credit than is due to him based on the numbers. In my opinion, Congress/UPA has done a good job, not a great job, at managing the Indian economy. So has Modi in Gujarat.

But going beyond the politics of the day, there is a big national security concern for India in its growth gap with China. China already has more than twice India's GDP, and the gap is widening. Catching up with China on growth is not just a socioeconomic imperative for India, but it is also a national security need.

goodcitizn wrote:Carvaka: Looked into ICRIER report to check out the fiscal deficit picture in India over the last several years. Here's what I found and it is quite interesting.

I am not yet convinced that the fiscal deficit is a big enough issue to merit attention at the same level as income growth and improvements in standard of living. The reason is probably a bit of crying wolf: I have been seeing warnings about India's fiscal deficit since the late 1990s, in reputable sources like the Economist no less. I will look into this later when I have more time.

Marathadi-Saamiyaar wrote:

Merlot Daruwala wrote:

truthbetold wrote:Idefix,
You cannot look at Gdp numbers in isolation.
Pvn turned the boat. His numbers were remarkable for early 90 considering the circumstances.
Nda went through a post nuclear economic sanctions period and did an outstanding job of pulling out of it through some deft negotiations of jaswant singh.
the pick in economy in 2003 was clearly visible and led India shining. India gained a powerful economic ally at that time.
at the time of upa victory I wrote on sulekha forum that ups will benefit from nda groundwork for 2 to 3 years. Congress could be in harvest mode in product portfolio terminology.

For someone aspiring for a balanced opinion, you are not trying hard enough. If you cite economic sanctions as a challenge for NDA, you should also consider the GFC and the sinking of the global economy post 2009 when you review the UPA's performance.

Maulane Merlot: For someone trying to act smart and be part of the Elite group in SuCH, you should know that Global downturn has an impact across the world economies.  But, the Nuke sanctions were only on India and hence adversely reflects on Indian performance (NDA).  Besides, there was Kargil and Bhuj earthquakes, DOTcom bust which cancels with the Global economic downturn for the UPA).

So, in short the NDA had an even uphill task and did quite well. The question ought to be why the UPA squandered the advantages built till 2004 and all the positive signals in 2005? Instead today India may be out of Brics replaced by indonesia.

Now you are trying to have your cake and eat it too. The original comment about sanctions, etc. was about the chart that compared NDA to UPA (and PVNR). It was posted before I posted the external comparisons with other countries. If for that chart you think sanctions are relevant, so should the Great Recession be.

Idéfix wrote:Surprisingly (for me at least), Bangladesh has registered a better percentage improvement on HDI than all other countries in this set; India has done better than everyone else, including China. But India has outperformed China only slightly, while China beat India comprehensively on GDP growth and per-capita GDP growth. 

Here is another view of the same numbers. In this chart, I have excluded South Africa and Philippines, the two worst performers on the chart above.


The percentages in parentheses are the improvements from the chart above. As you can see, Bangladesh and China have the highest absolute increase. India beats China on percentage improvement in HDI. 

Sources: United Nations Development Program, Human Development Report 2013, pages 16-18.
United Nations Development Program, Human Development Report 2010, pages 148-150.

this is truly the best kind of chart to create, i.e. one showing value, change in value, and % change in value on the same bar.
 
here, for example, it reveals that bangladesh's high % change in hdi may be due to its low base, at which point, a moderate change can produce a high % change, and also, that moderate change is easier to bring about in a low state of development when there are many underutilized resources. the latter is the low-hanging fruit effect.
 
for the same reason, i am surprised that in narasimha rao's time, immediately after after liberalization, the average growth rate was only 5.2% per year, whereas in manmohan singh's terms, well after the early post-liberalization period, after all the low-hanging fruit have been picked, the rate is as high as 8.2%. remember also that both the 5.2% and the 8.2% are partly due to population growth.
 
i think that an average growth rate of 8.2% is very creditable, given that it's been achieved without oppressive regulation of the number of children one might have or moving large segments of the population from rural to urban areas.
 
in any case, i shall be eternally grateful to narasimha rao.

Idéfix wrote:

rawemotions wrote:This kind of single point of comparison is NOT the right way at the level of a country.

This is not a single-point comparison. I am considering several metrics, including GDP, per-capita GDP, and HDI which is a composite "standard of living" metric that encompasses health, education, and income. I am doing both internal and external comparisons: between different governments of India, and across a comparable set of countries.
sta

rawemotions wrote:You need to look at various other factors, for the sustainability of any growth

I don't want to get into analysis paralysis, but you are welcome to conduct any other analysis that you think is germane to this discussion and post it here.

 

I did not start this thread . you did and when pointed out that any economic comparison is  NOT meaningful without considering all parameters like Inflation, impact on Debt etc. you are saying it is analysis paralysis. 

Every central bank worth its salt would always consider Debt, CAD, Inflation, Job Growth and GDP all together. Whereas you do not want to concern yourself about Job Growth and debt in a country where 18 million come into the workforce each year, because UPA looks bad on that front. Somewhere else you write that a four fold increase in Debt is not an issue. Any impartial comparison should compare all these.

It is Ridiculous to selectively put out some charts picked from varuous websites without holistically comparing the overall economic situation. May be you should apply for being Congress Economic spinmaster to sell their economic failures as successes. 

Sounds like you are running away from a clear objective comparison. Growth at any cost is what caused East Asian Crisis and stagflation now in Japan. The point is that, growth at what cost needs to be considered and sustainability of growth has to be considered. Without those points it is meaningless.

You can drive up the debt , pump in money with no regard to productivity and only measure output in terms of GDP and HDI, do some skullduggery to mask real inflation,  but then it would  not be sustainable. This is the China Model. But they had strong exports to correct any issues and even they have realized the pitfalls of such a policy. Seems like Congress is following this without any concomitant increase in exports and driving up massive CAD. Now they want to give more freebies (Mobiles for Women, Money to Muslims) etc.. and are figuring out way to increase the tax base. For this instead of going after the likes of Hasan Ali Khan, they are going after the retirees and normal salaried folks, who have already seen the buying power of their life long savings dwindled by a fifth in last five years.

This government needs to be thrown out for that aspect alone.

Ah since we can now choose our own metrics if we don't like how "our side" performs on the metrics chosen by Idefix, I submit this new self-explanatory chart.

Idefix and merlot,
Very little time. So I will ignore your barbs.
Ups deserves credit for. Holding Indian economy steady through 2008 economic. Crisis. I said the same on this forum. I also said and repeated that mms deserves credit for slowly disbanding petroleum subsidies.
The reason for current ups problems in terms of rupee value and inability to push stimulus is increasing current account deficit. That is a problem that crops at regular intervals.
Growth policies vs distribution policies is the central issue in Indian political debate. When the balance is lost, India wobbles. Nda more growth. Oriented under vajpayee but do not have a very sellable subsidy agenda putting limitations on electability. That also leads to seeking hindutva type of agenda.
ups and mms are also pro growth. Congress and other upa

Lost a part of the post. I will try later in the evening.

Idéfix wrote:"Here are my findings for analysis #2: comparing India's real GDP growth under different governments since the beginning of liberalization. 

The chart below shows the compounded annual growth rate (CAGR) of real GDP at constant 2004 prices. "

Can you explain - in simple terms (high school math allowed) what the highlighted part implies? Why 2004 prices? 

Also, how does the UPA-1 and UPA-2 compare if separated? I think the general agreement is that UPA-1 did better on the economic front but UPA-2 failed. People had already rewarded UPA-1 performance.

smArtha wrote:

Idéfix wrote:"Here are my findings for analysis #2: comparing India's real GDP growth under different governments since the beginning of liberalization. 

The chart below shows the compounded annual growth rate (CAGR) of real GDP at constant 2004 prices. "

Can you explain - in simple terms (high school math allowed) what the highlighted part implies? Why 2004 prices? 

Also, how does the UPA-1 and UPA-2 compare if separated? I think the general agreement is that UPA-1 did better on the economic front but UPA-2 failed. People had already rewarded UPA-1 performance.

Each year, GDP is calculated at current prices as they are prevalent that year. That is called nominal GDP, or GDP at current prices. If the country overall "earns" $1 billion this year, and earns $1.1 billion next year, the question that has to be asked is, does that extra $0.1 billion buy you more stuff than what you could buy with the original $1 billion? If you had an annual inflation rate of 10%, then the answer is no. So in "real" terms -- i.e. in terms of what that income can buy, or what real goods and services the economy produced to earn the $1.1 billion -- the economy has not grown at all after accounting for inflation. When I say real GDP, it means that the numbers are after reducing the stated GDP to account for inflation.

When you compute real GDP, you pick any year as the base year; then you adjust the values for remaining years using the inflation rates between those years. Let us take an example (these numbers are hypothetical):

Year	Inflation Rate	Nominal GDP
2004	4%	$100
2005	5%	$110
2006	3%	$120

Now, you can choose to do the math at 2004 prices, 2005 prices, or 2006 prices. Let us start with 2004 prices: the $110 of nominal GDP in 2005 is worth less in 2004 terms, because there was 4% inflation; to get to the real GDP number for 2005 (in 2004 prices), you do: $110 / (1+0.04) = $105.8. So you real growth rate was not 10% (that's the nominal rate), but 5.8%. For 2006, the real GDP (in 2004 prices): $120 / (1 + 0.04) / (1 + 0.05) = $109.9. The real growth rate for 2006: ($109.9 - $105./$105.8 = 3.9%

Now, let us do the math in 2005 dollars and see if it changes the growth rates we are interested in. 2004 GDP in 2005 dollars = $100 x (1 + 0.04) = $104. 2005 GDP in 2005 dollars = $110. So 2005 growth rate = ($110 - $104)/$104 = 5.8%. 2006 GDP in 2005 dollars = $120 / (1 + 0.05) = $114.3, and 2006 growth rate = 3.9%

Finally, let us do the math in 2006 dollars. 2004 GDP in 2006 dollars = $100 x (1 + 0.04) x (1 + 0.05) = $109.2. 2005 GDP in 2006 dollars = $110 x (1 + 0.05) = $115.5. So 2005 growth rate = ($115.5 - $109.2)/$109.2 = 5.8%. And 2006 growth rate = (120 - 115.5)/115.5 = 3.9%

Summarizing these in the same format:

Year	Inflation Rate	Nominal GDP	Real GDP at 2004 prices	Real GDP at 2005 prices	Real GDP at 2006 prices	Real GDP growth rate, 2004 prices	Real GDP growth rate, 2005 prices	Real GDP growth rate, 2006 prices
2004	4%	$100	$100	$104	$109.2	-	-	-
2005	5%	$110	$105.8	$110	$115.5	5.8%	5.8%	5.8%
2006	3%	$120	$109.9	$114.3	$120	3.9%	3.9%	3.9%

As you can see, changing the base year for the prices does not do anything to the growth rates computed. For my analysis of India's GDP, I used numbers that RBI published at constant 2004 prices.

rawemotions wrote:I did not start this thread . you did and when pointed out that any economic comparison is  NOT meaningful without considering all parameters like Inflation, impact on Debt etc. you are saying it is analysis paralysis.

I have already accounted for inflation in my analysis. I showed real GDP growth numbers, not nominal GDP.  

rawemotions wrote:It is Ridiculous to selectively put out some charts picked from varuous websites without holistically comparing the overall economic situation.

I agree. Not one chart I have posted in this thread has been picked from "various websites." They have all been created by me using data that I have clearly cited the sources for. You are welcome to do similar analysis of whatever other indicators you think are relevant, and post them here.

rawemotions wrote:This government needs to be thrown out for that aspect alone.

You are welcome to your opinions of reasons for throwing out the government. The purpose of my analysis was not to lead to such a predetermined conclusion as yours. Your objective is to show analyses that indicate that UPA needs to be thrown out. Mine, as I stated at the outset, was to look at the numbers and see what they tell us. I stated first which analyses I was going to perform, before I knew where that would lead us. Then I performed those analyses and posted the results. I am sorry if you don't like the results; the numbers are what they are, and you can verify the honesty of my analyses because I have shared my sources.

Finally, I chose the specific analyses I mentioned at the beginning of this thread, because I did the same analyses for Modi's economic development record in Gujarat.

Smartha, the reason I did not separate out UPA-1 and UPA-2 is the same that I did not separate out Modi's terms as CM in the Gujarat thread. We are trying to assess the record of a PM/CM and his party in power steering the economy. You can see from the chart above that UPA-2 still comes out ahead of NDA on CAGR, because it delivered 8.4% year-over-year growth in its first two years, and 6.5% y-o-y in the third. NDA's CAGR was 6.0%, lower than the growth in all three years under UPA-2.

Jebediah Mburuburu wrote:for the same reason, i am surprised that in narasimha rao's time, immediately after after liberalization, the average growth rate was only 5.2% per year, whereas in manmohan singh's terms, well after the early post-liberalization period, after all the low-hanging fruit have been picked, the rate is as high as 8.2%. remember also that both the 5.2% and the 8.2% are partly due to population growth.

I was wondering the same thing. My best guess is that after liberalization begins, there is a momentum that needs to build before growth accelerates. Investors, both domestic and foreign, need to believe that the reforms will "stick" before they risk their capital, and the average investor looks for others to leap in before (s)he will take the plunge. India's "Hindu rate of growth" was 3-5%, and you can see in the timeseries that y-o-y growth rose steadily from 1.4% to 7.3% under PVNR.

Idéfix wrote:Smartha, the reason I did not separate out UPA-1 and UPA-2 is the same that I did not separate out Modi's terms as CM in the Gujarat thread. We are trying to assess the record of a PM/CM and his party in power steering the economy. You can see from the chart above that UPA-2 still comes out ahead of NDA on CAGR, because it delivered 8.4% year-over-year growth in its first two years, and 6.5% y-o-y in the third. NDA's CAGR was 6.0%, lower than the growth in all three years under UPA-2.

 
Thanks for an informative and educational post. I'll be really surprised, if the inflation adjusted real GDP numbers are better since 2009. The end user 'aam aadmi' experience doesn't seem to match this. Has this got to do with the differences in WPI, CPI, PPI/Core Inflation measures? What is the source of inflation you had used to come to the real GDP numbers?

smArtha wrote:

Idéfix wrote:Smartha, the reason I did not separate out UPA-1 and UPA-2 is the same that I did not separate out Modi's terms as CM in the Gujarat thread. We are trying to assess the record of a PM/CM and his party in power steering the economy. You can see from the chart above that UPA-2 still comes out ahead of NDA on CAGR, because it delivered 8.4% year-over-year growth in its first two years, and 6.5% y-o-y in the third. NDA's CAGR was 6.0%, lower than the growth in all three years under UPA-2.

 
Thanks for an informative and educational post. I'll be really surprised, if the inflation adjusted real GDP numbers are better since 2009. The end user 'aam aadmi' experience doesn't seem to match this. Has this got to do with the differences in WPI, CPI, PPI/Core Inflation measures? What is the source of inflation you had used to come to the real GDP numbers?

I did not do the inflation adjustment myself, I used the RBI's published figures of GDP at constant 2004 prices.

Idéfix wrote:

Jebediah Mburuburu wrote:for the same reason, i am surprised that in narasimha rao's time, immediately after after liberalization, the average growth rate was only 5.2% per year, whereas in manmohan singh's terms, well after the early post-liberalization period, after all the low-hanging fruit have been picked, the rate is as high as 8.2%. remember also that both the 5.2% and the 8.2% are partly due to population growth.

I was wondering the same thing. My best guess is that after liberalization begins, there is a momentum that needs to build before growth accelerates. Investors, both domestic and foreign, need to believe that the reforms will "stick" before they risk their capital, and the average investor looks for others to leap in before (s)he will take the plunge. India's "Hindu rate of growth" was 3-5%, and you can see in the timeseries that y-o-y growth rose steadily from 1.4% to 7.3% under PVNR.

yes, that's probably the reason.

Jebediah Mburuburu wrote:

Idéfix wrote:

Jebediah Mburuburu wrote:for the same reason, i am surprised that in narasimha rao's time, immediately after after liberalization, the average growth rate was only 5.2% per year, whereas in manmohan singh's terms, well after the early post-liberalization period, after all the low-hanging fruit have been picked, the rate is as high as 8.2%. remember also that both the 5.2% and the 8.2% are partly due to population growth.

I was wondering the same thing. My best guess is that after liberalization begins, there is a momentum that needs to build before growth accelerates. Investors, both domestic and foreign, need to believe that the reforms will "stick" before they risk their capital, and the average investor looks for others to leap in before (s)he will take the plunge. India's "Hindu rate of growth" was 3-5%, and you can see in the timeseries that y-o-y growth rose steadily from 1.4% to 7.3% under PVNR.

yes, that's probably the reason.

And, u claim to be a business/financial expert?

BTW, I take offense at "hindu rate of growth" Just like "niggers", "Black", "harijans" have been discarded by PiS Community, this should not be used either. That was a coin thrown in by the "experts" when the Paki economy was growing and doing much better in the 70s and 80s. Now, this theory has been debunked by Growth of Bharat and decline of PakiSaitan, and "Christian rate of growth" in the West. The prosperity and wealth of the Hindu nationas were at its peak when the countries in Bharat were hindu-based until the iSlamic barbarians (the darling of PiS Gang) looted and raped the country starting 1100 AD.

If anything the slow rate of growth of post-independence Bharat was due to the British controls inherited by the CONgress/UPA who enforced Soviet copycat model.

Marathadi-Saamiyaar wrote:BTW, I take offense at "hindu rate of growth" Just like "niggers", "Black", "harijans" have been discarded by PiS Community, this should not be used either. That was a coin thrown in by the "experts" when the Paki economy was growing and doing much better in the 70s and 80s.  Now, this theory has been debunked by Growth of Bharat and decline of PakiSaitan, and "Christian rate of growth" in the West.  The prosperity and wealth of the Hindu nationas were at its peak when the countries in Bharat were hindu-based until the iSlamic barbarians (the darling of PiS Gang) looted and raped the country starting 1100 AD.

If anything the slow rate of growth of post-independence Bharat was due to the  British controls inherited by the CONgress/UPA who enforced Soviet copycat model.

I liked that impassioned speech, and I gladly note that that's the only thing here that you could disagree with.

I actually agree with you on the term "Hindu rate of growth." It is more a "socialist rate of growth;" that is why I put it in quotes in my previous post.

Idéfix wrote:As I said before in this thread, I am quite concerned about the gap between India and China in GDP growth rate. This prompted me to take a closer look at the gap in year-over-year growth rates between India and China since liberalization began in 1991. The chart below shows the gap in percentage points between the two countries' growth rates in GDP at PPP.


This means that in 1991, China's growth rate exceeded India's by 7.3 percentage points; in other words, India grew at GDP at PPP at 5.8% while China grew it at 13%. (The difference is 7.3%, not 7.2% because of a rounding anomaly). I have color-coded the chart for various governments in India since liberalization began: red is Congress/UPA, green is NDA and blue is third parties. 

Overall, it looks like India has steadily narrowed the gap in GDP growth with China. Looking at the data for each year can make it hard to spot long-term trends, so I computed averages for each government. The chart below shows the simple average of the gap in y-o-y GDP at PPP growth rates with China: 


As you can see, the average gap has been closing steadily. We still have a large 2-3 percentage point gap that we need to close. If you split apart the two UPA terms under Singh, the average gap under UPA-1 is 2.7% and the average gap under UPA-2 is 2.2%. 

This analysis is interesting because it normalizes for global economic conditions, while surfacing specific factors that affect one or both countries. In the wake of the global financial crisis, while growth in India has slowed, it has slowed a wee bit less than in China. 

The source for these charts is the IMF data cited above.

i suspect that india's gdp growth rate of just over 8% is more sustainable in the long term - say, for the next 20 years - than china's 10%.

i've enjoyed reading this thread. thank you carvaka and JM.