Discussing the “White Paper on the Indian Economy” in Lok Sabha on 9 February 2024 under Rule 342, Union Finance Minister Nirmala Sitharaman accused the UPA-led government of ruining India’s reputation globally through fiscal mismanagement at the Centre.
The “White Paper” compares the economic performance of 10 years of the Congress-led UPA government with a decade of NDA rule under Prime Minister Narendra Modi. Discussing it in the lower house, she also said that the Congress regime lacks “neeyat and niyam”, ie intention and adherence to the law during its 10-year mandate.
The banking crisis is pointed out as one of the most important and infamous legacies of the UPA government, citing political interference in commercial lending decisions of public sector banks and an increase in Gross Non-Performing Assets (GNPA) ratio.
It was pointed out that when the NDA government led by Atal Bihari Vajpayee came into office, the ratio of gross non-performing assets (GNPA) in public sector banks (PSBs) was 16%, and when they left office, it was 7.8%
However, his ratio, including restructured loans, climbed to 12.3 percent in September 2013, largely due to political interference by the UPA government in the commercial lending decisions of PSBs.
The paper further highlighted that the gross advances of PSBs were only Rs 6.6 lakhs in March 2004, while in March 2012, it was Rs 39.0 lakhs. “Moreover, not all problem loans were recognized. There was a lot under the hood,” FM said recalling the massive banking crisis of 2014.
According to a Credit Suisse report published in March 2014, the top 200 companies with an interest coverage ratio of less than one owed approximately Rs 8.6 lakh crore to banks. Almost 44 percent of those loans (Rs 3.8 lakh crore) were still recognized as problem assets.
That alone would have added another 6.7 percent to the GNPA ratio. In 2018, in a written response to a Parliamentary Panel, a former Governor of the Reserve Bank of India, stated, “A larger number of the bad loans originated in the period 2006-2008.”
What has the NDA government done for the Indian banking system and economy?
According to the time paper, the current government has, in the past 10 years, revitalized the stagnant financial sector and overhauled the credit ecosystem within the economy, bringing about major improvements.
It elaborated that the implementation of the Insolvency and Bankruptcy Code (IBC) and steps taken to strengthen the banks’ balance sheets include: asset quality review, quick fix framework, improved asset quality and capital infusion.
GNPAs of state-owned lenders stood at 4.4 percent, and net NPAs at 1 percent at the end of September 2023, according to the December 2023 Financial Stability Report. The ratio of GNPAs as a proportion of gross advances has come down to a lot. -annual low of 3.2 percent in September 2023.
The Indian economy also showed high external vulnerability, the paper highlighted. it said that India’s external vulnerability has increased due to excessive dependence on external commercial loans (ECB) that in an era where capital flows prevail.
During the tenure of the UPA government, ECB rose at a compound annual growth rate of 21.1 percent (during 2003-04 through 2013-14), while in the nine years from 2013-14 through 2022-23, they grew at an annual rate. of 4.5 percent.
In addition, the paper accused the UPA government of compromising external and macroeconomic stability, which led to the rupee’s plunge in 2013. From its high to low, against the dollar between 2011 and 2013, the rupee plunged 36 percent, it added.
In contrast, now, under the NDA regime, India’s external sector is much safer, with foreign exchange reserves rising 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. showed