The White Paper (Part 1)

 Hi. So as promised let us dive into the white paper first and understand what has the Government done so revolutionary that they are confidently blaming Congress. It took me a week to understand the white paper and analyze it thoroughly. So, the format of this analysis is simple. Basically, I will take the 8 most important parameters that the white paper has covered(where the Congress failed and where the BJP has changed it.

This white paper analysis even though decoded has a lot of things to be done. So we have divided it into two parts.

1.) INFLATION:

Before we jump into the stats what is Inflation? Let us say you bought tomatoes in 2019 for ₹30. But now the same tomatoes are bought for ₹ 70 in 2024. This price rise is known as Inflation. Now, Inflation is caused by a lot of factors such as geopolitical situations, global economic crises, and sometimes the failure of the government to control it. For example, if the income(salary) of the people increases obviously there will be inflation. We call it as good inflation. But if this is not the and there is a price rise then it is bad inflation and can affect our economy.

As you can see from the above graph the Inflation rate for FY(Financial Year)-2010,2011 and 2013 the percentages are in double digits.

This is a problem because let us say your salary in 2004 was  ₹12000 and in 2014 it is ₹24000.

You are spending ₹10000 and saved ₹2000. But in 2014, even though your salary doubled, due to inflation you have to spend a lot and save little. According to the white paper the UPA has failed to curb inflation as it decreased the purchasing power(ability to buy commodities) of the people.

What BJP did:

To deal with inflation the Modi government focused on the high inflation rates. In 2016 the government assigned a special task to RBI(Reserve Bank of India) to maintain inflation from 2% to 6%. This was a really strict target to keep inflation under control.

So, while the average inflation of the Congress government was 8.2%(2004-2014), the BJP government brought it down to 5%(2014-2024).

 

2.) BANK MANAGEMENT: 

This tells us how the government managed the banks. To understand this we need to know what is GNPA(Gross Non-Performing Assets).

Let's say I have  ₹ 20 and I give a loan of ₹5 each to my friends A, B, C, and D. At some point in time they have to repay me. But A and C didn't repay me. So I don't expect them to pay.

So, a performing asset ratio is 

(10/20)X100= 50%.

 

which means that 50% of the loan I gave cannot be recovered.

So, if the GNPA is high, the banks have given huge loans, and chances are slim of recovering that money. So the GNPA tells you how much the banks have recklessly spent and how the Government controlled them.

If this is clear, then let's go to the facts in the white paper.

When the Vajpayee-led NDA government took office(1998), the Gross Non-Performing Assets (GNPA) ratio in Public Sector banks was 16.0 percent, and when they left office(2004), it was 7.8 percent which is incredible. The UPA, to its credit, has brought down the GNPA even lower to 2.7% which is as mind-blowing as it was the time of the 2008 Global Financial Crisis. But in September 2013, this GNPA rose to a staggering 13.8% due to political interference in the UPA.

The white paper however did not mention the GNPA ratio of the current government. But here is an article from "The Economic Times" that talks about the GNPA ratio of this government.

https://economictimes.indiatimes.com/news/economy/indicators/banks-gross-npa-fell-to-a-10-year-low-of-3-9-in-march-rbi-in-financial-stability-report/articleshow/101337543.cms

3.) FOREX RESERVES:

FOREX or Foreign Exchange reserves is the money that the government has from NRI(Non-Resident Indians). The more forex reserves they have the more stable the government is economically.  The FOREX reserves in 2013, however, were only little enough to sustain for 6 months. So the UPA government came up with an idea called FCNR(B).

FCNR(B) stands for Foreign Currency Non-Resident Bank accounts. These are bank accounts that can be opened by NRIs and can deposit some money. 

Imagine I am an NRI. If I deposit $10000 in an Indian Bank, the bank gives me a 3% interest. At the end of the year, I will get $300 extra as interest and a total of $10,300. 

Irrespective of the rupee's value going down or up my deposit account would be safe and RBI would collect money from 10,000 people like me to increase FOREX reserves.

Kind of a win-win situation. A brilliant strategy right?

Wrong.

Due to these high interest rates that were offered in 2013 were not paid by the Congress Government they had to be paid by the BJP government. So the current government had to bleed its forex reserves to pay these NRIs.

 

4.) RUPEE DEVALUATION:

The UPA government had compromised external and macroeconomic stability, and the currency plunged in 2013. From its high to low, against the US dollar between 2011 and 2013, the Indian rupee plunged 36 percent

Here is a graph shown:

That wraps up Part -1 of the white paper. 

If you have any doubts please use the comment section.

If there is any data point that is wrong please do point it out.

Stay tuned for Part -2. It will be out tomorrow.😉

Bye👋