The White Paper (Part 2)

 

Hi. Welcome to part 2 of the white paper. If you haven't read part 1 please do read it before you read this.

5.)Fiscal Deficit:

The 2008 global financial crisis had nearly ruined the economies of the big powerhouses of the world. Countries like the USA, China, Brazil, and Japan faced huge inflation. Companies faced bankruptcy. However, India was not affected by this crisis much. Now this "why we were not affected" question needs a separate post.

So the UPA government introduced something called fiscal stimulus.

Fiscal stimulus is the action taken by the government to boost the economic activity of a country by spending more money on Infrastructure and tax cuts.

As you can see from the table India's growth rate in 2009 was 8.5% and we were the fastest-growing economy in the world. Due to this quick recovery, the UPA government started spending more money which led to an increase in the fiscal deficit.

Now, what is fiscal deficit?

If the government gets ₹100 from its revenue and it spends ₹120, then the extra ₹20 is known as the fiscal deficit.

From 2009 to 2014 the gross fiscal deficit was really high.

Compare this to the current government's performance then they have successfully managed to bring down the FD  except for

SOURCE: Think School

the year 2020-21. This was the mismanagement of Fiscal Deficit by the Congress Government.

6.) Government Debts:

We usually think that government debts and huge loans taken by the government are bad but if we use them in the right place they will boost the economy there is no problem with it. But how do we know that a government has spent it in the right domain?

Well to know this, expenditure can  be  classified into two parts: Capital and Revenue Expenditure:

Capital expenditure is the amount spent by the government on investments like infrastructure,   and developments and enables the government to make more money.

Revenue expenditure is the amount spent by the government on paying a salary of a govt. employee and subsidies etc which will allow the government to function smoothly.

From the above graph, you can observe that the CapEx of the Vajpayee and the Modi government is really high while that of the Manmohan Singh government is really low. 

From the Infrastructure blog, we know the performance of the NDA was better than the UPA.

So, the question arises. If the borrowed money was not used for infrastructure where did the money go?

UPA has spent the borrowed money in Revenue Expenditure. Paying salaries of government employees, farm loan waivers, etc. But one can argue that the farm loan waiver was a good step.

This debate will be continued and would really like to hear your opinion. Do drop it down in the comment section.

7.) Alleged Corruption Cases: 

2010  to 2013 was called the "era of corruption". The country was rounded with scams and scandals. Every other day a new corruption case will be exposed. Some people in the government were proven guilty and some people are still going through trials in court. Some examples are the Commonwealth Games scam, 2G scam, Colgate Scam, Coal Scam, etc.  This has eroded the trust of the people in the government. Although these cases were not proven with evidence this has left a black mark on the UPA government.

The details of these corruption allegations are given in the white paper in detail.

8.) "Policy Paralysis"

This is a term used by experts to describe the UPA government. The economic situation was so grave that the government could do nothing about it. Even if the government wanted to change things, even if they wanted to make policy everything could be done to some extent. 

Prime Minister Manmohan Singh couldn't save the economy despite having a great knowledge in the field. Political Interference and infighting within the UPA were some of the reasons for this phenomenon. Here is a small comparison of how both governments performed in the schemes

This wraps up the white paper analysis. Now I know this was too much to consume.

You might now think that the BJP saved the economy and that the Congress ruined the economy. 

Although whatever analysis is taken from the white paper is full of facts and is backed up with data points and facts, it is important to see the other side of the coin.

So that's why it is also important to analyze the Black Paper too.

The analysis of the White Paper and research has taken two weeks to be completed fully. So expect the Black Paper to come the next week.

I would really appreciate it if you follow this blog for other interesting policies.

I will attach the White Paper and a video explaining the white paper. This video actually helped me understand the white paper in greater depth.

a)White Paper, Ministry of Finance, Government of India

https://dea.gov.in/sites/default/files/White%20Paper%20on%20the%20Indian%20Economy%20-%20February%202024.pdf

b)Video by Think School

https://www.youtube.com/watch?v=iUF-Wh1Iu7w&t=748s

That's all from my side I will see you with a new blog.

Until then peace out✌✌