Why Modi govt's White Paper on UPA regime sounds hollow on most counts

The government has brought out a so-called White Paper to highlight the mismanagement of the economy by the Congress-led United Progressive Alliance government during its 10 years in office from 2004 to 2014. A positive contribution of the document is to imply that the Congress still matters at a time when the party itself is doing its best to wander into incoherent irrelevance. But otherwise, the document is an election rant, far from an objective account of the UPA government’s performance or India’s economic performance under the UPA.

It is doubtless true that the UPA was a quarrelsome bunch, every ally aware of its heft in the survival of the government and determined to extract its pound of flesh. Further, in its first term, the UPA depended on external support from the Left, guided by leaders living in ideological bubbles far removed from the real world, and from the pragmatism of a Harkishan Singh Surjeet or a Jyoti Basu. And the government was headed by a mild-mannered technocrat, who held only delegated authority, wielded it to its fullest extent only once, to protect the Indo-US nuclear deal from expedient sacrifice, and whose primary commitment was to safeguarding his own personal reputation for integrity. This led to a timid surrender before Opposition accusations and failure to take credit for the government’s solid achievements.

Fastest growth rate

The UPA era witnessed the fastest rate of growth in India’s history. Gross fixed capital formation as a share of output, both in current prices, rose above 30%, touched 35.8% before trundling down, but never went below 30%. Under the NDA, this vital ratio has stagnated below 30%.

The UPA instituted the biggest economic shock absorber for the rural poor in India’s history, the Mahatma Gandhi National Rural Employment Guarantee Act. Prime Minister Narendra Modi once dismissed it as a monument to national failure but has consistently used it to alleviate rural distress, allocating huge amounts to the programme. The UPA brought in the Right to Information at the national level, now defanged by the present government. It decriminalized the existence of forest-dwelling tribal groups, who had been rendered trespassers ever since the British nationalized all non-private forests, by enacting the Forest Rights Act, which gave them other proactive rights as well.

Nuclear deals

The UPA freed India from the technology-denial regime in which the West had placed it after its nuclear tests, by signing the Indo-US nuclear deal, in the teeth of strong opposition, not just from the BJP but also from its ally, the Left. This paved the way for India’s inclusion in the four international agreements that govern access to vital technologies with strategic implications: the Nuclear Suppliers’ Group (India has only quasi-membership, thanks to Chinese obstructionism), the Missile Technology Control Regime, the Australia Group on chemical weapons and precursor chemicals, and the Wassenaar Arrangement on dual-use technologies.

But the UPA failed to celebrate this as a major strategic move vis-à-vis China, paving the way for India’s inclusion in the Quad and access to advanced US defence technology, significantly widening India’s defence sourcing and production choices. The nuclear deal signalled to American companies that the US saw India as a country it could do business with, and started major investment and sourcing, such as by Boeing.

Maternal and child health

It invested massively in maternal and child health, leading to dramatic falls in maternal and infant mortality. This failed to register with the public, thanks to traditional disdain towards women and the government’s own failure to take credit for it. The government set up the National Skill Mission and the National Skill Development Corporation, which trained and placed hundreds of thousands of youths. Manmohan Singh’s PMO chose to keep this a closely guarded secret.

The Aadhaar project

The UPA had the sense to induct technocrat Nandan Nilekani into the government, according him the rank of a Cabinet minister and asking him to develop  Aadhaar. Aadhaar was already a project, but as an identity card for citizens. It was Nilekani, who reimagined it as a unique number linked to a resident’s invariable biological features such as fingerprints and the iris, whose data would be securely stored in the cloud, for ready verification of identity when required.

The National Payment Corporation of India was set up in 2008 and started functioning in 2009. The Aadhaar team married the idea of immediate mobile payments with unique identity, to enable the movement of money from bank account to bank account, with the help of phone numbers. Nilekani’s team also developed the India Stack of application programming interfaces (APIs) to enable easy building of applications that take advantage of Aadhaar. Digilocker, UPI, the consent layer that allows an individual to aggregate financial transactions to present a consolidated snapshot of financial health to a potential lender, and much else.

The basis of India’s celebrated digital public infrastructure is Aadhaar, which means “basis” or “foundation”, and which the UPA introduced and was opposed by the BJP, in particular by the then Gujarat chief minister, Narendra Modi.

Major PPP projects

The UPA heralded major Public Private Partnerships, leading to the creation of the Delhi and Mumbai airports, two of the world’s finest, ultra-mega power projects, and thousands of kilometres of road, new townships and largescale residential construction. This construction boom produced migration of labour from rural areas, raising rural wages. Over 2008-14, rural wages rose in real terms, on the trot, reducing poverty.

The government allowed its telecom revolution, which raised rural tele-density from 2% to above 50% over 2004-10, to be dismissed as a scam, instead of hailing it as the giant leap for humankind it truly was. The boom in telecom did not just mean that lots of people who could not afford to own a mobile phone earlier now got connected. It meant massive investment in data traffic capacity across the land, facilitating the growth and spread of IT services and business process outsourcing industries. This not only created export earnings for large companies but became a gateway for many cohorts of first-generation graduates to enter the middle class, who then spent on housing and other things.

The 2G scam

What about the so-called 2G scam? The White Paper reiterates the tale that the allocation of spectrum bundled with the telecom licence, instead of auctioning it off separately, led to a massive loss of revenue. The Comptroller and Auditor General did not, as the White Paper claims, say that this policy cost the exchequer Rs 176,000 crore. Rather, it described a range, from Rs 58,000 crore to Rs 1.76 lakh crore, of presumptive loss, depending on the assumptions made. This suffered from four egregious flaws.

One, it assumed that allocating spectrum without auctions was in bad faith. Two, it failed to take into account the revenue share the telcos were to pay annually as licence fee and spectrum usage charge, in return for being spared upfront payment for the spectrum. It may be recalled that the outstanding dues of telecom companies on the share of the adjusted gross revenue (AGR) they owed the government amounted to Rs 1,65,000 crore, just on a disputed part of the revenue. Three, it failed to take into account the faster rollout of telecom networks and the affordability of tariffs enabled by avoiding upfront payments of huge auction amounts, and replacing upfront payments with pay-as-you-go revenue shares. The resultant rise in tele-density accelerated the rate of economic growth, generating additional tax revenue outside telecom. And four, the spread of telecom networks enabled computerization of tax networks, raising the efficiency of collections.

Auctions vs administrative allocation

In response to a Presidential reference on the subject, a large bench of the Supreme Court clarified that it is wrong to assume that auctions are the only fair means of allocating scarce natural resources. In its latest telecom law, the present government itself has opted for the administrative allocation of spectrum for space communications. This undermines the basis of the so-called Devas scam, whose nub was the allocation of spectrum without auction for an ambitious project to offer satellite-based broadband.

Was there no corruption in the allocation of 2G licences? While the only court ruling on the subject dismissed the allegation of a scam, speed money was probably collected per licence granted. In a polity that bribes voters with liquor and cash on poll-eve, buys MLAs wholesale and hires crowds for rallies, political parties have to mobilise funds in unaccounted forms, to finance unaccountable spending. Speed money is one way to collect such funds.

Coal scam

On the coal scam, the picture is a little different. Rather than focus on the more than doubling of power-generation capacity, which generated a surge in demand for coal that the state-owned coal monopoly was incapable of meeting, the government allowed the supplementing of Coal India’s coal production through captive mining to be dismissed as another gigantic scam.

On coal, the White Paper makes a factual error. The CAAG did not say that the allocation of captive mines cost the government Rs 1.86 lakh crore. Rather, it said that it led to undue enrichment of allottee companies to the tune of Rs 1.86 lakh crore. The government’s revenue from coal comes by way royalty per tonne mined, and that had to be paid whether the allottee was X or Y. The UPA government did propose auctioning coal mines, but the entire political class opposed it, the chief ministers of BJP-ruled Rajasthan and Madhya Pradesh, as well as the chief minister of the Left-run West Bengal opposing the proposal. The Left was ideologically inimical to the idea of ending state monopoly in coal.

The present government has passed a law abolishing state monopoly of coal mining but has not made much headway in finding merchant miners who would pay royalty plus a premium. Despite possessing the world’s fifth largest proven reserves of coal, India continues to import coal, even as its own coal continues to lie underground. This, in fact, is the biggest scam in coal.

Fiscal mismanagement?

The White Paper claims that wanton fiscal mismanagement led to inflation. It makes the fantastic claim that the Global Financial Crisis did not require any expansionary fiscal policy in India, as its impact was negligible. This is to confuse cause and effect. It was not the case that the GFC somehow spared India, and so its fiscal expansion was superfluous; rather, because of the fiscal expansion, the GFC did not cause much damage to India. It is a different matter that the UPA government was already giving a fiscal stimulus to the economy in the run-up to the 2009 elections, and that cushioned the economy, when the GFC hit us.

It is true that Pranab Mukherjee, as finance minister, kept the fiscal deficit elevated longer than required and stoked inflation. Plus, the food minister, KV Thomas, hoarded grain with the government, even as grain prices soared in the open market. The environment minister sat on projects, allegedly to extract facilitation charges, and derailed projects, piling up bad loans with banks and unrepayable debt on company books.

Yes, the UPA did mismanage the economy. So did demonetisation and the hasty implementation of GST later. But to say that the UPA’s time in office is a dark chapter of India’s history stands on par with the proposition that Nathuram Godse deserves a Bharat Ratna for his services to the nation.

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