The Most Authentic Guide on Personal Finance and Investments

Words of Wisdom : "Failing to plan is planning to fail." ~ Alan Lakein   Write to us NOW !!!
Because, at The Wealth Architects "Honesty is NOT the best policy, it is the ONLY policy."

Whose growth is it?

A lot has been said and written about the high economic growth rate achieved during the first 2-3 years of UPA-1 regime from mid-2004 till 2007. And this has been ascribed as one of the reasons for UPA's success in coming back to power in 2009.

In his recent article 'The GDP Poll', Shri Arvind Virmani, former chief economic advisor, ministry of finance, and currently heading the think tank, has again taken up this issue of GDP growth and its impact on the success at polls. 

As a hypothesis, he focuses on "the growth of per capita GDP as an indicator of the improvement or worsening of the lot of the average marginal voter. Thus, if the rate of growth of per capita income has increased or decreased, the vote share of the ruling party is likely to show a corresponding increase or decline." Based on this he looks at the previous two elections and concludes that:

- In 2004, the NDA lost the elections because "its economic performance was worse than during the previous regime and voters had punished the government for poor economic outcomes. During 1999-2000 to 2004-5 the NDA government was in power, the average per capita GDP at factor cost grew at lower at 4.1% p.a., compared to an average of 4.5% p.a. in the previous five years."

- "The Congress party got elected in 2004-5 and till 2008-9 the growth of per capita GDP jumped to 6.8% p.a., giving UPA -1 a sweeping victory at the 2009 elections. The scale of the victory surprised both partisan politicians and objective analysts, but it is completely consistent with our model."

I would like to state that the basic premise is perfectly correct. People are more interested in growth as it improves their standard of living.

However, in my opinion the conclusion of the aforesaid article and numerous similar columns, opinions and articles, is incorrect.

As is well known, the economic policies work with a time lag; sometimes even a few years. Accordingly the poor economic performance during the early years of NDA rule must be attributed to the previous Congress Govt. 

Likewise the buoyant economic performance during UPA 1's early years are a direct result of the many progressive policies initiated by the NDA Govt (See my blog '3 economic policies of the Vajpayee Govt. that catapulted India's GDP growth'). In fact, the economy was in much better shape in 2004 (when NDA had to forgo power) than in 1999 (when NDA came to power) and India was beginning to shine after nearly 50+ years of economic gloom.

Unfortunately, there is little recognition of this fundamental economic truism. As such, the NDA Govt. gets wrongly blamed for poor economic performance and UPA 1 gets wrongly credited for the high economic growth. 

If only, people had realised this truth and voted NDA back to power. Then, in all likelihood India would have been an economic superpower... today. Tragically, by backing UPA we have lost 10 years; in addition to the 50+ years from 1947 to 1999. 

Hope people see through this misconception and make an informed choice in the forthcoming general elections.

Happy Republic Day!

You Learn A Lot By READING... And Even More By SHARING.

Share Button

Ignorance is like a SIGNED BLANK CHEQUE... anyone can MISUSE it.

Subscribe via Email
Books by Sanjay Matai
[Click on the Pic for more info on my books.]
Powered by Blogger.
The Intelligent Investor
Eat That Frog!
One-Page Financial Plan
... A M A Z O N   L I N K S ...


1. Which Is The Best Day To Invest Your Money?
Best Day for Investment
My "unique" take on the auspicious days to make the best investments.


2. Swachh Portfolio: 4 Tips To Clean Up Your Finances This Diwali
Clean up your Finances and Investments
The "4 R" formula for a quick and efficient cleaning up of your personal finances.


3. Misconceptions About Insurance Are Extremely Worrying
Insurance Myths
Are you seeing problems where none exist?