Losses of the national economy during Congress rule.

People of the nation must understand the reality of Congress' rule and the white lies presented by PM Manmohan Singh who said that inflation  may be one of the reasons for the defeat of Congress party in the recent election.In fact it not only inflation but overall performance of the economy during the UPA Rule has been demoralizing and it has discredited the government.The government has suffered from policy paralysis as a result there has been delay in the implementation of many policy decisions taken by the government at one occasion and then reversed at some other occasions. The situation turned out to be so perturbing that India was on the verge of facing a situation of 1990 like economic crisis.  No doubt in the second term of UPA rule the government failed to correct many policy related dichotomies that crippled the economy. Many people may remember that in beginnin of  twenty first century, all economic parameters were performing well and supporting each other. Like when agriculture sector was going down then private investment was encouraged to enhance its potential. In these years both manufacturing sector and construction sector were doing well.  During 2002-2006, the rate of interest offered by most of the commercial banks was in the range of 7% to 8.5%.This created large scale manufacturing and construction activities leading to growth of employment. 

However all of the sudden there was a policy change in the name of controlling inflation,when China was promoting construction sector with massive investment , India started withdrawing policy support to this sector and , commercial banks without any concrete reason started raising the rate of interest. Since investment had already taken place, ie supply has been created, there was curb on demand and this sector has to face the worst phase of its growth. The consumers who have taken loans on floating rate were the worst sufferers. And there was no Central Banking system to see into the matter. 

The Congress Party perhaps forgot that it was the middle class who bought it to the power and ironically the party was devastating this class by its pro rich policies . It is this erosion of faith of middle class  that led to debacle in the election of Delhi. 

Looking at other parameters like Fiscal Deficit which stands at Rs.5.42 lac crores ie 5.69% of GDP in 2012-13, the government  has also failed to correct macro structural deficiencies, such as non discretionary subsidy on LPG and petrolium products(Rs.65000 crores) fertilizers(Rs.65971.5 crores.). Both these subsidies ,along with food subsidy (Rs.90000crores) are creating huge burden on state exchequer. It also reduced finance available for capital investment (investment supporting growth).As a result performance of the economy during the Congress Rule started coming down and down. Furtheremore government is trying to control fiscal deficit through decrease in the Plan Expenditure on rural development, public health expenditure and education sector. The below graphic presentation will support this fact . Since exports were not rising at the expected rate and population was creating demand , the economy wss forced to depend on import.A common man calculations reveals that per year India is importing oil and other petroleum products of Rs 7.26 lac crore which means that during a five year plan India will have to spend about RS.38 lac crore on only this item. Without going into the great details , our trade deficit is widening every year. The economy further performed badly due to delay in reforms and poor growth of the infrastructure sector. Although very fancied MANREGA programm created employment but rampant corruption in it failed to bring any visible change on employment front. In second phase of UPA rule performance of economy on employment front has even gone from bad to worse. 

  Every month, government does something or other to increase inflation such as -increasing the prices of petroleum products on the regular basis. During UPA rule petrrolium prices have increased by 120% ie from Rs.34.23 to Rs.73.68. This situation is further complicated by fall in the value of Indian rupee in the terms of international currencies especially in respect of US dollar.  As regards to Trade Deficit performance of the economy is even more worrying becsuse it has gone up to about 88billion US dollar in 2013-14.It seems that PM is actually misleading the nation by saying that the demand is rising due to rise in the income of the people.  This cannot be an explanation for double degit food inflation. Erossion of value of rupee itself is a serious matter.It is a common economic practice that when the number of consumers increases then the demand will increase too.  The responsibility of the government is to increase the supply,  which is not happening.  

Indian economy is trapped under a phenomenon "Stagflation" in which prices keep on rising but supply of goods and services do not respond to normal economic practice ie. Supply increases with increase in the prices. Policy makers will have to take certain hard decisions to correct this situation.When similar problem prevailed in US, then President Reagan has introduced several policy decidions contrary to Keynesian economics and removed supply side bottelnecks which helped in  recovery.