Government

Fact Check: Modi on NPAs, Economic Growth and Democracy

The prime minister used his recent speech in Parliament to mount both an  attack on the opposition  and a defence of his government. But how well do his claims stack up? The Wire breaks it down.

Prime Minister Narendra Modi chose to use his Parliament speech to lash out and defend his government's record. Credit: PTI

Prime Minister Narendra Modi chose to use his Parliament speech to lash out and defend his government’s record. Credit: PTI

New Delhi: In a recent speech in parliament, Prime Minister Narendra Modi made a number of claims to target the opposition and list his government’s achievements. He said that the blame for the problem of non-performing assets (NPAs) in India’s banking system lies squarely with the Congress party, and talked about the growth of infrastructure and employment spending under NDA rule.

But how much of his fiery speech holds up to closer scrutiny? A lot less than should, it seems.

Mysterious numbers

“People should now know the truth…. It is the interest on what you squandered away. These are your (Congress’s) sins,” Modi said in parliament. He also claimed that since his government has come to power, not a single loan has been granted that could turn into an NPA. “The workings of our previous government are responsible for the NPA mess. They are 100% responsible and nobody else.”

The prime minister also quoted some figures to drive home his point. “Till the time you were in power you lied and said the NPAs were 36% but in 2014 (the year the BJP came to power) we started seeking the truth and looked at the documents. We realised that you gave wrong statistics. NPAs were at 82%,” Modi alleged. He went on to say that total advances by banks climbed to Rs 52 lakh crore in March 2014 – as part of the UPA government’s bad debt. “This was the money of India’s poor.”

But where did this ‘realisation’ come from? Do statistics back it up?

Not quite.

According to an NDTV report, the Reserve Bank of India has said that in the year 2013-14, gross NPA (as percentage of total loan amounts) stood at 3.8% – a far cry from the 82% Modi said it is. In addition, the Rs 52 lakh crore Modi mentioned refers to total advances by public sector banks, according to RBI data, and not NPAs.

RBI data also shows that gross NPAs have in fact risen, not fallen, under the Modi regime. According to NDTV, “In 2015-16, the second year of the present Modi government and the last year for which data is available, gross NPA nearly doubled to 7.5%.”

It seems as though the BJP may have realised that the prime minister’s statements were wrong. Minutes after NDTV journalist Sreenivasan Jain tweeted that Modi’s numbers don’t match RBI data and asked the ruling party for a response, the BJP’s official handle deleted both the video of Modi’s speech and a tweet quoting the data he had cited. The party has not explained why it deleted the tweets or issued a clarification.

A screenshot of the deleted tweet.

According to NDTV, an infographic tweeted by the BJP before Modi’s speech on Wednesday may explain where the prime minister got his (incorrectly used) numbers from. The infographic says that the percentage of stressed (banking) assets identified as NPA climbed during the NDA’s tenure, from 36% in March 2014 to 82% in June 2017. This claim is contrary to what Modi said about UPA underestimating the proportion of NPAs when it government.

While Modi is generally right that most of the current NPA crisis facing the Centre is one that it inherited from its predecessor, it is more than a little misleading to claim that not a single loan after 2014 has turned into an NPA or that not one loan has been given out after 2014 that will not turn into a bad asset. For one, it’s too soon to know whether any public sector bank loan given out in the last four years will become an NPA.

On the other hand, there are loans given out before 2014 that have turned bad in the last four years. For instance, Anil Ambani’s Reliance Communications missed loan payments in 2017 and defaulted on dollar bonds. The stress in the telecom industry as a whole has shot up over the last few years as well. As the recently released Economic Survey pointed out, “the share of  NPAs of telecom sector in total NPAs of infrastructure sector increased to 8.7 per cent in 2016-17 from 5 per cent in 2015-16,” it said.

The worsening loan situation in the telecom industry has been brought on, in part, due to the entry of Mukesh Ambani’s Reliance Jio and its free data strategy. As The Wire has pointed out, its free data schemes were made possible by regulatory decisions by the Modi government’s attorney general.

Infrastructure projects and employment

Another claim the prime minister made was that his government has achieved much larger targets in terms of rail and road construction. He also suggested that opposition leaders were ignoring the government’s achievements in order to score political points. But is that really the case?

As a report by Roshan Kishore in Hindustan Times points out, for Modi’s claims on infrastructure creation to have been true, the government’s capital expenditure (spending which results in the creation of assets) should have gone up as well. But data show that the Modi government has not been able to keep pace after an initial investment push. “Annual growth in new project announcements and projects completed (in value terms) by the public sector did show a recovery in the first two years of Modi government, but it has been going down since then,” the report says, quoting Centre for Monitoring Indian Economy data.

This public sector spending refers to both the Centre and states, but given that the BJP is in power in a large number of states, the prime minister’s claims should be applicable there as well.

While it may be true that the government has had some success in terms of creating welfare schemes such as the Jan Dhan Yojana and the Ujjwala Scheme, Kishore argues, none of this is a replacement for a steady income. Employment generation has been one of the areas the government has been criticised most about, and the lack of credible data has also meant that people are wary of accepting government claims on job creation.

However, as a recent RBI study showed, more and more people have been getting pessimistic about their present and future employment prospects. The share of those saying they thought the promised ‘achhe din‘ had not materialised also went up.

“These statistics suggest that the growing negativity vis-à-vis the government might be a bottom-up phenomenon rather than a top-down creation by a few opposition leaders,” Kishore concluded.

Democracy and the Congress

A good portion of Modi’s speech was also dedicated to attacking the Congress Party’s legacy and impact on India. At one point, he addressed the role the grand old party had on making India democratic.

“Congress feels India was born on August 15, 1947. I was surprised yesterday when they said that Jawaharlal Nehru and the Congress gave India democracy. You should know that the Lichhavi clan also had democracy. The Buddhist Sangha functioned with democracy and voting. We had Gana Rajyas (Republics) 2,500 years back and accepted both conformity and dissent,” Modi said.

As senior journalist Prem Shankar Jha, has pointed out, governance in the Licchavi clan was a limited form of democracy with only select members of society allowed to vote. In this, it can best compared to the Morley Minto reforms of 1909. Modi’s point that “conformity and dissent” were accepted 2,500 years ago, it would be difficult to compare it to the legal rights that all Indian citizens enjoy today.

“Modi cannot be more wrong. Democracy of the Licchavi sort was brought to India with the Morley-Minto reforms of 1909. What Pandit Nehru and the Congress did was to transform it instantly into modern democracy with universal suffrage. What is even more to its credit is that it did this while preserving legal space within the constitution that has allowed religious and ethnic minorities to retain their customary laws and change them at a pace of their own choosing. It is because they have this political space that we have a Muslim community today that is almost entirely free of terrorism in which its members can seriously debate ways of changing its divorce or other personal laws without immediately provoking the charge of apostasy from its clerics,” Jha writes in a recent article for The Wire.

 

Liked the story? We’re a non-profit. Make a donation and help pay for our journalism.
  • Ek Aur India

    There is no point in fact checking Modi. He speaks what comes to his mind. While i don’t oppose his policies, look every PM has right to do what they think is right policy after all people have given them mandate to do exactly that, i strongly oppose the kind of language he uses and his lack of respect for truth. Modi perpetuates lies most of the times, diverts attention from what his policies have yielded to attack Congress with 70 years rhetoric and have no intensions of following up on his own words. He asked the nation, in tears, to give him 50 days for demonetization but didn’t care to provide any update on any of the promises he made. Isn’t it his moral and duty to provide an update on his policy that put many people through hardship and lost wages? Did he not have any time to do it since March 2017? Make in India, Swach Bharat, Startup India list is endless. Has the Govt. provided any official data, i don’t consider claims made my Netas as data, about the implementation and benefits of these schemes?

  • Ek Aur India

    Dude, what do you smoke? Modi weed? Do some fact checking and go read SBI’s Annual report for 2016-2017 and if you can read financials you will get your answer. NPA was there in UPA II and NPA has been there in BJP’s urrent regime as well.

  • Ek Aur India

    Well, i’m not going to trust everything that the article says. But, for the sake of reasoning let’s go with your point. Let’s assume you inherited a business with bad debt in 2014.

    You are the sole decision maker. Now, because there is bad debt doesn’t mean you stop doing business so you continue to give out loans. Now, its the end of 2014 and you need to close your books and prepare a financial statement. What amount should go in the NPA column? The bad debt you inherited? or Bad debt you inherited + interest? An asset that has already been declared NPA doesn’t just keep earning interest. Why? Because the definition is in the name, its Non-performing. Year 2015 goes by and so does year 2016 and the NPA number goes up. Your argument ‘Hey, its the bed debt i inherited’. But you would be wrong in that argument. Those assets turned NPA on your watch. Whats even more interesting (you can look for Ambani and Adani bad debt. why these two? because these are the big fishes) is that those who had defaulted on previous loans were given fresh loan. Again, on your watch.

    I’m not in for blame game here and i apologies if this analogy seems childish but isn’t Modi’s who argument childish and like the deleted tweet a lie? He’s the CEO and he has the command so why loans are still turning NPA and why those who have already defaulted still being given loans? That responsibility solely lies on Modi.

  • Ek Aur India

    I’m sure you are following Nirav Modi scam that appears to be the biggest so far. These are the kind of loans that make NPA. Again, i don’t hold Modi personally responsible, just like i don’t hold UPA personally responsible. We had a loop hole in our banking system, we paid big for that loop hole and after seeing NPA from UPA NDA should have closed the loop holes. Thats where i see the miss and that miss falls more on Mr. Jootley than on Modi. But Modi can’t claim nothing bad happened on his watch anymore.