Tuesday, April 3, 2018

The performance of economy in the last 4 years under BJP government...

Today is 03-April-2017

Note: After reading this post, if you think that I have made any errors in facts or approach or calculations, do let me know. I will be very happy to acknowledge my mistake and rectify it.

I am very active on twitter. One of the point which the supporters of this government make regularly is the performance of the Stock Market. Sensex has gone up from around 19000 on 16-May-2014, when this government was sworn in to about 32000 today. This is somehow touted as an evidence that the economy of the country is doing well.

It is very perplexing. The performance of Stock Market do not sync with any of the indicators that you see around. Corporate credit offtake is poor, there are crores of unemployed people applying for a few lakhs of job openings, private investments are not picking up, GST rollout is botched up and indirect tax collections are much lower than expectations and finally the analysts have been predicting revival of 'Corporate Earnings in the next two quarters' for the last four years.

We are still waiting for those quarters...

I decided to do some number crunching.

I wanted to analyze the five year CAGR of Nifty Earnings starting from 16-May-99 onwards. Broadly, the following governments were in power during each of the next five years.

1999 - 2004: NDA 1 Under Shri Atal Bihari Vajpayee
2004 - 2009: UPA 1 Under Dr.MMS
2009 - 2014: UPA 2 Under Dr.MMS
2014 - till today: NDA 2 Under Shri Modi

The approach followed is given below.

For each Cut off day, I looked at the Nifty Value and the Nifty PE. I divided the Nifty Value by Nifty PE to get the Nifty earnings as on that day.

I used Nifty because historical data was easily available for the periods under consideration.

I got the historical Nifty Index Value from the NSE Website
I got the historical Nifty PE Value from the NSE Website

The results are as follows.

5 Year CAGR of Nifty Earnings Under NDA 1: 10.74%
5 Year CAGR of Nifty Earnings Under UPA 1: 14.43%
5 Year CAGR of Nifty Earnings Under UPA 2: 11.29%
4 Year CAGR of Nifty Earnings Under NDA 2: 3.21%

The results was startling. I knew that economy was not doing well under this government, but I never expected it to be this bad. This government has been the worst wealth destroyer in the last 20 years. This is despite the favorable tailwinds of Low Oil Prices and High Global Growth.

The calculation details are given below.

Nifty Earnings CAGR under successive governments from 1999
More surprises were in store. We are continuously led to believe that economy under UPA 2 was a disaster. Numbers do not match that argument. As can be seen above, the Nifty earnings growth under UPA 2 was better than that of NDA 1. I also analysed the year on year growth under UPA 2 from 2009-10 to 2013-14.

Again, the results were startling.

The year wise growth of Nifty Earnings under UPA 2 is as follows.

2009-10: 12.40%
2010-11: 13.32%
2011-12: 7.61%
2012-13: 15.97%
2013-14: 7.39%

The workings are below.
Year wise Nifty Earnings growth under UPA 2
Please note that even the lowest performance under UPA 2 was better than the performance under this government.

So, if you tell me that Economy is doing wonders under this government, I say, please read this blogpost.

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