Growth goes beyond a strong coalition

Weakest coalition since 1989, the United Front govt from 1996-98 delivered faster GDP growth than much stronger govts

Business leaders and market  experts are yearning for a strong government at the Centre, expecting to see faster economic growth. However, evidence since 1989 doesn’t support the link between  the gross domestic product (GDP) growth and a coalition’s strength as defined by the number of Lok Sabha seats held by the leading party.  

At 8.4 per cent per annum, GDP grew fastest under the UPA-I government when its lead partner, Congress, had only 145 members in the Lok Sabha.

In UPA-II, Congress tally jumped to 206 but economic growth slumped to 6.7 per cent during the second term (COALITION & GROWTH)

Worst performing was P.V. Narasimha Rao led Congress government from 1991-1996 when GDP grew at 5.2% per annum despite the party having 244 MPs in Lok Sabha just 28 seats shy of majority. The weakest coalition since 1989, the United Front government from 1996-98 delivered faster GDP growth than BJP dominated NDA despite the leading party, Janta Dal having less than fourth as many Lok Sabha MPs.

Experts explain the dichotomy to the political compulsion of the leading party in the coalition. Leading party with less number of seats is forced to work under the boundaries set by the coalition partners that translate in predictive economic policies. When the leading party become too large relative other coalition partners, it starts to work on its pet projects and take populist decisions with the hope of further increasing its tally in the next election.