Budget 2023: How It Will Impact 2023 State Polls And 2024 General Election
Finance Minister Nirmala Sitharaman is all set to present the Narendra Modi-led Bharatiya Janata Party’s ninth budget on Feb. 1. It is the second last budget before the grand finale in 2024. Since not much time will be available for implementation of budget 2024 proposals, this one assumes significance. It will be presented under the shadow of high unemployment and inflation, with the threat of a global recession looming large.
Though India’s economy is recovering from the aftershock of Covid-19 and is expected to be the bright star amid a gloomy growth prospect in 2023, challenges remain.
Sitharaman has to walk through a tight fiscal rope. At the same time, she cannot afford to entirely whisk away demands of populist schemes in an election year. But, do budget announcements impact electoral outcomes?
No Clear Correlation Between Budget Sops And Results
Price rise, unemployment, and farm distress were top issues even in 2019 when the BJP won a record mandate. Announcement of PM Kisan Nidhi Yojana (Rs 6,000 cash dole to each farmer) played its bit in an election fought in the fervour of nationalism after the Pulwama attack. While 33% farmers backed the BJP in the 2014 general election, according to a CSDS survey, this jumped by 50% to 48% in 2019, as per Axis My India survey.
The Congress government won a second term in 2009 on the back of a farm loan waiver announced in the budget. However, despite an increase in food security allocation in 2013, the Congress lost the general election of 2014 very badly.
In 2004, the BJP led by Atal Bihari Vajpayee lost unexpectedly despite announcing tax sops for salaried, senior citizens and pensioners, and launch of a community-based universal health insurance scheme in the 2003 budget.
Sops For Middle Class To Fight Inflation In Election Year
2022 witnessed high inflation, above RBI’s tolerance level, and eased to sub-6% levels only in the last two months of the calendar year. In a high petrol and diesel price scenario, coupled with high cooking gas cylinder price and high prices of food items (including cooking oil), the poor and the middle class are hoping for relief.
The middle class is hoping for tax breaks, while housewives belonging to the poor/lower socio-economic class—struggling to manage their house budgets—are hoping that the central government announces some measures to ease pain of inflation like subsidised/free gas cylinders.
Sitharaman’s statement that said she belongs to a middle class family and understands the pressures they face has added to the chatter that the government could increase the exemption limit from the current Rs 2.5 lakh per annum to Rs 5 lakh per annum, resulting in a savings of Rs 12,500 per annum.
The middle class has been a vocal supporter of the BJP since its early days. While 22% middle class voters backed the BJP in 2009, this number increased to 38% in 2019. They also come out in large numbers to vote, which makes them an important vote bank which can’t be overlooked. From 60% in 2009, their turnout increased to 70% in 2019.
Labharthis Need To Be Kept Warm
Over the years, the BJP has moved from being labelled as a middle class party to a party which champions the cause of the poor and downtrodden. Through various DBT schemes and programmes like the PM Awas Yojana, PM Ujjawala Yojana, Jan Dhan accounts, PM Kisan Nidhi Yojana, Mudra loans, PM Jeevan Suraksha Yojana, Ayushmann Yojana, etc., the BJP has converted them in what is called a labharthi vote bank.
The beneficiary community is constituted mostly by the poor, downtrodden and marginalised sections of society who outnumber the middle and rich class, and this welfare politics can tilt the scales in favour of any party. This large chunk of around 25 crore voters cuts across religious and caste lines.
The support received by the BJP from the poor and lower economic class has more than doubled from 16% and 19% in 2014, respectively, to 36% each in 2019. The pandemic has increased the dependence of the poor on the government and direct benefit transfer has ensured that intermediaries are eliminated.
Various voting cohorts like farmers and labourers are hoping for a sweetened Kisan Nidhi/NREGA deal to take into account the high inflation levels in post-Covid scenario. The NREGA allocation, which was increased to more than Rs 1 lakh crore level in 2020, has been scaled back to pre-Covid levels in the previous Budget. The Kisan Nidhi has stayed at Rs 6,000 per annum for the last four years. The government has already approved distribution of free food grain till December 2023.
Government To Continue The Heavy Lifting
In a paper, titled Political Budget Cycles And Election Outcomes, Jeroen Klomp and Jakob de Haan—employing data for 65 democratic countries over the period from 1975 to 2005—find that parties in government can influence the election outcome significantly by manipulating government spending.
Government spending also has an indirect positive effect on the support received by the parties in government by promoting faster economic growth in the election year.
In the last two years, with both private consumption and private investment taking a backseat, government spending on capex and infrastructure projects has led to creation of demand in the economy. In an election year, the thrust on infrastructure is likely to continue. This is likely to create demand for goods/services in the economy, create jobs and kick in the multiplier effect, thus providing a boost to the GDP.
Feel-Good Factor For 2024 General Election
An annual budget is unlikely to have any impact on state election results as they are contested on local issues and performance track record of the state government. Sops announced for poor and middle class, if any, could impact the voting preference of a section of people, as evidenced in 2019 (farmers). Sops announced in the budget would create a feel-good factor; however, whether it lasts till the next elections is difficult to estimate.
To sum up, budget announcements do impact the economic prosperity/well-being of voters. However, they are just one of myriad issues on which voting decision is made and do not guarantee success in elections. Increasingly, we are also witnessing that many key policy decisions/programme announcements are made outside of budget, which has been reducing its importance over the years.
Amitabh Tiwari is a political commentator, strategist, and consultant advising political parties and leaders. He was previously a corporate and investment banker.
The views expressed here are those of the author and do not necessarily represent the views of BQ Prime or its editorial team.