Book Excerpt: Why Economic ‘Mood’ Doesn’t Swing Votes In India
Whether the economy does well or poorly, either way it has hardly any impact on poll results, writes Axis My India’s Pradeep Gupta
Excerpted from ‘How India Votes’, by Pradeep Gupta, with permission from Juggernaut Books.
Ahead of every parliamentary poll there is a common chatter in the plush living rooms of big city dwellers – that the state of the economy will have a direct impact on the poll prospects of the incumbent government. But after every such election, the prediction is invariably proved wrong. If we are to examine the general elections of the last two decades, each one of them has defied this common perception and for fairly good reasons. The Bihar assembly polls that gave the JD(U)–BJP combine a narrow but clear victory – leaving us pollsters, who had predicted a decisive win for the Mahagathbandhan, at our wits’ end – in an environment of economic gloom and a steady fall in the gross domestic product (GDP) bears testimony to the fact that the economy – at least as rich urbanites understand it – has no bearing on poll results. To my mind, the impact of the Covid-19 pandemic upon the state coffers over a reasonably long period of time could alter this trend but not anytime soon.
To understand why this is so, we need to look at how the various sectors contribute to our economy and their reach in terms of the voting population that is involved in that sector. Despite being a ‘krishi pradhan’ (agriculture-dominated) country, India draws only 15.87% of its GDP from agriculture, even as a sizable section of its voting population (roughly 80%) earns at least part of their livelihood from agriculture and allied services. In sharp contrast, the services sector, which is the largest contributor to our GDP at a whopping 54.40% (2018–19), remains concentrated in twenty to thirty cities while industry contributes 29.73%. The services sector like information technology, courier, media and entertainment and banking are dominated by some metros and tier I and II cities like Delhi, Mumbai, Bengaluru, Hyderabad, Ahmedabad and Pune. It is only in unprecedented times like the Covid-19 pandemic that we witnessed migrant labour distressed and displaced during the initial nationwide lockdown.
Even if we were to assume that the 4.68 crore migrant labour in the country affected during the Covid-19 crisis were upset with the government’s handling of their situation or the economy, that population is only a fraction of the total 25 crore households that end up voting. The impact is not more than 20% but let us also not forget that only 50% to 60% of the urban voters cast their ballot. If the migrant worker population is happy with the state of the economy then there could be some impact on the economy, nonetheless marginal in my opinion.
Overall, whether the economy does well or poorly, either way it has hardly any impact on poll results.
A look at the elections outcomes over the last two decades summarize my arguments succinctly. The backdrop of the 2004 ‘India Shining’ poll campaign led by then prime minister Atal Bihari Vajpayee showcased his much-hyped economic optimism. The GDP growth rate that year was on a high at 7.92% and there was a general consensus on the economy faring well under Vajpayee. Yet he lost to the United Progressive Alliance and fell sharply from his previous tally of 182 seats to 135. Andhra Pradesh emerged as a microcosm of the same phenomenon that was playing out at the national level. Despite Chandrababu Naidu’s stellar performance in the state with a booming IT industry – the emergence of Satyam as a big player (this is back when Satyam was an IT icon rather than a scandal), setting up of Ramoji City etc. – the chief minister, whose party was the second largest in the NDA coalition government of 1999, flopped and how. Conversely in 2009, when the world was going through one of its worst recessions, Prime Minister Manmohan Singh comfortably led the UPA to a second term. Again in Andhra Pradesh at that time, Y.S. Rajasekhara Reddy, who was seen as a leader of farmers – unlike Naidu, who was a mascot of growth and technology – steered his party to a clear victory and also contributed heavily to the UPA, sending 33 MPs to the Centre from the 42 seats in the state.
In 2014, despite a GDP growth rate of 7.41%, a 1.02% increase compared to the previous year, the Manmohan Singh government crumbled to debutant Narendra Modi. The 2019 general elections stood testimony once again to the fact that the state of the economy does not change a party’s prospects.
A wobbly economy does not necessarily mean huge cuts in public spending and, as I stated earlier, all governments be it at the Centre or state are judged entirely on their ‘delivery’, that is, essentially pro-poor policies and social security spending. One can argue that if the economy is not doing well then tax collections are also badly hit but the question is ‘how badly’. For if government tax collection are below expectations, the defence budget can always be brought down as a first measure. If you look at the global situation in such years, then war-like situations usually do not arise in such circumstances/ recession years. Even in the Covid-19 crisis, India and China would not want to wage war, regardless of their political posturing. Central and state governments also look at quick revenue raisers such as collections from alcohol, which became a saviour during the early nationwide lockdown days across states. Petrol/diesel taxes have also been a source of increased revenue collection during the recent economic slowdown.
Effectively public spending is hardly affected unless an unprecedented crisis like the Covid-19 pandemic wreaks havoc on the economy and the government of the day is forced to rework its priorities. However, in a low-growth year, even if business houses are affected, their profit percentage may have gone down but they still would have made a profit that year. No loss or even a low profit rate leaves a sentiment of loss in the business community that in turn impacts their advertising and media spending and the latter takes it upon itself to amplify a sense of doom among the people. The common man mostly remains untouched by this but the perception creators in the media studios cry themselves hoarse because their revenue that comes from corporates and business houses is curtailed. Voters on the ground have nothing to do with this perception and hence their preferences see no change. For farmers, monsoons are a huge factor and a drought or hailstorm would their pockets. Elections could sway in an altogether different direction if the incumbent government does not pay attention to the farmers’ demands in such a situation or if the opposition makes a more credible promise. The longer-term political impact of the ongoing farmers’ protests remains to be seen. We can never deny the existence of two Indias – a krishi pradhan Bharat and a more elite India – both of which have different sets of priorities and both of which vote differently.
Pradeep Gupta is Founder, and Chairman & Managing Director of Axis My India.
The views expressed here are those of the author, and do not necessarily represent the views of BloombergQuint or its editorial team.