The state of the Indian economy, at best, may be described as being stable. There are no major visible signs of pick-up in investment or consumption, and the level of sanguinity is also low for FY20. The expected recovery in the economy has not quite played out in FY19, and it does appear that any movement is only gradual. Amid such circumstances, it was expected that the elections would be fought on not just economic but also other grounds to ensure that the tone is convincing. The qualitative improvements made during the last five years would have to be highlighted to drive home the point that the government has delivered. This ultimately appears to have worked, as seen by the resounding success of the ruling NDA. But there are some interesting conclusions.
This time, the elections were fought on micro-economic and non-economic grounds for all practical purposes. From the ‘development’ paradigm that was the masthead in 2014, the campaigns in 2019 moved to other political issues and, while the two leading parties’ manifestoes spoke of more for the poor in different forms, the tone was one of ‘appeasement’ rather than ‘promise’. This is a major change in stance because rather than promising a better tomorrow in the macro sense, the focus was at the micro level.
The final outcome has been a surprise because the change in the economic stance of the government from policy and governance to direct action for the poor, ostensibly brought about by the adverse state election results late last year, did indicate a modicum of concern on the final outcome. The fact that the government has returned to power will be, not just a victory, but a relief, as there did appear to be some doubt along the way, which was revealed by the change in stance.
The results have a lot to say about the vindication of various policies pursued by the government in the last five years. First, demonetisation did not really matter at the end of the day because notwithstanding the pain caused to the lower income groups, including the farmers, the people have voted for the party in power. In fact, even when the UP state elections had given the ruling BJP a very decisive victory, it was widely asserted that demonetisation was accepted by the people, who did not hold any grudge against the government. It can also be that human memory is short, and other issues, like the surgical strikes or religion-oriented themes, have found favour with the masses.
Second, the GST was widely believed to have affected the SME sector and, as it came just after the demonetisation endeavour, it served a double whammy. Yet, the concerned people at both the entrepreneurial and employee levels have not found it harsh enough to vote against the NDA. This is definitely a victory from the policy perspective. In a way, it may be interpreted as being a reflection of the fact that people do not really mind harsh reforms if a larger good is served.
Third, the raging economic issue today is employment. There is enough evidence to show that not enough jobs have been created in the last couple of years. This issue is real as the government has taken pains to prove otherwise and has cited even EPFO data to show that this is not true. The NITI Aayog has also tried to prove that the NSSO data is not yet verified and that employment has been increasing.
Quite clearly, there was concern that lower growth in job creation can work against the ruling party at the time of elections. Whether or not the claims of unprecedented unemployment are true, the fact is that employment has either not been an issue with the electorate or that people are not aware of the severity of the problem.
Fourth, a factor that has been put forward for the loss of the NDA-led parties in the three state elections last year was low farmer income due to the non-realisation of the MSP. While it is true that the MSPs were not realised on crops such as pulses and oilseeds, the farmer constituency had not considered this to be the Centre’s fault—if at all it is a serious issue. It is possible that the farmers are more discerning and do distinguish between the states and the Centre when it comes to evaluating performance. But, given that the MSP is actually announced by the Union ministry of agriculture, the follow-up action should have been from here and not the state. Yet, the electorate voted against the BJP at the state level but supported it at the Centre. This surely is an interesting takeaway.
Fifth, the asset generation efforts of the government appear to have paid off. This has come in the form of provision of affordable homes, toilets or gas cylinders—all real and tangible benefits received by the rural folk. This appeals just like how the sewing machine or bicycle has garnered votes in other states. Similarly, even DBT is a positive gain for households as it means money in the bank account that can be spent. Something tangible received does stick in the memory, and when the candidate talks to the voters, he/she can actually show what had been delivered against the promises made. Therefore micro issues matters more than macro.
At another level, there are certain issues which may not really resonate in these sections even though are intellectually stimulating. For instance, black money and the promise of transferring `15 lakh into the accounts of the poor has not yet been achieved, but does not matter in the broader scheme of things. Also, the issue on interest rates or stagnant investment is not something that has any connect with the voter. Therefore, economic variables like GDP growth or investment rate or current account deficit or fiscal management are only meant for the intelligentsia, but do not affect the common man enough to be taken seriously. This probably also holds for something like highway construction that appeals to rating agencies and multilateral institutions, but may mean little to the voter who is on the lookout for something tangible.
Even in the past, we have seen that voters turn away when there is high inflation. High prices of onions can affect voter reaction. But other economic variables do not matter. Gains that are tangible in kind or money makes sense but macro or global gains are only taken as posturing. At the same time, people also don’t really mind harsh measures if it is explained well to them. This is probably the message from the voter behaviour this time.
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