For decades, voters have thrown out virtually every incumbent government in New Delhi. Going by history, the current incumbent—the UPA coalition headed by the Congress Party—should be heading for a thrashing, the more so because of the economic slowdown. GDP growth decelerated sharply to 5.3% in the October-December quarter, down from 8.9% in the same quarter of 2007.
Yet the Congress mood is upbeat. Rural India appears to be doing well, and 70% of the population is rural. The Congress believes that Bharat (rural India) is shining even if India is slumping, and this can take it to victory.
The BJP, of course, disagrees. It says that in October-December, agricultural GDP fell 2.2% against a rise of 6.9% in the same quarter in 2007. Farmers continue to commit suicide in various states. Finally, manufacturing has come to a shuddering halt—its growth was sub-zero in the last quarter. This means fewer jobs for migrants from rural states to once-booming cities. So, says the BJP, Bharat is slumping no less than India, and the Congress will get whipped.
There is something in both viewpoints, but the Congress has the stronger facts. A record 15 million new cellphone connections were sold in January, up from 10 million in earlier months, and this smells of rural prosperity (urban centers are largely saturated already). Hero Honda’s sales of motorcycles, which focus on rural areas, rose 24% in February. Despite the economic slowdown, sales of fast-moving consumer goods have been rising briskly, especially in small towns and rural areas. This is hard evidence of rural prosperity.
Even so, the UPA will probably lose some ground. The Times of India estimates that the Congress will get 146 seats this time against 145 last time, but weaker performance from its allies will reduce the UPA tally to 201 seats, from 228 last time. This would be well short of a majority, yet marginally ahead of the BJP-led NDA (195).
Now, the Times of India estimate could prove quite wrong. But it reflects the upbeat Congress mood. And it reflects my personal experience during the Madhya Pradesh and Rajasthan state election campaign last November-December. The economic slowdown was already two months old, yet both Congress and BJP politicians agreed that the global meltdown was a non-issue for voters, since job losses were not really deep.
Three of the five incumbents (in Delhi, Madhya Pradesh and Chattisgarh) were re-elected in the November-December state elections. There was a voting swing against incumbents almost everywhere, but it was too mild to dislodge most incumbents. Voters were not as angry as usual.
Why not? Because agriculture had been doing well, averaging almost 4% growth for five years. Historically, bumper harvests usually mean low prices, and high prices usually mean bad harvests. But currently farmers are enjoying both bumper harvests and high prices.
Is this year’s harvest really good? The October-December data show a fall in agricultural GDP of 2.2%. This is misleading. First, growth in the same quarter of 2007 was a huge 6.9%, and decline from such a high base is not bad. Second, agricultural GDP grew at 3.0% and 2.7% in the two earlier quarters, so the third quarter decline may be a blip. Third, high agricultural prices mean that farmers may be better off even despite smaller harvests. For instance, cotton production has fallen 14.4%, but the minimum support price is up 40%, so cotton farmers are happy. Sugarcane is down 16.6%, but this is largely because farmers have switched to highly profitable wheat.
North India had a bumper monsoon this time. But rainfall was seriously deficient in some parts of central India and the Deccan. In these regions the voter mood could be strongly anti-incumbent.
The Consumer Price Index for Rural Labour was up a whopping 11.35% in January, mainly due to high food prices. But good job opportunities thrown up by buoyant agriculture for several years, plus the National Rural Employment Guarantee Scheme, have combined to keep rural wages high. Several states have revised minimum wages upward, benefiting workers under NREGS, and hence assuaging voter anger.
In cities, there is no employment guarantee, job growth is slowing and many small businesses and hawkers are suffering. Sheila Dikshit was re-elected in Delhi last December. But conditions have worsened a lot since then, and urban voters may be in an angry mood by the general election in May.
On balance, the Congress is not badly placed. Even if it loses some seats, it could emerge as the largest single party. Whether it can cobble together a majority coalition is another matter.