By themselves, the state elections in Punjab and Uttrakhand are not important. But they hold lessons for the big event of the year, the assembly elections in Uttar Pradesh, India’s largest state, in April-May.
Lesson no 1. Sonia Gandhi’s Aam Aadmi campaign and its flagship National Rural Employment Guarantee Programme yielded no political dividends in Punjab or Uttrakhand. True, these states were not focus states of the NREGP. But the fact is that all parties have financed rural employment programmes when in power, and all have lost elections nevertheless. The NREGP is a variant of the Employment Assurance Scheme introduced by Narasimha Rao in 1994, which guaranteed 100 days employment for agricultural workers in backward districts. This helped increase rural employment from 875 million man-days in 1990-91 to 1,232 million man-days in 1995-96. Nevertheless the Congress got thrashed in the 1996 general election. Besides, a recent survey of the NREGP by Pinaki Chakraborty (EPW February 17, 2006) shows that in 2006-07, rural employment spending will be just 0.33% of GDP, no higher than last year and below the peak of 0.4% achieved by the NDA in 2002-03. Hence do not expect the Aam Aadmi to vote for the Congress.
Lesson no 2. When governance is poor, people ascribe any progress to their own cleverness and hard work, but all their difficulties to the government. Even in the best-governed democracies, voters like a change and often oust incumbents. In India, 80% of incumbents lose. No surprise, then, that the incumbent Congress Party lost in Punjab and Uttrakhand. Expect Mulayam Singh Yadav, the incumbent in UP, to get drubbed too.
Lesson no. 3. Inflation, especially for food, was a key issue in Punjab and Uttrakhand, which were ruled by the Congress. But in UP the SP rules, and will claim that inflation is entirely the fault of New Delhi, not Lucknow. Will voters buy the argument? I doubt it. Over 90% of citizens have never seen a central government official. The only government they know is the state government. So, expect Mulayam Singh Yadav to suffer—somewhat unfairly.
Lesson no 4. Rapid GDP growth with high inflation causes electoral defeat. This has been proved time and again. Narasimha Rao achieved GDP growth of 7.2% and 7.5% in his last two years in office, but the consumer price index rose by a cumulative 22% over these two years, so he got thrashed in 1996. The BJP thought that Indian was shining when GDP growth soared to 8.7% and 7.5% respectively in 2003-04 and 2004-05. But wholesale price inflation rose from 3.4% in 2002-03 to 5.5% in 2003-04 and 6.5% in 2004-05, and that was fatal. Today, after two years of more than 9% GDP growth, the Congress has been beaten in Punjab and Uttrakhand.
Lesson no. 5 Voters have short memories, so the timing of an election matters. Punjab and Uttrakhand went to the polls before the rabi harvest, when rural consumer inflation had shot up to almost 12%. However, the UP election will take place after the harvest, in April-May, and prices usually dip sharply in those months. Mulayam will hope that this seasonal dip will save his bacon. Note, however, that the National Democratic Alliance held its 2004 election in May, after the rabi harvest, and was nevertheless thrashed. Incidentally, one commodity, sugar, has crashed in price this year, yet this could hurt rather than benefit the SP. Sugar mills say that at such low sugar prices they are broke and cannot pay farmers for cane supplies. Any non-payment will hurt the SP.
Lesson no. 6 The rapid growth of services in cities yields very poor political dividends. In 2004, the metros—Mumbai, Delhi, Kolkata, Chennai and Bangalore–voted massively against the NDA. Chandrababu Naidu was humbled in Hyderabad. After 2004, service industries continue to roar ahead, this may not benefit the Congress. The very same BJP that was thrashed in the cities in 2004 has won 17 of the 23 urban seats it contested in Punjab. Earlier the BJP swept the municipal elections in Maharashtra and Uttar Pradesh.
Lesson no. 7. Rapid industrialization did not help the Congress in Uttrakhand, since modern industry is highly mechanized and creates few jobs. Tata Motors and Bajaj Auto have both doubled their production while halving their workforces. Far more rewarding electorally are new seeds that can raise agricultural incomes. Bt cotton and the promise of big retail chains (like reliance) helped the Congress wrest several seats from the Akali Dal in its traditional rural stronghold of Malwa. Lesson: more votes can be won by accelerating FDI in retail chains than Sonia realizes.
Lesson no. 8. Never write off a party when it is down and out. The Congress Party was supposed to be dying in 1998-04 under Sonia Gandhi was a useless leader, yet it then bounced back. The BJP too was written off when Vajpayee resigned and Advani committed hara-kiri after the 2004 defeat. Yet the party has come back to power in Jharkand and Bihar, where it was almost wiped out in 2004. By winning municipal elections in Maharashtra and Uttar Pradesh and now the state elections in Punjab and Uttrakhand, it has given notice that it is a real contender for power again in the 2009 general election.
Lesson no. 9. Uttrakhand used to be part of UP, and so is a guide to the UP election. The BJP will take heart from its performance in Uttrakhand, but even so is unlikely to win a majority in UP. The SP will probably suffer like other incumbents. The Congress Party is not in good shape. The BSP did reasonably well in Uttrakhand, and so must have high hopes in UP. Given the likelihood of another hung Assembly in the coming UP election, the combination best placed to form the next government will be the BSP plus BJP. These have on two past occasions entered into unhappy marriages that ended in rapid divorce. Since alternatives are so unappetizing, expect a third marriage, equally unhappy.