Economy has a key role in impacting voter choices

Sushma Ramachandran

Senior Financial Journalist

WITH the country in the poll mode, one must consider the role of the economy in influencing voters to take decisions. Though regional differences persist in terms of development, some issues are perennially in the minds of citizens as they walk towards polling booths. These include inflation and unemployment, along with basic infrastructure and quality of life. Currently, the economic outlook seems brighter than the past few years, with GDP growth expected to cross 7 per cent in 2024-25. Despite this apparently sanguine scenario, there is no guarantee against unforeseen developments.

The recent farmers’ agitation is a case in point. Having doused the fires of the nearly year-long protests in 2021, the government must have been taken aback by the fresh round of demonstrations. After having succeeded in forcing the government to repeal three farm laws, farm unions have now sought a legal guarantee for procurement at the minimum support price for 23 crops. Clearly, this is not the end of the road for the vexed issue, though it seems to have simmered down for the time being, giving respite to the government before the elections commence on April 19.

There are other challenges on the economic front. One of the biggest is to ensure inflation stays within the tolerance band of 4 to 6 per cent laid down by the Reserve Bank of India. The data for February shows that inflationary pressure has dipped marginally to 5.09 per cent from 5.1 per cent in the previous month. Concerns remain, however, over food inflation that touched 8.66 per cent in February, making it the main culprit behind price spikes over the past year. Tomato rates, for instance, had shot up a few months ago. It is now the turn of onions. This innocuous yet widely consumed vegetable needs to be handled with care, given that its spiralling prices were credited with the unseating of Sushma Swaraj as Delhi Chief Minister in the 1998 Assembly elections.

No wonder onion exports have been banned since last December in a bid to keep prices low. But the consumer-friendly move has angered onion farmers, who have lost out on potential windfall gains due to elevated rates. In fact, the onion issue highlights the difficulties of balancing the interests of consumers and the farming community. There has been a tendency in the past of governments to weigh in favour of consumers by keeping food prices low. This ends up denying remunerative prices to farmers, who rightly seek compensation for being deprived of the benefit of higher prices.

The other volatile element that could impact inflation is global oil prices. Currently, oil markets are firming up, contrary to most forecasts. Prices of the benchmark Brent crude are hovering around $86 per barrel after having remained in the range of $75-82 for several months. The situation has changed suddenly in recent weeks due to geopolitical tensions, with drone attacks on Russian refineries reducing their production capacities and Yemen-based Houthi rebels continuing their strikes on global trade moving through the Red Sea. This has combined with a higher demand in both the US and China as well as efforts of the Organisation of Petroleum Exporting Countries Plus (OPEC+) to cut quotas and push up prices. Rising global oil prices could have an inflationary impact on the economy over the next two months.

Another bugbear that could affect voters’ choices is unemployment. The situation may have improved since the Covid pandemic, but there continues to be a vast mismatch between job availability and the country’s huge manpower pool. The latest data from the Centre for Monitoring Indian Economy shows that the unemployment rate in February this year was 8 per cent, up from 6.8 per cent in the previous month.

An additional finding is that rural unemployment has risen sharply to 7.8 per cent from 5.8 per cent in January. In contrast, urban unemployment has fallen from 8.9 to 8.5 per cent. Joblessness could thus emerge as an issue of concern during the elections in rural areas, in case this trend continues in the coming weeks.

A controversy has erupted over Chief Economic Adviser V Anantha Nageswaran’s comment that government intervention cannot solve all economic and social problems, including unemployment. He has opined that the industry needs to hire more people. In a sharp reaction, the Congress has promised to unveil a concrete plan to tackle unemployment.

Regarding basic infrastructure, there has clearly been an improvement in the quality of roads, while housing schemes for weaker sections have expanded rapidly. Yet, there was a gap between urban and rural consumption levels over the past two years, with the latter lagging behind. Surveys for the October-December quarter, done by market tracker NielsenIQ, indicate that rural consumption is picking up, but key indicators like tractor sales are continuing to fall.

The latest Household Consumption Expenditure Survey shows that income levels have been rising over the past decade, bringing about an expansion in expenditure on non-food items. This phenomenon has been visible in both urban and rural areas. Within the food basket, the share of cereals is declining, with more nutritious products like eggs, meat, milk and fruits playing a bigger role. Enhanced income levels could play a role in determining voting preferences.

Economic wellbeing remains a critical electoral element despite the emotive appeal of issues being raised during the poll campaign. The consecration of the Ram Mandir may be a feel-good factor for a while, but the common man still needs the basics of roti, kapda aur makaan (food, clothing and housing). It is for this reason that the ruling BJP is laying great stress on development and direct benefit transfer through digital banking. It has been using the term labharthi (beneficiaries) for those who have reaped the benefits. Yet, discontent can rise rapidly even in this segment if the economy is beset by unexpected domestic or external developments in the coming days. This could have an impact on voting patterns.

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#Inflation #Reserve Bank of India RBI #Unemployment