The GDP poll

Jan 16 2014, 15:56 IST
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SummaryVote share of a ruling party varies with its economic performance.

In 2004, the BJP lost the general election, despite its belief that the Indian economy’s performance had been outstanding and voters would reward it for this performance. Many analysts and most opposition parties accepted the contention that the economy was performing very well, but the fruits of this growth had not reached the “aam aadmi” who voted against the BJP. As a contrarian, I argued that the economic performance had been, in fact, worse than during the previous regime and voters had punished the government for poor economic outcomes.

Earlier this month, the prime minister gave a press conference to assert that the economic performance of his government had been outstanding and the Congress party was therefore likely to win the elections again. Unfortunately, he is making a mistake very similar to the one made by the BJP. The actual performance, which matters to the aam aadmi voter, is much worse than the performance benchmark (as per the model developed by me). The outcome is therefore likely to be equally disappointing for the Congress party.

Under normal circumstances, elections are held every five years. At the end of the five years, the simplest way for the aam aadmi to judge a government’s performance is to see how he and his family, his friends, neighbours and acquaintances have done during those five years and compare this with what happened during the previous five years (with an earlier government). If the performance is better/ worse than in the benchmark years there would be an increased/ reduced likelihood of him voting for the party in power.

Pared down to the barest essentials, there are three economic indicators that, in our view, matter to the independent, swing or marginal voter. These are economic growth, public goods and services (popularly referred to as “bijli, paani, sadak”) and transfers or subsidies net of taxes. The growth of per capita income determines not only the change in the living standards of the average voter but also the employment opportunities (in jobs or self-employment) created and available to her. Public goods include a range of local or municipal services such as roads, drinking water, sewage, sanitation, drainage, public health and basic education. An improvement (or worsening) in the quality and/ or volume of such services would tend to have a positive (or negative) impact on the voter and thus tend to increase (or reduce) the ruling party’s vote share.

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