Price rise to harm UPA’s prospects in polls

Price rise to harm UPA’s prospects in polls
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First Published: Mon, Sep 01 2008. 12 05 AM IST

Updated: Mon, Sep 01 2008. 12 05 AM IST
Although inflation has marginally declined from 12.63% for the week ended August 9 to 12.4% for the week ended August 16, there still seems to be no respite from it.
The annual report of the Reserve Bank of India (RBI) released last Friday said that inflation risks have increased sharply and appear to be persistent. A realistic policy endeavour would be to bring down inflation from the prevailing level of more than 12% to a level close to 7% by 31 March 2009, the bank said in its annual report for 2007-08.
Owing to some downside risks to growth and upward pressures on inflation in the near term, RBI has reportedly informed the government that inflation is likely to rise further to peak levels of 13-14 %, and may ease off only in the second quarter of next year.
The advisory of RBI on the inflation front has sent alarm bells ringing in the ruling United Progressive Alliance (UPA) government. Speculation has been rife in political quarters in the past few days that the Congress may advance Lok Sabha elections due in April-May next year to ward off the dangers posed by the worsening economic situation.
The UPA government, which has been preoccupied with the nuclear deal (Indo-US civilian nuclear agreement) over the past few months and euphoric about its grand victory in the July trust vote in the Lok Sabha, appears totally oblivious to the reality that the nation’s electorate has had it with the government’s inability to rein in soaring prices.
Usually, people do not blame the Union government alone for high prices and apportion some responsibility to state governments but this time, throughout the country there is an overwhelming perception that the UPA government has grossly failed to contain prices and is alone culpable for the situation.
Possibly, this perception is a result of the Union government’s direct involvement in increasing the prices of petroleum products. The issue of rising prices has acquired such dangerous proportions that it has the potential to vote out the UPA government at the Centre.
Consider this: In the poll-bound Bharatiya Janata Party (BJP) ruled states of Madhya Pradesh, Rajasthan and Chhattisgarh, the sentiment against the Union government over price rise is overshadowing the anti-incumbency sentiment against the state governments. In states such as Rajasthan and Chhattisgarh, where the BJP looked extremely vulnerable six months ago, the situation has turned around, thanks to the UPA government’s failure to contain prices.While the final outcome may depend on local and caste factors, the BJP has got a fresh lease of life in these states.
In the Congress ruled state of Delhi, where assembly elections are barely two months away, inflation has emerged a major issue and the party is likely to be voted out on this alone. If high onion prices in 1998 could push the BJP out of power in Delhi, one can imagine the scale of likely defeat for the Congress party in the ensuing assembly elections.
While the UPA government has failed to rein in prices, it is surprising that the Congress leadership is not even making the usual noises highlighting its concern. Even the usually articulate finance minister P. Chidambaram and the highly acclaimed economist-turned-Prime Minister Manmohan Singh have gone completely silent on the issue.
The Congress is perhaps hoping that remaining silent would help the electorate forget the issue. The party plans to focus its campaign on the nuclear deal, which is proving to be a complete non-issue as far as voters are concerned.
Still, things could have been worse. That’s because even as people suffer the fallout of inflation and the government seems unable to contain rising prices, the BJP has so far failed to make the issue its central election plank. Even so, the BJP is likely to be the direct beneficiary as voters across the country believe the party’s track record in controlling prices is much better.
If “price rise” indeed becomes the dominant issue in the general elections, as I reckon it will, the UPA will suffer reverses as the lower and middle income classes, an important political constituency, are likely to turn out in large numbers to cast their decisive vote against the ruling coalition.
Clearly, time is running out for the UPA government to act decisively against the unabated price rise. Every incremental rise in inflation will cause the UPA’s electoral prospects crash that much faster.
To read all of GVL Narasimha Rao’s earlier columns, go to www.livemint.com/thebottomline
G.V.L. Narasimha Rao is a political analyst and managing director of a Delhi-based research consulting firm. Your comments are welcome at thebottomline@livemint.com
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First Published: Mon, Sep 01 2008. 12 05 AM IST