RBI surveys show where the battle is during elections
Historically, elections have been won and lost because of inflation. But come 2019 Lok Sabha elections, it is not just the cost of living but the opportunity of earning a livelihood that matters
Mumbai: The Reserve Bank of India’s (RBI) surveys provide a fair assessment of how the present government has done on inflation and employment.
The Bhartiya Janata Party (BJP)-led government has for sure won the war on inflation. The credit, of course, goes to RBI. The central bank’s adoption of an inflation target and the steadfast adherence to achieving the 4% mandate has, to a great extent, reduced the fear among Indians on price rise.
The proportion of households that expect prices to rise faster are lower now than they were in March 2014, just ahead of the elections that brought BJP as the ruling party. The accompanying chart shows that household inflation expectations have been reined in considerably in the past four years.
Historically, elections have been won and lost because of inflation. In 1981, soaring onion prices claimed the Janata Party-led government. However, this time around, it is not just the cost of living but the opportunity of earning a livelihood that matters.
Hence for a poll-bound country, the perception on employment and growth outlook are far more important.
In the absence of robust employment data, a look at the RBI consumer confidence survey shows that the government needs to remedy the employment situation urgently.
The chart on employment expectations from the RBI consumer confidence survey shows that Indians have become less optimistic on their employment prospects.
In September 2014, which was a few months after the Lok Sabha elections, about 36% believed that employment opportunities have improved. Now, this proportion has come down to 33.9%. What is more disturbing is the percentage of respondents who said employment opportunities worsened has increased sharply to 47.2% now from just 28.7% in September 2014.
Indians are less optimistic about their employment prospects in the coming year as well. The net response, which is the difference between the respondents who believe employment prospects will improve and those who believe it would worsen was 23.1 percentage points, far lower than 51.9 percentage points in September 2014.
Put simply, the government has not lived upto to its promises on employment generation.
Much of the dent in consumer sentiment has been due to the demonetisation shock in 2016. The goods and services tax (GST) that sought to formalize the economy resulted in many small businesses going under.
That said, the optimism given by rising purchasing mangers index shows that businesses are more confident than before on demand conditions. This posits with the RBI’s survey in October that showed business sentiment index rose indicating optimism on prospects.
The 2019 Lok Sabha elections scheduled in just six months will be a litmus test for the present government. So far, its biggest promise of jobs is where the lack is.