Illustration: Jayachandran/Mint
Illustration: Jayachandran/Mint

Economic growth is now winning elections

The marginal impact of growth on voters is more pronounced than ever

If not for a brief interregnum of Jitan Ram Manjhi’s nine-month reign, Nitish Kumar would have completed a decade in office by the time the Bihar elections approach. All this while, Bihar has posted phenomenal growth rates, breaching the 10% mark multiple times. It is strange then that Kumar is relying more on caste calculations and less on his own performance to seek re-election. Does good economics not translate into good politics? After all, chief ministers such as Narendra Modi, Shivraj Singh Chouhan and Naveen Patnaik have successfully used the growth plank to get re-elected into office time and again. To be fair to Kumar, he used the same to get re-elected in 2010, albeit with a different caste coalition.

A recent paper by Milan Vaishnav and Reedy Swanson of the Carnegie Endowment for International Peace helps unravel the relationship between good economics and good politics. Adding to the meagre amount of such work on India, the authors analysed the growth and electoral data for 18 major states between 1980 and 2012. The aggregate data of the period under study is inconclusive. However, when it is segregated decade-wise, some interesting insights are thrown up.

The period of 2000-12, unlike the previous decades of 1980-89 and 1990-99, showed significant positive electoral dividend for state governments delivering economic growth. This is a new phenomenon as the experience of the decade 1990-99 was exactly the obverse when the governments delivering higher growth were thrown out. The decade of 1980s also showed positive correlation between growth and electoral fortunes, but the results are statistically insignificant. The paper also concludes, for the period since 2000, economic growth to be a greater influence on voter decision as compared to both inflation and law and order.

Sceptics will point out the failure of N. Chandrababu Naidu to get re-elected in 2004 as an obvious counter. The glitzy IT parks of Cyberabad, it was said, stood egregiously in contrast with the suffering farmers in rural hinterlands, thus bringing about the inevitable fall of the “CEO" of Andhra Pradesh. A recent study by the IDFC Institute, however, concluded that Naidu was also voted out by urban voters as much as by rural. Moreover, the average growth rate of agriculture and allied sectors in Andhra Pradesh during the period of 1999-2004—the period coinciding with Naidu’s pro-business reform years—was almost double the national average. Naidu’s ship was, however, scuppered with two successive drought years in 2001 and 2002 when the agricultural output of the state shrank by 1.5% and 7.7%, respectively.

The conventional view of Indian electorate as a myopic lot preferring identity over growth might finally be changing. In a 2013 research paper, Devesh Kapur characterized India’s electoral competition as one revolving “around distributing public resources as club goods (goods with excludability characteristics) rather than providing public goods to a broad base". He further observed that “those who have the voice (the middle and upper classes) have de facto exited from the system, preferring market solutions over poor quality and unreliable public services, further reducing pressures to change the system". As growth pulls more people out of poverty and expands the middle class, the nature of demands is changing from identity-based club goods to public goods. Economic growth, undoubtedly, belongs to the latter.

The economic liberalization began in fits and starts in 1980s and achieved a greater momentum only in 1990s; the most impressive growth figures were seen in 2000s. A sustained period of high growth drove home the benefits of reforms by moving a large chunk of population above absolute poverty. The cumulative impact of each percentage point of extra growth made discernible impact on incomes and lifestyle. The high tide, if there was one in India, was realized in the new century.

The liberalization also increased the power of the state governments to improve the economic wellbeing of their respective constituents. In a research paper, Krishna Chaitanya Vadlamannati has used the data on Industrial Entrepreneurs Memorandum proposals from each state annually, as well as other variables determining investment proposals during the period of 1991 to 2009 to establish a clear spurt in competition among states in attracting investments. When this is accompanied by fierce electoral competition states—with both national and regional parties in the fray—the marginal impact of growth on voting decisions are more pronounced than ever.

The lesson for political parties is clear. Economic growth matters, even wins them elections. One only hopes that the opposition does not take the wrong lesson of stalling the economic reforms in order to defeat the ruling party and seize power.

Do Indian voters reward governments for delivering economic growth? Tell us at views@livemint.com

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