Home > opinion > Voter preferences and the 2014 general election

A lot has been written in recent weeks about how an estimated 120 million new voters will be eligible to participate in the national elections due in 2014, or more than one in every six of the 790 million Indians who could vote next year. No party won more than 120 million votes in 2009, so many pollsters and political commentators have been persuasively pointing out that the voting behaviour of these electoral neophytes could have a powerful impact on the final results in 2014.

One important issue that should bother election strategists on all sides is what economic parameter affects these young voters more—growth or inflation? There has been almost no public discussion on this key question compared with the more common debates on where the young Indian voters stand on various political issues.

Former Reserve Bank of India governor D. Subbarao had once mentioned how he had conducted a straw poll at a public event on what the focus of economic policy should be. He asked for a show of hands to gauge the public reaction. The older members in the audience generally preferred inflation control while the young voted for faster economic growth.

An economist friend repeated this little experiment at a Mumbai business school where the two of us were speaking. The result was broadly the same: the students thought faster growth was more important to them than lower inflation. Purists may point out that it is incorrect to extrapolate from the results of what was clearly a small and non-random sample, as this column is doing. But I shall nevertheless take the risk.

Such a stark difference between the economic preferences of the young and the old is perhaps natural. The young will generally prefer policies that ensure rapid job growth since they seek to enter the labour market with attractive opportunities. Older people already have jobs so would rather focus on policies that protect their wealth. So the first group would vote for economic growth while the second group would vote for inflation control.

This is merely an untested hypothesis, but it is one that is worth mulling over at a time when economic growth is tepid while consumer inflation is stubbornly high.

The unexpected link between economic policies and demographics was recently the subject of a lively debate among economists active in the world of blogs. In early September, Steve Randy Waldman of Interfluidity blog argued in a series of fascinating posts that the Great Inflation of the 1970s in the US was not primarily because of monetary factors but because of underlying demographic changes that provided a radically different optimal solution to American policymakers (and politicians) who were grappling with the usual growth-inflation trade off.

“To summarize my view, I dispute the idea that the US’ Great Inflation in the 1970s resulted from errors of monetary policy, errors that wise central bankers could have avoided at modest cost. During the 1970s, the simultaneous entry of baby boomers and women into the workforce meant the economy had to absorb workers at more than double the typical rate to avoid high levels of unemployment. This influx was effectively exogenous—it was not like a voluntary migration, provoked by the existence of opportunities. Absorption of these workers required a fall in real wages and some covert redistribution to new workers, which the Great Inflation enabled," he wrote on 11 September in a reply to various critical comments by other economists. “I don’t dispute that monetary contraction could have prevented the inflation of the 1970s. But under the demographic circumstances, the cost of monetary contraction in terms of unemployment and social stability would have been unacceptably high."

The point here is not whether this contentious hypothesis can be easily adapted to contemporary India. This is a different country and these are different times. But the economic preferences of the young do matter—especially because they can be different from those of older voters. I think all this opens up interesting questions on the changing incentives for the Manmohan Singh government as the nation goes to the polls. It could also present interesting challenges for the Narendra Modi campaign in the coming months. Should the two campaigns focus more on falling growth or on high inflation?

Low inflation is a precondition for sustained economic growth, so this is not an argument for inflationary policies. But the short-term trade-off between growth and inflation may look quite different in the months leading to the next national election. It is worth remembering that finance minister Manmohan Singh had fully supported the monetary squeeze put in place by the Indian central bank in 1996—months before the election—because inflation was way too high even then. It will be worth seeing what the government he now leads does in the coming months.

Niranjan Rajadhyaksha is executive editor of Mint. Comments are welcome at cafeeconomics@livemint.com. To read Niranjan Rajadhyaksha’s previous columns, go to www.livemint.com/cafeeconomics-

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