Will economics unseat the great economist?

This past week, economists Jagdish Bhagwati and Arvind Panagariya wrote a syndicated article titled, “The bell tolls for India’s Congress Party.” They said that the Congress-led UPA government had been “ineffectual” and that this would hurt the party in the 2014 Lok Sabha election.

Mr Bhagwati and Mr Panagariya also had a second argument. “Voter attitudes have shifted significantly in the past decade,” they wrote. “Average annual economic growth of 8.5 per cent over the eight-year period from 2003 to 2011 has led to a revolution of perceived possibilities... Voters in most Indian states now support leaders and parties that deliver good economic outcomes, and turn out those who do not. This marks a major shift from the fatalistic attitudes of the past.”
This contention led to much debate among readers of the Bhagwati-Panagariya piece. Was there enough evidence that the Indian voter was now driven by predominantly economic motivations?
The answer is not an easy one. It is layered. As such Mr Bhagwati and Mr Panagariya can be both right and wrong, or, more accurately, partially right. Nevertheless, they are correct in presuming the limited “economic vote” that does exist is decisive for the Congress or indeed the BJP, the other national party.
To understand that seeming paradox, some context is required. First, almost everybody in India almost always votes for a better life. Even so-called emotional and identity-based voting decisions are often transactional. Individual castes and communities — or their leaders — barter their vote for specific economic gains, whether subsidised electricity for Jat Sikh farmers in Punjab or a water source in a Yadav-majority hamlet in Uttar
Pradesh.
As such to dismiss Indian voters as historically fatalistic and blindly supportive of ancient loyalties and associations is unfair. The hope of economic gain or lifestyle change has been married into those loyalties and associations, or been expressed through them.
Of course when Mr Bhagwati and Mr Panagariya — as well as their adherents and critics — speak of economic motivations for voters, they are really asking if there is an electoral constituency for economic reform and for the politics of growth. Admittedly this constituency is only a slice of India’s 700 million voters. It is a section we loosely term “India’s middle class”.
There are two points to ponder here. One, this middle class — or these middle classes — are not a heterogeneous group. They comprise both English-speaking urban professionals as well as humble folk, such as chauffeurs and construction workers, who have benefitted from the business boom in India’s bigger cities.
The self-identifying constituency of beneficiaries of economic advance extends from an investment banker living in Colaba to a worker in a textile-exporting facility in Coimbatore to a carpenter doing the interiors for a new apartment in Chandigarh. All three don’t fall in the same socio-economic demographic group. The first is clearly upper class; the second and third comprise the genuine Indian middle class.
It is the voting preferences of the second and third categories that must detain us. Have they evolved in the past decade? There is fair reason to believe this section now recognises that its economic fortunes are determined by forces beyond those influenced by a constituency MLA or sometimes even a regional party. This does not mean that macro-economic policy — or a limited understanding of such policy — is the only factor determining how it votes; certainly that is not true. However, it is part of the mix, and wasn’t so 15-20 years ago.
This explains why many such voters, who have professional links with urban centres of growth, now vote differently in state and national elections. The difference between the Congress’ performance in Uttar Pradesh in 2009 and 2012 is an example. Less commented on is the contrast between the parliamentary and state elections in Andhra Pradesh in 2009. The Congress won 33 of 42 Lok Sabha seats but only just over half the 294 Vidhan Sabha seats. The incremental vote in the Lok Sabha poll could be said to be coterminous with the “economic-growth constituency”.
Two, for a national party, this economic constituency is not sufficient to win a mandate, but it is necessary. Consider recent Lok Sabha elections. In 1996, the two national parties won 301 seats in a House of 543 (BJP 161, Congress 140). In 1998, they won 323 (BJP 182, Congress 141). In 1999, the number fell to 296 (BJP 182, Congress 114). In 2004, it dropped further to 283 (Congress 145, BJP 138). In 2009, it rose to 322 (Congress 206, BJP 116). That comes to an average of 305, but with a massive 40-seat span between the highest and lowest points.
What is the significance of these numbers? Bluntly those 40-odd seats can be swung by the urban, economic-growth constituency. If it puts its entire weight behind either the BJP or the Congress, that party could go to the 180-200 seat range. If this vote and these seats are split, it could result in neither party being at a decisive advantage. How the winning party uses (or wastes) its mandate is for it to choose, but those 40-odd seats could give a national party a cushion to run a coalition to its liking.
When do these urban middle classes vote decisively, if they vote at all? Frankly, they do so only when their economic interests are threatened. Theirs is a protest vote. In 2009 it was a protest vote against the CPI(M) that had, they believed, manacled the Prime Minister. In 2004, this section was happy with the economy and its interests were not threatened. As a result it did not vote even though it wanted the BJP to get re-elected.
In 2014, these people are going to queue up at polling stations to record their anger against the Congress. Never mind how and how much the BJP could benefit — that is a separate issue. What is apparent is that a segment vote, guided by economic priorities, could unseat the Congress. To that extent, Mr Bhagwati and Mr Panagariya are right.