3 years

ANIMAL SPIRITS

Democracy as a Demographic Puzzle

Devangshu Datta writes on economic trends and markets
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Political parties that fail to work out the relevance of the economy and its impact on youth aspirations are doomed

The next General Election promises to be a watershed. Every political party is doing its best to figure out what buttons to push in order to make voters push the right buttons on electronic voting machines in 2014. Most parties will combine some sort of economic agenda with the age-old loops of caste relationships and linguistic or religious identities.

The problem is, political strategies are always crafted to win the last election. The assumption is that people will vote the same way again. This is usually wrong in the Indian context and it could be disastrously wrong in 2014. India’s electoral demographics have changed since 2009. The global economy has also gone into a tailspin, taking India’s growth rate down with it. Voter preferences may be dramatically different in 2014, and economic considerations may well play a bigger role than ever before. Politicians would have to reboot their thought process to focus harder on economics, and this is hard for any traditional politician who is trained to think only in terms of identity.

The first time an Indian politician even acknowledged that voters were influenced by economics was as late as the 1970s. That was when Indira Gandhi coined a couple of election slogans, to wit, ‘Garibi Hatao’ and ‘Roti, Kapda aur Makaan’. Ever since, promises of poverty eradication and of providing the simple bare necessities of food, clothing and housing have resonated through election campaigns. In the 2000s, ‘Bijli, Sadak, Paani’ were added by general consensus. Circa 2014, ‘Mobile’, ‘School’, and above all, ‘Naukri’ may be part of the deal.

My sense is that when the votes are counted and new MPs take their oaths and sit down in the 16th Lok Sabha, political pundits will say with 20-20 hindsight that “It was the demographics, stupid!”

India is a very young nation. Half the population is under 25. An estimated 110 million people will be eligible to vote for the first time in 2014. Another 45 million came of voting age in 2009. Put them together, along with those who cast their first votes in various assembly polls inbetween, and almost 25 per cent of the electorate is aged 18-27. The politicians who prove most adept at decoding the decision-making processes of this vast cohort of youngsters will, in all probability, win in 2014.

It will not be an easy task for any party. The average age of the 15th Lok Sabha is 53, and there are only 65 MPs who are under 40 in a house of 542 (that is, 12 per cent), even though the minimum age for a candidate is 25. There is a big disconnect between the geriatrics and middle-aged ‘youth icons’ who decide political strategies and a voter-base that is decades younger. We saw signs of that generation gap in December 2012 when every party fumbled to respond to spontaneous protests after the Delhi gang-rape. It is not difficult to understand why politicians across the board were clueless and incapable of dealing with the anger. The average 70-year-old anywhere doesn’t understand his or her grandchildren. For that matter, the average 45-year-old finds it difficult to understand what motivates his or her children. Multiply the generation gap by 150 million and the demographic disconnect between politicians and young voters is easily explicable.

On top of the generation gap, the Indian under 30 has grown up in an entirely different environment. The young Indian is far better educated. This is not saying much in absolute terms. The literacy rate was 43 per cent in 1991 and it’s only 75 per cent now. But higher literacy does mean young Indians know more and have higher aspirations than their parents. When you factor in high levels of comfort with mobile internet devices, wider access to more varied information (and disinformation), native use of social media and technology in general, the divide gets ever larger.

The typical debutant voter’s attitudes were also formed by life experiences very different from their parents’. S/he was born after the Babri Masjid went down, and, most likely, has only dimly heard rumours about Delhi’s 1984 riots. Many would not have registered Godhra because they were so young when it happened.

To this age group, Indira Gandhi, Mahatma Gandhi and Jawaharlal Nehru are names primarily associated with roads and airports. Getting a new phone connection means hanging around for an hour if the service centre is inefficient, not waiting 18 months. Buying a train ticket is a matter of going online. Withdrawing money takes two minutes at an ATM. It would be reasonable to assume the economic demands of this generation and hence their voter-preferences will be different from their parents’ and grandparents’. Other things have also changed faster than the political class realises. The changes suggest that economics is more important than ever.

India is in the middle of the biggest migration in human history. Millions of young people have shifted from villages to cities over the past ten years and more are doing so even as you read this. Approximately one-third of all voters are now urban, and urban centres are represented by about 200 Lok Sabha seats. Another 50-100 seats include several urban segments.

Urban voter behaviour is different from rural voter behaviour. Issues of local logistics and economics dominate urban seats, while caste lines, so clear-cut in rural areas, blur. Can politicians meet the aspirations of this new ‘caste’—the urban migrant? Do politicians understand how much influence the city slicker has vis-a-vis the family in the hinterland?

Every political party is likely to trip up on this count. The one that trips up least will win the largest share of this swing youth vote. Given that this migration has gained momentum over the past five years, the UPA may have made a serious misjudgement in its focus on entitlements and handouts, rather than job creation.

Every rural denizen who chooses to forgo handouts of the MNREGA, and comes to the city instead, is saying, “I want a proper job.” Unfortunately, jobs have not been easy to come by, and that is at least partly due to lack of political will. The official unemployment rate, which means people who have signed up at employment exchanges, is close to 10 per cent. Unofficially, under-employment and unemployment are much higher. As India’s Chief Economic Advisor Raghuram Rajan pointed out in the Economic Survey, there could be tens of millions of ‘missing jobs’ by 2020. This is especially likely to be true if women start participating more in the labour force, as they should, given rising educational levels.

Far-reaching changes are required in the policy framework, including changes in business regulation and expedition or elimination of permits required, changes in labour laws, better infrastructure, easier funding and so on, to support the growth of small and medium businesses, which create the most jobs. In that sense, the last 10 years (and the 10 before that) have been wasted.

These things cannot happen in a day or even a year. But the party or parties that make the most credible promises of expediting job creation would win a lot of support from young voters.

Unfortunately, most politicians seem to have bought into the UPA’s axiom that entitlements and handouts work better than job creation. Everyone prefers a simple political narrative even if it’s wrong. According to accepted political wisdom in both the Congress and BJP, the NDA lost the General Election of 2004 despite doing its best to provide Bijli, Sadak, Paani; and the UPA won in 2009 by providing entitlements and writing off loans, rather than by letting jobs be created by rapid economic expansion in the preceding few years.

The Congress President seems to have never had doubts on this score. Mrs Gandhi Senior believed in spending on handouts and entitlements even if it meant that growth was stifled for lack of investment. Her daughter-in-law inherited that mindset and the 2009 election result appears to have reinforced her conviction.

In the nine years of UPA rule, its political strategy has been heavily focused on entitlements. First, there was the NREGA, now renamed the MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act). Just to make sure that farmers stayed happy, there was also a debt forgiveness scheme with some Rs 76,000 crore worth of farmers’ loans being written off in the 2008-09 Budget. Sonia Gandhi apparently believes that rural employment and that debt writeoff helped the UPA win in 2009, and she will try the same formula again.

Government spending on the social sector, including education, health, housing, water supply and sanitation, etcetera, has risen from 5.9 per cent of GDP in 2007-08 to an unprecedented 7.1 per cent of GDP in 2012-13, accounting for 19 per cent of Union Budget expenditure. According to Finance Minister P Chidambaram’s latest Budget presented on 28 February, this spending will rise to around 7.3 per cent of GDP in 2013-14, which would be a sizeable 21 per cent of all budgeted disbursements.

The UPA’s policies have had some positive effects, of course. Poverty has not been eradicated but it has been reduced. The numbers will vary depending on methodology. There have been quibbles about where poverty lines should be set, but per capita income has indeed increased at the lower end of the pyramid. Based on the Tendulkar Committee methodology, the proportion of people living below the poverty line (Rs 32/ day in urban areas and Rs 26/ day in rural) declined from 37.2 per cent in 2004-05 to 29.8 per cent in 2009-10. In absolute terms, the country’s number of poor people declined by 52.4 million. This implies poverty declined an average 1.5 per cent every year between 2004-05 and 2009-10. This is twice the rate of decline experienced over 1993-94 to 2004-05.

Unfortunately for the incumbent government, the cost of food, clothing and housing has spiralled up at double-digit rates through 2012-13, making life difficult for everyone, not just the poor. Though it may be easing, inflation is still high, and an inability to control it could add to the anti-incumbency factor. Bottlenecks in infrastructure creation have also made it difficult to deliver reliable and comprehensive power and water coverage, and to provide good roads.

The MGNREGA scheme has been implemented in all rural districts. About 44 million households have been granted employment, according to the Economic Survey. The average wage paid under the scheme has gone up from Rs 65 in 2006-07 to Rs 115 in 2011-12. This has, in effect, become the minimum wage for casual rural labour.

In its second term, the UPA also introduced new social security schemes like the Right to Education Act and a health insurance scheme, the Rashtriya Swasthya Bima Yojana, as well as the New Pension Scheme. It has proposed a Food Security Bill, and has started rolling out a pilot cash transfer scheme that rides on Aadhaar identification (the UID programme). At the same time, it has also implemented the Jawaharlal Nehru National Urban Renewal Mission for big cities and Urban Infrastructure Development Scheme for Small and Medium Towns. Take together, all these should enhance the urban dweller’s quality of life in terms of ease of transport, better sanitation and water supply.

In rural areas, there is Bharat Nirmaan, which targets improvements in rural infrastructure across irrigation, roads, housing, water supply, electrification and telecom. Under this, as part of the Pradhan Mantri Gram Sadak Yojana, some 360,000 km of rural roads have been built and 126,000 villages connected. About 73 per cent of rural ‘habitations’ now have access to safe drinking water. However, only 33 per cent have latrine facilities.

Surprisingly, for an election year, the Union Budget for 2013-14 has been restrained in terms of handouts. Existing social schemes have been maintained, but there hasn’t really been much more by way of giveaways, even if the nominal hikes in social sector disbursements are slightly higher than the expected rate of inflation. This is because national accounts are in terrible shape with both a massive fiscal deficit and a record current account deficit. Bluntly, India could see a pullout of foreign investments and a possible currency collapse if the twin deficits get any larger and it leads to a downgrade of the nation’s sovereign credit rating. Such an outcome would more or less guarantee that the UPA gets voted out.

So, despite Sonia Gandhi’s fondness of handouts, the Government cannot afford to expand social security funding and this Budget focuses on fiscal consolidation instead. Of course, there’s nothing to prevent an increase in entitlements if the economy picks up over, say, the next six months.

Even if we discount the demographic factors, admittedly difficult given the numbers, history suggests that the Indian voter is a fickle creature. Average electoral volatility in India—that is, the change in a party’s share of the popular vote from one election to the next—is around 26 per cent. This is much more than multi-party European democracies, where electoral volatility is an average 14 per cent, or the two-party US, where the figure is just 3 per cent. Less than one-third of Indian legislators tend to win two successive terms.

For reference, the BJP won 19 per cent of the national vote in 2009, which translated to 116 Lok Sabha seats, while the Congress got 28.5 per cent of the vote, which gave it 206 seats. If India’s average electoral volatility holds in 2014, with each major party gaining or losing about a fourth of its earlier share of votes, the Congress could win a voteshare of either 21 or 35 per cent, and the BJP, a voteshare of either 14 or 24 per cent.The BJP’s best voteshare was 25 per cent in 1999 (182 seats won plus 4 crossovers), and the Congress’ best since 1984 was 36 per cent (232 seats) in 1991. So these numbers aren’t impossible to contemplate.

High electoral volatility also suggests that the axiomatic insistence on identity politics isn’t necessarily the best strategy. Identity doesn’t change but voteshare does shift dramatically from election to election. One way of trying to reconcile an electoral strategy with this volatility is to assume that every political party plays the caste-cum-religious cards as best it can. So the differentiator eventually becomes good governance and the economic policies that voters actually like.

The ‘X factor’ in 2014 will be the economic preferences of that army of youngsters. Which set of grandparents will be better at guessing these?

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