On the Monday, 7th of March 2022, Nifty opened with a cut of ~380points (or 2.3%), and ended the trading session almost at the opening level. Not much new had happened over the weekend to warrant this kind of fall on Monday morning. The Russia-Ukraine conflict was intense throughout the previous week and the commodity prices were already rising. Many friends enquired what could be the reason for this sharp cut on Monday. I was not sure about it, so I started inquiring from various market participants whose numbers are stored in my phonebook. Unsurprisingly, none offered any convincing explanation. Some people however felt compelled to offer an explanation, for the fear of losing the “expert” status they enjoy in my opinion.
``The exit polls today evening may show the BJP losing UP elections”, was the most common explanation offered by the experts. When I asked, how do you know about exit polls, sitting far away from UP?, they indicated that they have “credible sources” reporting from the ground. Since, I myself had travelled to UP thrice to assess the people’s mood and my view was quite contrary to these sources, I decided to dig a little deeper. What came out was absolutely astonishing. Most of these “experts” were relying on a column published by Mr. S. A. Aiyar in the Sunday’s Times of India, and some studio experts who had “personally” witnessed an anti BJP wave in UP.
As an amateur politics enthusiast, I have been actively following elections for the past 3 decades. It has been my consistent view that economics in India is politics agnostic and as such has no direct correlation with the markets (for example see here and here). Therefore, learning that one column in a newspaper, based on prejudiced imaginary, could influence the markets so much is surprising to me. Anyways, the exit polls results that evening did not concur with Mr. Aiyar and most studio experts, and the markets recovered Monday's losses in the next couple of days. Thankfully, Mr. Aiyar also changed his opinion in his next column (Sunday, 13th March 2022) and the studio experts have also offered a variety of explanations for the election's outcome.
Regardless of the opinions and views of experts and election outcome, I would like to reiterate that drawing economic and market inferences from the election outcome may not be useful. I continue to believe that the evolution of economic policy and hence the direction and trajectory of economic growth is incremental in India.
Since independence, all the political parties in India have pursued the same economic policies paradigm with incremental changes. Only twice a non-linear shift has occurred in the economic policy paradigm – First in 1991 when the economy was opened up to the global competition (presumably under the pressure of global agencies which bailed out India out of a balance of payment crisis); and in 1998-2000 when the government gave up many monopolies to seek larger private sector participation in the economic growth (presumably to counter the impact of global sanctions post 1998 nuclear test). In 1991 we had a Congress led minority government at the helm. In 1998-2000, we had a BJP led coalition government that comprised 27 regional parties of all shades.
Like all elections, the latest elections have also thrown some new jargon like Upyogi (UP+Yogi) and Labharthi (beneficiaries of government schemes) etc. A narrative is being created to imply that free ration, housing subsidy, LPG cylinder etc. have won the support of women voters for the incumbent government in UP; and the attempts of caste and religious polarization have been mostly rejected by the voters. I would like to draw the attention of readers to the following insight I gained from my numerous travels across the state of UP, Uttarakhand and Punjab.
1. India is constitutionally a socialist country. No government in India can adopt an economic agenda that is against the principles of socialism. All governments in the country have pursued a socialist agenda and will continue to do so. The cash transfer schemes to farmers and urban poor, free LPG schemes, health insurance implemented by the incumbent governments are incremental improvements over the schemes being implemented since independence.
The factors like technology developments, financial inclusion, Aadhar and increased awareness due to social media, etc. have only made the delivery of schemes more efficient and transparent. This trend will continue in the foreseeable future. It may in fact accelerate as the citizens become more aware about the power of their franchise and become more demanding. Free internet data could be the next offering in this series.
2. The development narrative of governments is mostly an appropriation of a consistent trend. The expressway construction program in UP started with the Golden Triangle 25yrs ago. Every government in the past 25years has taken the process forward. The pace was slower in the first decade due to multiple obstacles (mostly land acquisition). The implementation of new land acquisition policy (2x or 4x compensation and 80% acquisition prior to commencement of construction), and better technology and equipment has led to faster execution. Between the years 2012-17 the total installed electricity generation capacity in UP increased 81% from 13053MW to 23662MW. During 2017-21 it registered an increase of 18% from 23662 MW to 27896MW. The development of civil aviation infrastructure also started more than 2 decades ago when the NDA government decided to allow private airport operators. New airports and better air connectivity has been a consistent trend for the past two decades.
3. The analysis of the latest elections has focused much on the emergence of “women vote bank”. It is being emphasized that the women have identified the PM with the benefit schemes of free ration, housing, LPG connection, health insurance etc. and therefore overwhelmingly voted for BJP. It is pertinent to note in this context:
(i) Mrs. Indira Gandhi had successfully created a women vote bank with similar schemes. Charming Rajiv Gandhi had also attracted women votes in large chunks to make history in 1984 Lok Sabha elections.
(ii) Punjabi women also got similar benefits as UP benefits, but did not vote for BJP.
I have highlighted this in many previous elections since 2014 that the women voters have become more assertive in the states like UP, Haryana, Punjab, Uttarakhand, Rajasthan and Bihar. Traditionally, in these states the women were seen to be voting as “directed” by the head of the family (usually husband or father) or community leaders (Khap, Maulvi, etc.)
The Anna Hazare movement in 2011-12 and subsequently Aam Aadmi Party campaign in 2013-14, brought the political discussion to the drawing rooms and kitchens of households, from the clubs and chaupals. The women of the house started asserting herself politically and rebelled against the dictates of their fathers and husbands. Losses suffered by the parties like INLD, RLD and BSP in the last decade are clear indications of women rebelling against the “male dictate” to vote.
It would be inappropriate to ignore the
contribution of Ms. Mayawati in the area of girls education. I have been
frequently highlighting how the rise in the number of girls going to school (walking
or cycling for several kilometers daily) has been the most striking change in
UP in the past 15years.
