Does Good Economics Mean Good Politics in India?

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Summary
Indian voters are rewarding politicians for good economic performance—a new and encouraging sign that Indian democracy is maturing.
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There is an old truism in India that good economics doesn’t make good politics. But when the Bharatiya Janata Party’s (BJP’s) prime ministerial candidate Narendra Modi won his third mandate as chief minister of Gujarat in December 2012, he proclaimed the end of that traditional narrative. In Gujarat, he said, “people have shown that [they support] good economics and good governance.” Modi might well be on to something.

In most democracies, the proposition that politicians rise or fall on the backs of how the economy performed under their watch is considered received wisdom. That famous phrase that grew out of the 1992 U.S. presidential campaign, “It’s the economy, stupid,” has been copied the world over.

But in India, years of scholarship and popular commentary have argued that voters there prioritize factors other than good economic performance when evaluating incumbent governments. Namely, Indian voters are said to put more stock in patronage, populism, or parochialism. As the saying goes, in India voters do not so much cast their vote as they vote their caste. The result of this is that even governments that observers generally agree have performed well often get the boot at the ballot box.

Yet, there has been a noticeable shift in the voting patterns of Indians away from the prevailing wisdom according to thirty years’ worth of state election results and the corresponding economic records of incumbent governments. Since 2000, there have been increasing electoral returns to governments that deliver higher economic growth.

This new dynamic, albeit still nascent and uneven, is an encouraging sign of the maturation of Indian democracy. With national elections on the anvil for the spring of 2014, this is a shift India’s political parties ignore at their peril.

Economic Growth Has Traditionally Not Mattered for Politics

The quintessential example of the conundrum that good economics does little to help, and may even harm, an elected state or national leader’s future prospects is the demise of former Andhra Pradesh chief minister Chandrababu Naidu. Ruling the state for nearly a decade starting in the mid-1990s, Naidu was the darling of the international donor community. Business leaders revered him and hailed him as a visionary for his sound economic management and pro-growth policies.

For all of his efforts, however, Naidu was unceremoniously dismissed by his state’s voters. The reasons behind Naidu’s loss are complex; they have to do as much with alliance logic and caste arithmetic as with popular disquiet over his perceived pro-rich bias.

Yet observers have elevated Naidu’s downfall to a kind of generalizable cautionary tale about Indian politics. As one scholar wrote at the time, “India has not reached a stage where the people would prefer a CEO to a politician to run the government.”

That generalization seems to have held true in the past. Looking back at more than 120 state-level contests across eighteen major states over the past three decades, it appears that Naidu’s misfortune may not be unique and that Narendra Modi’s claims are little more than wishful thinking. Between 1980 and 2012, there was almost no relationship between average per capita economic growth during a state government’s tenure in office and conventional metrics of electoral success (see figure 1). This is true whether success is gauged by the change in the percentage of seats or votes the incumbent won or simply by whether the incumbent was reelected.

Indian voters are rewarding politicians for good economic performance—a new and encouraging sign that Indian democracy is maturing.

Voters Begin to Reward Economic Growth

There is an emerging belief among some observers of Indian politics that the ground is shifting beneath politicians’ feet. While in the past voters may not have been attentive to issues of the economy, with the passage of time—these observers argue—good economics has increasingly made for good politics. According to this view, India’s political economy has undergone a structural break in the last decade.

Proponents of this view cite several pieces of evidence in support of their optimistic assessments of the growing meritocratic nature of Indian elections.

First, India has increasingly seen ruling parties come to power at the state level that represent “rainbow coalitions” of disparate caste and religious communities. The reelection of Bihar Chief Minister Nitish Kumar of Janata Dal (United), for example, in 2010 on the back of wide-ranging support from the upper, intermediate, and lower castes—as well as Muslims—is seen as evidence that narrow, parochial interests are gradually giving way to more programmatic agendas, even in ethnically polarized states. The role of caste has not disappeared, but in many states it has been married to a discourse about development and the economy.

Second, India has witnessed the rise of a cadre of popular state chief ministers who have been both highly touted for their economic achievements and richly rewarded by voters. This lineup of CEO chief ministers cuts across party and regional lines, featuring BJP leaders such as Modi, Raman Singh (from Chhattisgarh), and Shivraj Singh Chouhan (from Madhya Pradesh); the Indian National Congress’s Sheila Dikshit (who, until recently, governed Delhi); and the regional party bosses Naveen Patnaik (Odisha) and Bihar’s Kumar.

By reputation, Indian voters are notorious for throwing incumbent governments out for reasons that remain elusive, even to veteran observers. Yet the experience of these chief ministers indicates that the era of reflexive anti-incumbency, while far from over, may be easing somewhat. The repeat success of this lauded bunch of chief ministers is consistent with data from the Center for the Study of Developing Societies (CSDS) that shows declining rates of anti-incumbency, especially when compared to the electorally volatile 1990s (see figure 2).

Indian voters are rewarding politicians for good economic performance—a new and encouraging sign that Indian democracy is maturing.

There is hard evidence to support the notion that voters in India are now rewarding parties that deliver better economic outcomes as well. One study found a significant, positive association between economic growth and the electoral prospects of candidates contesting India’s 2009 parliamentary elections. Furthermore, a July 2013 all-India preelection survey conducted by the CSDS found that, of voters who expressed a preference, the economy and development were among the most important determinants of their vote choice.

And there is also evidence that there have been increasing positive electoral returns to growth over time. Looking at the relationship by decade (the 1980s, 1990s, and 2000s), it becomes clear that in contrast to previous years there were significant electoral returns to higher growth in the 2000s (see figure 3). Statistical analyses, after controlling for a range of factors, reveal that a 1 percentage point improvement in a state’s growth rate in the 2000s is linked to a greater than 9 percent increase in the likelihood that the incumbent will be reelected, a 4 percentage point gain in seat share, and a 1.3 percentage point rise in vote share. These effects are unique to the most recent decade, as growth failed to deliver positive electoral returns in either the 1980s or 1990s.

Of course, the positive connection between economics and elections is not absolute; there are several outliers that buck the trend. Indeed, in states such as Tamil Nadu, regime alternation between opposing political parties irrespective of economics appears to be hardwired into the state’s political DNA. Yet the overall shift across states is unmistakable.

Indian voters are rewarding politicians for good economic performance—a new and encouraging sign that Indian democracy is maturing.

The Maturation of India’s Democracy

Detecting a shift in Indian voter behavior is one thing, but understanding why this shift occurred is a more complex enterprise. The increasing electoral rewards for good economic performance could be indicative of a gradual maturation of India’s democracy, which involves a number of reinforcing components.

The heady growth years of the 2000s may have fundamentally altered the behavior of the Indian voter, triggering what’s been called a “revolution in rising expectations.” As one noted economist put it, “People at all levels, especially the poor, had discovered that unlike during the first four decades of independence, rapid improvement in the economic fortune was possible.” In other words, the so-called aam aadmi (common man) tasted the fruits of rapid growth and has begun to demand that governments deliver more of the same.

During the same period, of course, India witnessed an explosion in the degree of political competition. This increase in competition may have also contributed to a tighter link between vote choice and economic outcomes. With robust competition and a clearer picture of the menu of available options, voters today have a greater number of credible “exit” options if the incumbent underwhelms.

Finally, states are playing a more integral role in India’s general governance structure. Over the past several decades, power has increasingly been decentralized in India’s federal system so that the states today exert much greater autonomy and control over the performance of the regional economy. To the extent voters recognize the primacy of state politics, they are likely to pay greater attention to state elections compared to national elections, particularly when it comes to economic considerations. Higher turnouts in state elections, including the record high turnouts witnessed in a crop of elections held in December, relative to national polls is evidence of this.

Whatever the precise motivations behind this shift, the growing relevance of the economy to the way Indians behave at the ballot box is welcome news. When voters hold their leaders accountable on the basis of performance rather than patronage or parochialism, both accountability and governance stand to benefit.

Reedy Swanson was a junior fellow at the Carnegie Endowment.

End of document

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Comments (1)

 
 
  • Neeraj Kumar
    1 Recommend
     
    It would have just completed the superb picture presented by the authors here had they included the emergence of Aam Aadmi Party (popular as AAP that means You in English) while talking of the menu for voters. The party's gladiatorial emergence speaks a volume about how the new middle class voters in Delhi voted almost en masse for an alternative that simply promised a better governance for commoners. Whether they deliver remains a guess for now, but it has sent mainstream parties for a tizzy for sure. Yes, it would be an interesting pursuit for researchers if they keep a close watch on whether other provinces in India too, specially the Hindi-heartland states, accept AAP as a unique electoral choice. Carnegie Endowment would do a great favour to the scholarship if they constitute a project on this. Regards
     
     
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