Is it not the economy, stupid?

“It’s the economy, stupid” went down in the lexicon of American catchphrases after the Bill Clinton campaign successfully used the words as its mantra in the 1992 Presidential race against the incumbent, the senior George Bush. Since then, it is almost become theory, at least in America and generally extrapolated to many other democratic races, that the state of the economy has a huge impact on the prospects of a candidate. A bad economy would mean the end of the incumbent. In the context of India, this doesn’t seem to be true because the numbers just out tell us that the economic situation is dismal. Growth is down. At 5.8 per cent, growth is much lower than expected and the lowest it has been in as many as 17 quarters. Unemployment is up. The monsoon is delayed and that probably will add another complex layer of pressures on the economic system. So, all in all, the picture looks bad.

Conventional wisdom has it that a bad economy would mean the end of the incumbent. In the context of India, this doesn’t seem to be true because the numbers just out tell us that the economic situation is dismal and the incumbent won hands down and in fact, performed better than the last time. 

What the numbers tell now, many insiders and watchers of the economy have held for a long time in private. The report on unemployment, which carries explosive data on how jobs have been one of the biggest banes of Modi 1.0 at least when looked at from the surface, adds the “worst ever” qualification to the data. Numbers show that unemployment is at its worst in 45 years. These come from the very report that was allegedly buried by the government, fearing the impact the number might have on the prospects of a re-election of the incumbent. And yet, the BJP under Narendra Modi has returned with a mandate higher than it won in 2014. So do the numbers matter at all? Or do they matter but not enough to unseat an incumbent who has not been able to deliver in the aggregate? There is another question that might get asked: Do the numbers reflect the reality on the ground, in which case we may relook at how these are measured at all? Or is their impact subdued, even negated, when the numbers are kept hidden (as they were in this case – all the bad data has come tumbling out well after Modi was sworn in or his second term) so that you feel the sputtering economy in the bone but other distractions stop people from believing their own gut, their own observations and experiences on just how bad things are. In which case, we may have an Indian catchphrase for the elections, which might read: “It’s NOT the economy, stupid”.

So do the numbers matter at all? Or do they matter but not enough to unseat an incumbent who has not been able to deliver in the aggregate? There is another question that might get asked: Do the numbers reflect the reality on the ground, in which case we may re-look at how these are measured at all? Or is their impact subdued, even negated, when the numbers are kept hidden.

These are of course mere musings as the nation adjusts to a historic win coupled with historically weak (at least in part) economic data. There are many answers and they will point to how this election was different, how Modi managed to change the agenda and how a charged agenda can woo the people. This is a coin that is particularly difficult to deal. One side of it says Modi and his team are clever but the other side says, like it or not, that the people are stupid. Which of course the people are not since this was a clear, thumping vote, there was no tentativeness about it and there is a difference in the patterns seen in States and the Central elections – something Indian voters have shown again and again. So, there can be a suspension of self-interest, even at the cost of economics, at least in the Indian context. This was best seen in how Modi got by despite the huge blunder of demonetisation. People just didn’t seem to think his intentions were wrong, which is another way of saying that people agree that there is a lot of black money around and any effort to ferret it out is good – even if it means the poor line up to withdraw their own hard-earned money. But it also means that Modi the ferreter is not the dealer in black money, which puts a rather solid positive spin on a very negative story – well capsulated by Dr. Manmohan Singh who never spoke more clearly: “organised loot and legalised plunder”.  In sum, it would seem the intention matters, not the result. So, in the Indian context, economics can be given the go by completely; data and evidence can mean nothing in the face of a national mind to the contrary. Consider that no one believed that Morarji Desai could do anything against the country, never mind all the allegations that the up-until-then well-regarded journalist Seymour Hersh might have made. Hersh lost credibility and became a nobody, not Morarji-bhai.

So, there can be a suspension of self-interest, even at the cost of economics, at least in the Indian context. This was best seen in how Modi got by despite the huge blunder of demonetisation. People just didn’t seem to think his intentions were wrong...

But back to the economy, it’s not that Modi 1.0 did nothing on the economy. Subsidies did flow though to a limited section. This was Modi’s version of MNREGA from which the Congress-led UPA is also said to have benefitted to bring back Dr. Manmohan Singh for a second term called UPA-II, which eventually became the disaster that brought Modi to power in 2014. (As the author Nassim Nicholas Taleb once said, “You can’t fool people more than twice”). Subsidies and doles work, it might seem. The fact remains that India is one nation but within that India thrive many Indias. This is something businesses have often got on to early and there is this idea of catering to the needs of mini-Indias within the larger India. The needs and aspirations of the many Indias point in the same direction – up the economic pyramid -- but they are distinctly different and depend on what level of the pyramid the citizen is at. It was the late management guru C K Prahalad who wrote that “low-income markets present a prodigious opportunity for the world’s wealthiest companies — to seek their fortunes and bring prosperity to the aspiring poor.” So, do low income “markets” also provide political parties a prodigious opportunity to move the vote by doling out some semblance of prosperity? At the bottom of the pyramid, where the economic situation may hurt the most, government intervention and subsidy matters and this argument holds that if this India can be catered to, then the election may become safe.

Subsidies did flow though to a limited section. This was Modi’s version of MNREGA from which the Congress-led UPA is also said to have benefitted to bring back Dr. Manmohan Singh for a second term called UPA-II, which eventually became the disaster that brought Modi to power in 2014. (As the author Nassim Nicholas Taleb once said, “You can’t fool people more than twice”).

Elections of course are far more complex and the search for easy one-line explanations is less an effort to unravel the complexity and more an attempt to oversimplify – and get it wrong.  But one thing may be said – the pundits, often sitting at the upper end of the pyramid, are more likely to read it wrong. They get it the least, and today it can be said that they probably also matter the least!