Why the rural economy matters to elections?
The Institute of South Asian Studies at the National University of Singapore (NUS) had prepared an interesting note on the relationship between elections and the rural economy in India. Some of the highlights can be summarized as under:
- The outcome of the elections in states like Gujarat, Karnataka, Rajasthan, MP and Chhattisgarh will substantially influence the election manifestos of political parties in favour of the farmers.
- The agricultural crisis in India and the farm distress, which manifests itself in farmer suicides, will be the driving factors of the 2019 elections in India. Just look at the 15 major farmer protests last year!
- The jobs numbers tell their own story. In India, 33% of the workforce is employed in services, 23% in industry and 44% in agriculture. This is despite agriculture contributing less than 15% to the GDP.
- In India, 342 out of the 543 Lok Sabha constituencies are substantially influenced by the economics of agriculture. Unlike the US where the wealthy turn out to vote, in India it is the poorer families that vote with greater enthusiasm.
For the ruling NDA government, the rural economy will be the fulcrum that will drive the elections. As per the election commission data, in 2014 the BJP got 40% of the urban votes but less than 30% of rural votes even in a predominantly wave year.
Nurturing the rural story – the road ahead
The rural distress stems from a plethora of factors and they are the key to the outcome of these elections. Demonetization was an important factor as it caused stress in rural and semi-urban areas due to the cash nature of these economies. Secondly, GST led to business stress in rural and semi-urban segments. A bulk of employment in these segments is provided by the MSME sector, where compliance costs have gone up but the benefits are yet to kick in.
The last five years have seen distinct cost escalation for the rural people. For example, fuel is up by 27%, fertilizers by 15% and pesticides are 30% more expensive. Also, the MSP for most crops stagnated between 2014 and 2017 and the higher MSP promised in 2018 was constrained by limited procurement by the government. Lastly, a production glut and market stocks (e.g. sugar) led to falling prices. All these underscored the need to address the rural story in the 2019 elections.
Leaving no stone unturned
Political campaigns are leaving no stone unturned to pamper the rural masses. Sample these.
- In 2018, the NDA government announced assured MSP at 150% of the cost of production and free health insurance coverage for nearly 10 crore rural and semi urban families.
- Learning from the Japanese experience, the NDA government also announced Helicopter Money in the form of assured incomes of Rs6,000/year for all families.
- Not to be left behind, the Congress also went ahead and announced the NYAY scheme to assure a much larger sum of Rs72,000/year to rural families.