Road To 2024: Does inflation affect election outcomes?

Voting is both an emotional and multi-dimensional decision and election outcomes of the past in India show no clear correlation with high inflation.

Inflation has been one of the top issues across states and elections in India. In a country where per capita income is below $2,500, high prices of goods and services erode the purchasing power of the poor significantly.

High prices of tomatoes and cooking fuel have been the talk of town lately. The opposition has been raking up the price rise issue and some of the guarantees of Congress and AAP like subsidised LPG cylinders and cash doles are centred around providing inflation relief.

Congress won Himachal Pradesh and Karnataka projecting price rise as one of the big poll issues. The INDIA alliance aims to make it a big slogan in state elections due at the end of the year and general elections next year.

Inflation And Governments

Computing the average inflation under various Prime Ministerial tenures from 1971, as prior to that Congress was relatively unchallenged, we observe the following pattern.

The average inflation in the last 50-odd years has been 8 percent. Of the 13 party/government terms, almost half, six have witnessed inflation within +/- 1 percentage point range of this average inflation of 8 percent.

During three tenures, inflation has been above the 10 percent range: PV Narasimha Rao (1991-96), Manmohan Singh’s first term (2004-09), and Vajpayee’s one-year term (1998-99).

Four terms including the two terms of current PM Narendra Modi have witnessed 2-3 percentage points lower inflation levels than the average inflation of 8 percent. This includes the first non-Congress government formed by the Janata Party and first full term of Vajpayee.

No Deducible Impact On Poll Outcomes

Congress governments at national level tend to have high inflation compared to BJP and Janata Dal / Janata Party governments. However, inflation doesn’t seem to be affecting the fortunes of governments.

Narasimha Rao, whose tenure averaged higher than 10 percent inflation, lost power during his re-election bid in 1996. Ironically, Manmohan regained power in 2009 when inflation was over 10 percent through his first term, and lost in the 2014 re-election bid though inflation had comparatively cooled in his second term.

Even Vajpayee, who holds the record of lowest inflation in a full five-year government since 1971, couldn’t win the 2004 elections.

Global Trends

Post-COVID many countries have witnessed inflationary pressures never seen since the 1970s oil crisis. It is driving resentment amongst the public and hence putting pressure on governments.

Brazil’s President Jair Bolsonaro cut taxes on fuel and electricity to tame high prices in a bid to return to power, but was ousted by his leftwing challenger Lula.

In England, when Prime Minister Liz Truss launched her policy centred on tax cuts and energy price controls to tackle inflation, market reaction and political disarray short circuited her tenure to a mere 44 days.

In our neighbourhood, Sri Lanka’s soaring inflation led to a mass uprising that led to the ouster of the Rajapaksas. In Pakistan, Imran Khan was successful in channelling popular anger against inflation into a series of bypoll wins for his party, PTI.

In the US midterm elections last year, Republicans regained control of the House of Representatives, but with just a narrow majority, and failed to take control of the Senate, despite the high oil prices then.

According to a Monmouth University poll, 82 percent of Americans had considered inflation to be an "extremely or very essential issue" for the government to handle, and seven in ten Americans disapproved of Biden's handling of the cost of living rise.

Welfarism Blunting Inflation’s Bite?

While price rise was amongst the Top Three issues in recent elections like Uttar Pradesh and Karnataka, only 6 percent and 4 percent respondents as per Axis-MyIndia exit poll cast their vote on this basis.

Post-COVID, the savings of the poor have taken a hit. However, schemes like additional free ration distribution by the Centre and cash doles by Centre and states have acted as a balm as this cushions many of their spending outflows too.

In the US, the rise in gas prices have been strongly correlated with Biden’s rising disapproval rates (Harbridge, Krosnick & Wooldridge).

Americans who have longer commute times are “more likely to hold the president accountable for gasoline price increases (Harbridge, Krosnick & Wooldridge)

However, as per a research in the University of Virginia Center for Politics, over the years, whatever impact a single factor (gas prices) might have on presidential approval, the importance of that factor might be declining.

While inflation is high on voters’ minds, there are a myriad of other factors like development, polarisation, leadership, party loyalty, caste dynamics, image of candidate, motivation of cadre, impact of campaign, organisational strength, beneficiary status, etc. which impacts voting decision and electoral results.

Amitabh Tiwari is a former corporate and investment banker-turned political strategist and commentator. Twitter: @politicalbaaba. Views are personal, and do not represent the stand of this publication.