Congressonomics

Food prices are rising, in India and around the world, and they must now be factored into any calculation on desirable election dates. Rice, edible Oil and dairy product prices should already be on every serious politician’s radar. True, wheat prices are flatlining in India, and pulses and sugar are less costly now than a year back. But in the context of the global food price rise that is expected to stay with us in 2008, and a domestic supply chain as rusty as ever, only the very brave will predict that between now and, say, October-November — the early election date, apparently — a more generalised food price Inflation may not happen. One must remember in this context that the official story, that most aam aadmi voters can be supplied via controlled PDS prices, is a fiction. Most voters buy from the open market.

First, will voters blame more the incumbent at the Centre or those at the states in case general elections are held when the price of rice is an issue? Recent national election verdicts seem almost a sum of state-level voter decisions. But no one knows whether this will or won’t hold in the context of a major inflationary episode.

Second, there can be local variations in the inflation experience. Look at the price indices that apply to industrial workers and non-manual urban employees. These are computed city-wise, and the differences between urban centres may warrant serious political attention when formulating strategy.

Third, that inflation hurts the rural poor is another conventional wisdom that should be reconsidered partly. In areas of states where the rural jobs programme is working, and therefore significant cash transfers have happened, real wages (money wages adjusted for inflation) may increase. But will the Congress get credit for this if it is not the state-level incumbent?

Interestingly, this state-Centre signal problem impacts another election decision variable, the budget’s farm loan waiver. The Congress is probably most desperate to do electorally well in the Hindi heartland. But most institutional farm credit is concentrated in the south and west. Even if the loan waiver works well as a vote getter, the fact that farm loans are not preponderant in Uttar Pradesh and Bihar may mean that Rs 60,000 crore will not buy what the Congress needs most.

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