Income Growth, not Loan Waiver may be the No.1 reason why Congress won MP

The Congress party tends to take wrong lessons from every election. Even though there was limited data evidence, many concluded that NREGA won them the 2009 election. The massive bump in urban seats was apparently not visible to most analysts. The Congress went about defending its artificial advantage amongst rural voters between 2009 and 2014 and the rest is history. In 2014, its vote share amongst rural voters was almost the same as urban voters.

The 2018 elections is apparently telling the Congress party that it is all about the Farmers. But the reality may be far more complex. I place some data points and as irritating as it may be, I readily admit more research is required on this subject.

Firstly, some good news – The performance of each party strongly correlated to how well the State was doing on per capita GDP. You could say it is a surrogate for Incomes. BJP folks pushing data on savings and inflation should be mindful of this. How much money are voters making than before? If your incomes are not growing quickly, there is no incentve in voting a Government back. Note the below data is inflation adjusted. 

Look at the above chart left to right. Telangana TRS survived, MP BJP almost pulled it off and Chhattisgarh BJP on the right hand side got wiped out. Admittedly there are many other factors as well but income is a critical one. Let us look at agriculture which is spoken about a lot. (below data is aggregate and not average)

Three things are clear from the data

– Pace of agriculture growth has fallen across States (with exception of of Andhra)

– While Madhya Pradesh is number 1, growth has fallen by almost a 3rd compared to the 3 years between 2011-14.

– Chhattisgarh too has not performed poorly while both Telangana and Rajasthan have done poorly

But this is not the end of this, see this chart

The above chart is quite clear, Madhya Pradesh, Chhattisgarh and Telangana have a high % of agricultural labourers as well. So while rural is dependent on agriculture and some States more than other, there are two categories of beneficiaries. The cultivator is more dependent on agricultural and allied income while the agricultural worker can perhaps shift beyond agricutlure (to construction for example)

So I use NREGA wages a surrogate for agricultural labourer wage growth (It is not a perfect correlation but any other method would perhaps be equally imperfect given the absence of sub-category level data. Essentially wage data is available at sub-category level in rural india but no such population estimates are provided by the census)

This chart in my view is the most important chart for 2018 election. In both Madhya Pradesh and Chhattisgarh, rural wages appear to have hardly increased even though they form a large proportion of the voting population. In Telangana, they have galloped in line with the State’s per capita growth. Rajasthan has been slightly above inflation

Let us come to the election performance data now

MP – BJP rural win rate – 66% to 46%. This is not really that bad. Urban fell from 90% to 54%

Chhattisgarh – BJP rural win rate – 53% to 17%. This is terrible but seems to have started at a lower base

Rajasthan – BJP rural win rate – 81% to 35%. This is a huge collapse

Telangana – 67% of the seat gains for the TRS came from districts with higher concentration of urban voters

Piecing all of the above together  – 

– Telangana TRS got saved because they ‘probably’ performed well amongst agricultural workers. Rythu Bandhu must have saved some cultivator votes as well. But it is the strong urban performance that helped it the most

– Rajasthan got hammered because the farmers did NOT gain as much on incomes and workers incomes too were growing just above inflation. This is the only State where farmers seems to have hurt the BJP the most. According to C-Voter, 11.5% of the farmers abandoned the BJP in 2018, the highest amongst all voting groups. Amongst agricultural labour (who saw some income growth), it was a little lesser at 7%.

– Chhattisgarh Farmers were doing alright but agricultural workers were doing very poorly. And they formed a significant proportion of the rural voting population.

– Madhya Pradesh farmers were in the best of the state though not as well as before but it is likely that most rural votes were lost due to agricultural workers and not farmers. Further, a slower growth compared to the past meant that many urban voters too abandoned the BJP and moved to the Congress.

Overall, the theme is clear, better income growth provides greater safety to the political class. Focussing on farmers too much and ignoring urban voters or labour (rural and urban both) can prove to be a disaster as it has been demonstrated in this election. To the Congress party, the 2019 election cannot be about Modi, it has to be about increased incomes for all – not just Farmers. To the BJP, pushing LPG, Toilets and low inflation etc is fine but it cannot substitute poor income or wealth growth. Both parties have a lot to think for 2019, we Indians deserve better and more creative solutions for the next 5-10 years.