Voters’ Response to Economic and Governance Outcomes and Electoral Trade-Off Between Inflation and Growth: Evidence From 2009 Lok Sabha Election

We examine the voting pattern in 2009 Lok Sabha election in India to assess voter response to various economic and governance outcomes. We find evidence that vote shares for the Indian National Congress (INC) and the Bharatiya Janata Party in the states were influenced by macroeconomic outcome variables such as consumer price inflation, growth rate of per capita net state domestic product, as well as specific indicators of infrastructure development like the density of rural and urban roads, and implementation of welfare schemes and safety nets such as the employment and income supplement provided under the National Rural Employment Guarantee (NREG) Act and subsidised food grains provided through Public Distribution System (PDS) in the states. The evidence was weak for electoral response to the other macroeconomic outcome variables such as employment rate, employment growth and inequality of personal consumption levels, to public services such as provision of drinking water, and to the law and order situation in the states as reflected in the crime rates in the states. In the process, we identify the electoral trade-off between consumer price inflation rate and the growth rate of per capita nsdp and the other factors causing shifts in this trade off relationship. Briefly, for every one percentage point increase in the average nsdp growth rate over the previous five years, the voters would have been willing to accept an increase of CPI inflation rate of 0.24 per cent to keep the vote share of INC unchanged at the level obtained in 2004 Lok Sabha election. Thus, the voters’ trade-off between inflation and growth in India is strongly adverse to growth. Further, the voters would have been willing to accept a somewhat higher rate of CPI inflation and kept INC vote share constant if NREG wages per head or PDS subsidy share of expenditure on subsidised food commodities or increase in rural road density was higher. In states in which the percentage of SC and ST in population was higher, voters would require a lower CPI inflation rate to keep the INC vote share unchanged.