How bad is the UPA’s economic record?

The economic record of the United Progress Alliance (UPA) is a major election issue, and the Bharatiya Janata Party (BJP) is making the case that weak leadership and a welfarist ideology led the UPA to fritter away India’s economic future.

At a press conference earlier today, BJP leader and former Finance Minister Yashwant Sinha posed 18 questions (that are mostly rhetorical, I should warn) to Finance Minister Palaniappan Chidambaram, and ended with the following statement:

The fact of the matter is Sri Chidambaram that you will be remembered by history as a spoiler, as some one who specializes in sub 5 percent growth rate, for your hubris and for your baseless tall claims which you do not tire of making even today. Your words and statements have lost all credibility.

Feelings do seem to be running high here. But what is the UPA’s actual record of delivering economic growth?

The case against the UPA is encapsulated in the following chart, which shows a discernible economic slowdown from early 2012:

UPA defenders counter that, the current slowdown notwithstanding, growth in 2004-13 has been much faster than it was under the BJP-led National Democratic Alliance (NDA) in 1998-2004:

They also point out that India under the UPA has been the second fastest growing major economy in the world after China:

How to make sense of all this? A growth number means nothing in isolation: it must be pegged to a baseline expectation. As an example, economists Maitreesh Ghatak and Sanchari Roy recently examined the claim that Narendra Modi has transformed the economy of Gujarat since becoming chief minister in 2001. They found that:

Gujarat’s growth rate in the 1990s was 4.8%, compared to the national average of 3.7%; in the 2000s it was 6.9% compared to the national average of 5.6%. The difference between Gujarat’s growth rate and the national average increased marginally, from 1.1 percentage points to 1.3 percentage points. A good performance? Yes. Justifying the hype? No.

Just as a proper evaluation of Gujarat’s economic performance under Modi must take into account how the broader Indian economy is doing, any judgement regarding India’s economic performance cannot be divorced from the state of the global economy with which India is now tightly integrated. The NDA had to endure the effects of the dot com crash and 9/11 in 2000-01 while the UPA’s record was affected by the collapse of the US housing bubble and the recession that followed in 2008-09.

I therefore compare India’s per capita GDP growth since 1998 with that of developing countries in general (using World Bank data). Doing so allows us to isolate — to some extent — the domestic determinants of economic growth from global factors.

So what do the numbers show? India’s per capita GDP grew on average 1.2 percentage points faster every year between 1998 and 2013 than did that of low- and middle-income (let’s call them “developing”) countries. If we define 1998-2003 as the NDA period and 2004-13 as the UPA period, we find that growth in the former was 1.8 percentage points higher than the developing countries while in the latter it was only 0.9 percentage points higher.

Screen Shot 2014-03-20 at 10.26.53 am

Slam dunk for the NDA? Not quite. Since many NDA supporters believe that the high growth during UPA1 was shaped by the NDA’s policies, let’s do the minimum and introduce a one-year lag i.e. give credit for growth in the first year of each government to its predecessor.

Screen Shot 2014-03-20 at 10.27.13 am

All of a sudden, the per capita GDP growth gap (in India’s favour) during the NDA period drops to 1.2 percentage points while during the UPA period it rises to 1 percentage point.

Many people like to distinguish between the UPA1 (2004-08) and UPA2 (2009-13), the argument being that the first was some sort of golden period for the UPA while the second witnessed an economic unravelling. The numbers do bear this out: the UPA1 (1.6 percentage points) now shines in comparison with the NDA (1.2 percentage points) while the UPA2 (0.3 percentage points) looks weaker.

If you’re wondering why introducing a one-year lag made such a dramatic impact on our findings, the reason is this: the Asian crash of 1997 hurt the growth rates of developing countries that had convertible capital accounts, which made India shine in comparison in 1998 and 1999. Correspondingly a pick up in developing country growth between 2003 (3.8%) and 2004 (6.3%) made India’s 2003 performance (6.2%) look much better than its 2004 performance (6.3%) in relative terms, even though the absolute number in 2004 was higher.

Now let’s run the numbers with a two-year lag under the reasonable assumption that a new government’s economic policies take more than a year to really affect growth.

Screen Shot 2014-03-30 at 5.12.03 pm

The UPA now seems to have outperformed the NDA, with the UPA1 beating its developing peers by an incredible 1.8 percentage points, and the UPA2 under-performing the NDA by a little over a percentage point.

So what does all this tell us about these governments’ relative economic performance? The NDA may be better or worse than the UPA, and the UPA may be better or worse than the NDA. Their relative performance jumps around so much under different cut-off points that it is hard to reach a definitive conclusion. My own view is that the effect of government policy on economic growth is cumulative, and that there is little to separate the various governments in terms of broad direction.

Will we all stop making exaggerated claims now? (I thought not.)

Ground realities

In its recently released election manifesto, the Indian National Congress sought to take credit for passing the land acquisition act in August 2013:

The seminal Right to
 Fair Compensation
 and Transparency in
 Land Acquisition,
 Rehabilitation and
 Resettlement Act,
 2013 – a key campaign
 promise of the
 Indian National Congress in 2009 – was enacted after two years of nationwide consultations. This law was a historic victory for our brothers and sisters working in the agriculture sector. The law ensures that land cannot be acquired without the land owners consent, promises up to four times the prevailing market value as compensation and repeals the Land Acquisition Act of 1894.

The idea is that a transparent and easy to follow land pricing policy will prevent the recurrence of conflicts over price in transactions in which the state forcibly acquires land from farmers on behalf of companies (that forced the Tatas out of Singur, for instance).

The land acquisition act has attracted some favourable media commentary, but by and large analysis has been critical. In a column titled “The UPA’s worst legacy“, Business Standard Editorial Director TN Ninan asserted that this law was perhaps the UPA’s most economically damaging policy:

The land law stipulates that forcibly acquired land must be paid for at two to four times these market prices, in addition to other relief and rehabilitation costs. So the new law will make land acquisition next to impossible, or unaffordably expensive (which becomes the same thing) in most states. And since development unavoidably means projects that require large bits of contiguous land (railway lines, roads, irrigation canals, power stations), it means that development itself could be slowed down.

It’s not just thoughtful commentators like Ninan who feel this way. Economist and former Federation of Indian Chambers of Commerce and Industry (FICCI) secretary general Rajiv Kumar was so incensed that he tore into an obsolete, previously discarded version of the land bill in a Financial Express column “Land Bill a mortal blow to India’s modernisation“.

I won’t get into the details of this legislation here except to say that my own view of the land acquisition act is closer to what Vinayak Chatterjee, the chairman of infrastructure consultancy Feedback Infra, argues in his Business Standard column “Land and the greater common good.”

The data analysis angle is this: There is a general consensus in the investment research community that the negatives of the act (viz. higher land costs for industrial projects) are eminently manageable and will have a minimal impact on project returns. This is a conclusion that has been derived after careful study of company balance sheets and cost structures. Yet if you read the media, the land acquisition act is presented, more often that not, as Exhibit A in the “UPA killed the India growth story” narrative.

Here’s what Kotak Institutional Equities thinks:

Screen Shot 2014-03-22 at 2.15.05 pm

And this is what UBS Investment Research has to say:

Screen Shot 2014-03-22 at 2.15.19 pm

The end of the “India growth story”? Not even close.

 

Rush to judgement

The Association of Democratic Reforms has analysed 280 of 469 Lok Sabha candidates announced by the Bharatiya Janata Party (BJP) and the Indian National Congress (INC) and discovered that:

The data do not seem to be up as yet on the ADR website, so here is quick breakdown by party using the numbers quoted in news reports:

Screen Shot 2014-03-22 at 10.52.15 am

It would appear that the proportion of candidates with criminal cases in 2014 has gone up in comparison with 2009 — from a fourth to close to a third. The INC’s proportion stays constant at 27% but the BJP’s seems to have risen by 7 percentage points to 35%.

But don’t race to any conclusions until parties have declared all their candidates. We don’t know the basis on which the sample of 280 candidate affidavits was chosen, and that too from a partial list of 469 candidate declarations. The two biggest parties together had 833 candidates standing for election to the Lok Sabha last time.

Why Modi may have a fight on his hands in Varanasi

It seems clear that Uttar Pradesh (UP) with its 80 Lok Sabha seats is the Bharatiya Janata Party’s (BJP) biggest bet in this election and that Narendra Modi is standing from Varanasi in order to boost the BJP’s prospects across eastern UP.

The BJP’s man in UP Amit Shah certainly seems gung-ho:

With a couple of exceptions, many people are assuming that Modi will easily win in Varanasi even if Arvind Kejriwal joins the contest. For instance CNN-IBN’s Sagarika Ghose tweeted this yesterday from Varanasi:

But don’t take anything for granted, as the following analysis by two political scientists suggests. Modi will probably still pull off a win in the face of adverse local politics, but he may have a fight on his hands.

Guest post by Philip K. Oldenburg, Research Scholar, South Asia Institute, Columbia University

The implications of the choice of the BJP to field Narendra Modi in the Varanasi constituency need to be explored a bit more.  It is not simply that the BJP has to do very well in UP, and that Modi contesting in the state gives them a much better chance (which I would agree with), and that this is a signal that Hindutva will remain central to the BJP (possibly true). 

It is not at all clear that Modi would win the seat, and certainly will have to expend a good deal of effort if he wants to have a chance.  In 2009, the party-wise vote shares were: BJP (30.5%), Bahujan Samaj Party (27.9%), Samajwadi Party (18.6%) and Indian National Congress (10.0%). Jolie Wood, who teaches political science at Allegheny College, writes (on 19 Mar):

As someone who has spent some time doing fieldwork in Varanasi and has met many major local political figures there, I agree . . . that it is not at all clear that Modi will win in Varanasi.

The city is often viewed as a “BJP stronghold”, but it is not exactly that. First, Muslims make up about 27% of the city population and at least 30% of the district’s population (according to the admittedly outdated 2001 census). Joshi won his seat with just over 17,000 votes over a Muslim candidate who was not previously very prominent and is widely seen as a mafioso. The business community, probably the best organized occupational group in the city, is not entirely pro-BJP – the SP also has a very strong organisation among them. Many in the business community (including those loyal to the BJP) are quite wary of anyone who might inflame communal sentiment and in fact discouraged more right-wing elements of the BJP from pushing the Gyanvapi Masjid/Kashi Vishwanath Mandir issue because it was bad for business.

If we look at other reasons why the city is seen as a BJP stronghold, we can also see some reason for doubt. Take, for example, the current Members of Legislative Assembly (MLAs). The MLA of Varanasi South is Shyamdeo Rai Chaudhary, who has held that seat for something like 6 or 7 terms now. He is personally popular and is seen as someone who is decent, trustworthy, non-corrupt, and (importantly) not super partisan or “communal”. Jyotsana Srivastava is not a major political player by herself – she alternates terms (more or less) with her very popular, much higher profile, husband Harishchandra Srivastava. These MLAs win consistently on the basis of their personal stature, as much as or more than on the basis of their party identification. Finally, the MLA from Varanasi North, Ravindra Jaiswal, is a business leader who is a first-time MLA, and who holds a seat in a district that has usually gone for Muslim candidates linked to the Ansari community, which is particularly strong in that constituency. I would not assume that he or any BJP candidate can easily hold onto that seat.

So, my point is that the BJP’s current dominance of Varanasi’s elected offices is not necessarily due to the strength of the BJP per se. Add to this that the very large Muslim community tend to support SP, Congress, or BSP. Congress has done very poorly in the city for the last several elections. The SP and BSP have much stronger organizations in Varanasi than does Congress, so I’m not sure why some discount their role in the coming election, though it is true that they’ve never fielded a strong candidate for the MP seat.

The big question for me is how they will approach this election. If they form an alliance with AAP, it could weaken the BJP considerably. [But] I really wonder if AAP could coordinate any kind of agreement with BSP and SP. And while Mukhtar Ansari may have won a lot of votes in 2009, I actually don’t know if the BSP is that much stronger in Varanasi than it was in 2007, when it had no presence at all, even when Mayawati won an outright majority in the state. I do know that Congress had become a total non-player by then.

I do think that if Muslim voters backed AAP in a more or less unified way, then Kejriwal might have a chance, but if BSP fields Mukhtar Ansari again, that probably won’t happen. (Also, many Shia Muslims in Varanasi support BJP.)

Jolie’s analysis seems sound to me, and it raises an important question: If this is a seat for which Modi must fight, and if fighting for it means spending significant time in Varanasi that he might otherwise have spent travelling throughout the country, then perhaps this choice of seat might weaken the BJP’s campaign.

And if it so happen that Modi loses – and here the importance of Jolie’s point that in effect “communalism can be bad for business” is particularly important. If Modi tones down his Hindutva rhetoric, then what happens in those parts of UP where that would draw votes and, more important, a hyperactive “base” of political workers? And if the BJP and its pre-election allies and supporters fall short of a majority, then having an alternate BJP prime minister becomes a serious possibility.

How opinion polls fared in the last two general elections

As more and more opinion polls hit the headlines, it’s worth recalling how they fared in the two most recent general elections:

2004

2009

Note: The figures in parentheses under the NDA and UPA columns are the respective seat tallies of the BJP and Congress Party.

Guilty parties

With political parties beginning to name their candidates, media attention once again turns to the topic of criminals in parliament. Here we look at which parties are guiltiest of facilitating their entry into politics (data from National Election Watch).

On the face of it, the Indian National Congress (INC) and Bharatiya Janata Party (BJP) have a large concentration of Lok Sabha MPs who face criminal charges:

But that’s hardly surprising since these are the two largest parties in parliament. What you need is a measure of proportion, and things begin to look much better for the Congress. The BJP has nearly twice the percentage that Congress does of MPs in the Lok Sabha who face criminal charges.

The BJP comes off almost three times worse than the Congress when you restrict the analysis to MPs who face serious criminal charges. The Samajwadi Party, Bahujan Samaj Party and Shiv Sena are also fare poorly in this ranking (which I limit to the ten biggest parties in the current Lok Sabha):

Screen Shot 2014-03-11 at 1.24.41 pm

So far so good. However there is one flaw with this analysis: It is always possible that some parties gave a lot of criminals tickets of whom only a few were actually elected, while other parties gave a relatively small proportion of tickets to criminals of whom many made it into parliament.

The picture changes when you look at the proportion of Lok Sabha candidates in 2009 who had criminal charges against them (ranked in the chart below by the percentage of serious charges). The BJP and Congress look much more comparable now, while the Communist Party of India (Marxist) makes a surprise entry at #3. Overall the Janata Dal (United) and the Shiv Sena gave the highest proportion of tickets to candidates with criminal records.

Screen Shot 2014-03-12 at 10.58.34 am

Finally not all criminally-charged candidates are equal. Of the total 1,114 candidates charged with a serious criminal offence, 355 (or the top 32nd percentile) had more than one charge. To test which parties gave election tickets to the most hardened (alleged) criminals, we count the number of candidates with more than one serious charge, add up the number of charges and calculate the total as a percentage of the total candidates per party. This allows us to calculate the intensity of the alleged criminality of each party’s candidates.

And this is what we find:

Screen Shot 2014-03-11 at 10.03.25 pm

Lo and behold the CPI(M) tops the list. This is only partly the consequence of chronic violence in areas of northern Kerala; the CPI(M) candidates with the most criminal charges stood from Palakkad in eastern Kerala and Bikaner in Rajasthan. The BJP’s alleged criminals are about 28 per cent more hardened than those of the Congress Party. The BSP, the only other party that had more than 400 candidates nationwide in the 2009 election, ranks about the same as the Congress.

Should opinion polls be banned?

Despite my critique of their use of communal violence data, the India Today Group graciously invited me to participate in a panel discussion on opinion polling at the India Today Conclave 2014 on Saturday, Mar 8.

I made the following points:

  1. Parliamentary seat projections should be treated with skepticism because there is no simple relationship between vote shares and seats won (as I have argued previously).
  2. About a fifth of the seats in the 2009 Lok Sabha election were won with a margin of 3 per cent or less, which means that fluctuations within the margin of error of most surveys can dramatically change the number of seats a party wins.
  3. Between 20 and 30 per cent of voters make up their minds about whom to vote for a couple of days prior to voting, and last minute vote swings can make a big difference.
  4. Of course I didn’t think that opinion polls should be banned but made more transparent and evaluated by better-informed consumers.

The full video of the event is here: India Today Conclave 2014: Need to regulate opinion polls, say psephologists.

Here is an edited version:

Political parties’ Facebook activity

In response to my post on Political parties’ Facebook “likes”, Pragya Tiwari correctly pointed out that an additional flaw in that measure is the likelihood that parties and politicians purchase “likes”, and that people “talking about this” might be a less manipulable figure.

So here is some data (an evening’s snapshot on Mar 1):

Politicians here appear to attract more chatter than political parties, although we don’t know what people are saying. No doubt there are commercial tools available to figure that out, and I’d be interested in getting such data were it to be available.

A question of ordering

A Feb 26 survey by Pew Research’s Global Attitudes Project, titled “Indians want political change” (more detailed pdf version here), got a fair amount of media attention, and no surprise why. The poll shows overwhelming support for the Bharatiya Janata Party (BJP) and its prime ministerial candidate Narendra Modi across the length and breadth of the country.

Note that Pew’s questions relate to party preference, not voting intention, and to candidate favourability, not candidate choice. While these are obviously correlated in the real world this also means that the results of this survey cannot be expected to be identical to, say, the CSDS opinion polls.

There are however other reasons to be cautious about these findings:

  1. Sample errors: The survey has a small sample size of 2,464 which includes an urban oversample of 588. This means that only 1,876 responses were randomly distributed by region and urbanity. You want to oversample a specific population if you are interested in studying that sub-group in greater detail, but in this case I suspect it was done to keep costs down. This makes the margin of error for rural residents higher than that of urban residents. The overall margin of error is 3.8%.
  2. Priming. Question ordering can have a substantial effect on survey results. In the Lokniti election tracker questionnaire, the first substantive question asked of a respondent is whom she intends to vote for, followed by whether she is satisfied with her financial condition, the ruling coalition etc. In the Pew survey, the first question is “Overall, are you satisfied or dissatisfied with the way things are going in our country today?”. With satisfaction levels down to 29% from 51% in spring 2012, a sense of dissatisfaction could arguably influence (or “prime”) the answer to the next question, which asks the respondent to choose between the BJP and INC. In their defence, Pew questionnaires often begin this way and, at least in the US, the evidence suggests that the priming effect of this particular question is modest. But in India, particularly in comparison with the Lokniti method, there could be a question order effect. One way to deal with this is to rotate the question ordering, but we don’t know if that was done.
  3. Framing. More critically, the Pew questions convert the election into an artificial two-horse race, keeping regional parties entirely outside the frame and scoring them only when the respondent volunteers an answer. After a series of questions in which dissatisfaction is channelled towards the BJP we finally get to Q5 in which the respondent is asked whom she thinks should lead the next government. This again creates a national party bias in comparison with asking whom she plans to vote for because it’s perfectly plausible that a voter thinks the BJP should lead a national coalition but nevertheless plans to vote for a regional party. This tilt is misleading because regional parties unaligned with the BJP and INC are currently getting 42% of the vote in opinion polls. In subsequent comments Bruce Stokes, a Pew Research Center director, accepted that the presence of smaller parties “could complicate matters“, but to me this is a fundamental design flaw.

The available evidence certainly suggests that the BJP is ahead of the INC by a decent margin but surveys such as this one are doing us all a disservice by exaggerating the lead.

Note: I have emailed Mr Stokes asking for some clarifications about the Pew survey and will post an update if I hear back from him.

Update on Mar 2

Or you could skip my analysis and proceed straight to this classic clip (transcript here) from the TV series Yes, Prime Minister: