No end of the road for the Congress

Here’s a look at the Congress Party’s national prospects, first published as an oped in the Hindustan Times:

After a merciless series of election defeats since 2014, it’s tempting to write off the Congress as a leading national force. With few visible signs of a Congress revival, some argue that India’s regional parties are now the main bulwark against the BJP.

This certainly seems to be the case with the next big state election: Uttar Pradesh in 2017. The Congress is very much the underdog, with the BSP seemingly best positioned to beat back the BJP. The Congress’ current irrelevance was shown up — if in a small way — in the two recent UP by-elections where, in the absence of the BSP, voters dissatisfied with the Samajwadi Party gravitated towards the BJP.

But it may well be premature to write off the Congress. Even in its present nadir, the Congress is either the ruling party or the principal opposition in six of India’s 12 largest states (which account for 80% of the Lok Sabha seats). The BJP, at its current zenith, is one or the other in six states, although it clearly hopes to add UP to this list soon. Obviously ruling a state counts for more than being the opposition, but the Congress remains the only feasible alternative in a big swath of the country. Recall that the party ruled only two such states (Orissa and Madhya Pradesh) when Sonia Gandhi took over in March 1998. In military terms, the party’s intentions might seem suicidal to some, but its capabilities cannot be ignored.

Things will remain tricky for the party through early 2017. It will need to put in a respectable performance in UP, which at a minimum means winning enough seats to affect government formation in the state. It will have to fight off a challenge from the Aam Aadmi Party in Punjab and retain some of the smaller states. This won’t be easy: The BJP could lose a third of its 2014 UP vote of 42% in a four-way race and still have a chance of winning the state.

But once the Congress is past this stage, opportunities may begin to open up in Gujarat, Madhya Pradesh, Rajasthan and Chhattisgarh, all of which are ruled by the BJP and together account for 91 of the 543 parliamentary seats. The Congress won just three of the 91 in 2014. As tempting as it is to project BJP’s invincibility indefinitely into the future, the fact is that all of these governments are vulnerable to a challenge, and the Congress will be the only party positioned to take advantage.

Gujarat has been plagued by a Patidar agitation and its chief minister is facing allegations of cronyism. The three-term Madhya Pradesh and Chhattisgarh governments are also battling corruption charges, while Rajasthan tends to seesaw between the BJP and Congress (although the BJP will also be defending a large vote margin — as the AIADMK just managed in Tamil Nadu). The Congress will be in danger of losing its last major state, Karnataka, but the risks will weigh against the BJP.

So how does any of this matter? Despite the 2014 Modi wave, the national landscape is still shaped by state politics. While dissatisfaction with the UPA was obviously a factor, the data from the Centre for the Study of Developing Societies show that satisfaction with the ruling state government was perhaps the most important determinant of voting. Consider that the Congress’ 2014 vote share in Karnataka actually rose in comparison with 2013; but the BJP gained seats because of its merger with BS Yeddyurappa’s splinter party.

It is possible, as many commentators assert, that the Indian voter’s disenchantment with the Congress is irreversible. But it’s too easy to extrapolate the most recent trend into the future. Nationally, the Congress is positioned to the left of the BJP, ready to reap any disappointment with Narendra Modi’s development rhetoric, possesses a deep bench of younger leaders and has more boots on the ground than any other contender.

And if the party shakes off its stupor and survives the UP and Punjab elections, it has the chance to take the battle to the BJP heartland.

Paint by numbers

We observed what can go wrong when journalists who lack an understanding of statistical inference make claims about data in How Mail Today got its analysis of communal violence exactly wrong. This tendency became clear once again from an Apr 26 article in The Hindu titled Gujarat behind West Bengal in new factory jobs, as the following analysis shows:

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

Perhaps the most common error the media make when presenting data is to use the “absolute” numbers on their own, rather than adjusting them appropriately. For example, growth in income should always be “real,” adjusted to eliminate the effect of inflation. In a piece headlined “Gujarat behind West Bengal in new factory jobs; National Sample Survey data poses a challenge to ‘Gujarat growth model’,” published in The Hindu recently (April 26, 2014), we find a graph showing that there were 24 lakh jobs created in the manufacturing sector between 2004 and 2011 in West Bengal, versus 14.9 lakh jobs in Gujarat — some 60% more, making the state a “distant second.”

If one adjusts the figures to take into account the differing populations of the various states, the graph would be much less dramatic, and the ranking changes (excluding states with negative job creation):

Jobs created per 10,000 population

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West Bengal is now only 8.5% “better” than Gujarat. (Ideally, one would “normalize” the absolute numbers in this case by using some other denominator that would adjust for size of the state: perhaps its adult worker population, or something else.) That adjustment makes the analysis in the rest of the report irrelevant, in my opinion.

In the best of all possible worlds, any reporter assigned to do a story that rests on quantitative data should have had at least a course in elementary statistics, and every editor (equipped similarly) would catch errors in data presentation and analysis with about the same failure rate as now exists for typographical errors.

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.

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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.

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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.

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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.)