PM Narendra Modi addresses officials of the Prime Minister's Office (PMO) after taking charge for the third time
Credit: PTI Photo
Even before the election results, the 2024 polls were compared to previous elections: supporters of the Bharatiya Janata Party (BJP) compared it to the 1984 elections when the ruling Congress won 400-plus seats. Its dissenters compared it to the 1977 elections where the Opposition challenged an authoritarian government. The results on June 4 suggested it was neither 1977 nor 1984. The BJP lost 63 seats from its 2019 tally and with 240 seats it fell short of a simple majority in the Lok Sabha. It has formed the government with its alliance partners — an unthinkable possibility before the election results.
Initial analysis suggests that the BJP saw a decline in its vote share in rural areas. In 2019, the BJP got 39.5 per cent votes in rural areas, which declined to 34.8 per cent in 2024. In urban areas, its vote share increased from 33.6 per cent in 2019 to 40 per cent in 2024.
To understand this, it is important to look back at the 2004 general elections and its results. The BJP-led National Democratic Alliance (NDA) appeared invincible, but lost the elections. The BJP in a hurry to highlight its achievements went with the ‘India Shining’ campaign only to be humbled by the voters. The voters believed that ‘India Shining’ was largely an urban phenomenon helping the rich, and not impacting the lives of the rural poor. This time, given the invincibility of the election outcome, it once again adopted a subtle ‘India Shining’ campaign. And once again the voters disagreed with the campaign and reduced its majority.
As was seen in 2004, this time too there has been a wide rural distress and concerns that rural wages have not kept pace with inflation.
From June 2019 (when the second Narendra Modi-led NDA government was elected) to February 2024, the growth in non-agricultural rural wages averaged 5.5 per cent, whereas inflation based on rural labour has been 6.3 per cent. For rural agricultural labour, the wage growth averaged 5.5 per cent whereas agricultural inflation averaged 5.6 per cent in the same period. This means inflation-adjusted wages have been negative for non-agricultural labour, and almost zero for agricultural labour.
Rural inflation has been higher than urban inflation since 2022. Rural incomes are usually lower than urban incomes. With higher inflation, it means real incomes are even lower in rural areas when compared to urban areas. The share of rural spending on food is higher than urban spending on food. Within inflation, food inflation has been higher than other inflation, leading to even more problems for rural areas.
The Modi government’s promise of doubling farmer income has remained unfulfilled. The agricultural daily wages for men in February 2016 (when the policy was made) was Rs 241.81 and by February 2024 (when last data is available) it had increased to Rs 381.21, an increase of 57.6 percent.
Apart from real wages and inflation, there are concerns over farmer indebtedness — a problem that continues to evade a solution. For the government and economists working in the financial markets, the economic reality of the rural areas and expectations from the government differed greatly.
The Union government patted itself on the back for the high GDP growth, whereas rural areas cared more for the distribution of this high GDP, which was not reaching them. The trickle-down theory where the growing pie is eventually shared with the lower strata in society, was either not working in some areas or working too slowly in others.
The economists were satisfied with the Reserve Bank of India’s and the government’s efforts to lower inflation to the target of 4 per cent. However, for rural areas, continuous inflation meant higher prices every year. The inflation-targeting policy has led to an illusion. A lower inflation does not mean lower prices. It just means prices are rising at a lower rate. If incomes and wages are not rising as was the case in rural areas, even lower inflation has a considerable impact.
The government and economists have turned the wisdom of government spending on its head. The only spending they care for is capital expenditure. As long as the government is spending on capital expenditure it is fine; every other spending is seen as a ‘revadi’. So, any fiscal deficit on account of genuine subsidies has been deemed as wasteful and fiscal deficit on account of capital expenditure is highly appreciated. This is highly worrisome as the government needs to spend on people’s basic needs. Government programmes for food and nutrition are the only source of food for millions of people. Similar is the situation for access to education and healthcare.
While the urban voters stuck to the Modi government, the rural voters challenged it. The results punctured the picture created by the government of a robust economy. The fruits of the growing economy did not reach a majority, especially those in rural India. The second Modi government prioritised its spending on physical infrastructure and not the social infrastructure. This difference between what the government thought to be the right spend and what the people thought it should have spent on was reflected in the results of the Faizabad seat. The government thought that building a grand temple and creating a tourism ecosystem was what was required, whereas the people wanted government spending on livelihood.
Will the current NDA government learn its lessons from the election debacle? I don’t see that happening as the government is not treating the verdict as a setback. The BJP has spun the results as a victory and is back to treating its alliances as in the past.
While the government looks largely the same, what has changed is the Opposition. Will it question and make the government more accountable for its actions? If the next five years are going to see a repeat of the past decade, it is unlikely that rural distress will be addressed.
(Amol Agrawal is an economist teaching at Ahmedabad University.)
Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.
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