Why Inflation Matters?

Despite a low Consumer Price Index and a plummeting Wholesale Price Index, price rise was a widely discussed issue in the month of August. The main reason for this has been the sharp rise in the prices of onions and pulses which are used daily by households across the country. The government also has been on a watch out and has been forced to take urgent measures for bringing down the prices of these items.

Findings from surveys conducted by Lokniti-CSDS show that price rise is one of the most important issue for voters across the country. In the 2014 Lok Sabha election, it was the most important issue while voting for a quarter of the voters. There was much greater concern over price rise than other issues like development/good governance, corruption, employment etc (See Figure 1).

Figure 1: Most important issue while voting (In Percent)

Note: Rest gave other responses; No Response/Don’t Know has been set as missing Source: NES Post Poll Survey 2014

We disaggregated the responses by class groups and tried to ascertain if there are any differences in the concerns of various class groups over price rise. Figure 2 clearly shows that there are hardly any inter-class differences. 22 percent of the poor class respondents said that price rise was the biggest issue for them while voting; the proportion among the upper class respondents was in fact 2 percentage points higher at 24 percent. Still it is possible that different class groups present different sentiments when they give price rise as a response. For the poor, this might be a reflection of low purchasing power and unaffordability while for the middle and upper class this could merely be a concern over lower disposable income/savings due to higher expenditure.

Figure 2: Class-wise: Price Rise is the most important issue while voting (In Percent)

Note: Rest gave other responses; No Response/Don’t Know has been set as missing Source: NES Post Poll Survey 2014

Economic revival and income growth were important agendas in the 2014 Lok Sabha Election. Table 1 clearly shows that price was an important concern in the minds of voters and shaped their perception of the economic performance of the government. Those who thought that the country’s economic condition had become worse during UPA II were more likely to consider price rise as the most important issue while voting. Similarly, those who thought that their own family’s economic condition has worsened in the last five years were more likely to give price rise as a response. This clearly indicates that Modi would be unable to build a positive perception of economic revival unless he is able to control the rise in prices of essential commodities. A positive appraisal of economic performance by people is extremely important for incumbents as it could greatly increase their chances of winning.

Table 1: Appraisal of economic performance and concern for price rise

Source: NES Post Poll Survey 2014

Price rise and particularly onion prices have always been sensitive issues politically and governments have tried to deal with them with urgency. In the past, many incumbents have had to suffer defeats because of their inability to control the prices of essential commodities. The most popular example still remains the 1998 Delhi Election when the BJP suffered a major defeat primarily due to the sharp rise in Onion prices. In a pre-poll survey conducted by Lokniti-CSDS during that election, close to two third (64 percent) of the respondents had identified price rise as their main problem.