Is economics delinked from politics in India?

Little more than a week ago, the official growth numbers for the quarter ended September of the current financial year for the Indian economy were released. They revealed that the slowdown in the economy had accelerated. Growth in the September quarter slowed for the sixth consecutive time to 4.5%, the lowest since March 2013.

Given the political cacophony that has surrounded this news—while some members of Parliament participating in a debate on the subject in the Rajya Sabha dubbed it as a recession, other critics such as former Reserve Bank of India governor Raghuram Rajan have chosen to describe the slowdown as a growth recession—one would assume that it would have set off panic signals within the government. From the outside that doesn't seem to be the case, and instead looks like business as usual, with some in the cabinet going around mounting a quixotic defence.

At the same time in this 18-month period, the Bharatiya Janata Party (BJP), which heads the National Democratic Alliance, has won a second national election in a row and scrambled home in seven out of the 12 assembly elections. Yes, the electoral map, which at one time was saffron for most of India, is not that threatening any more. Yet it is a fact that the BJP has established itself as the principal pole of Indian politics.

Take the two facts together and it begs the obvious: Is economics delinked from politics in India?

A linear empirical exercise would suggest that this indeed is the case. However, we all know well that this is not true. It is always a two-way relationship with both feeding off each other in varying degrees.

Politics easily influences economics in democracies as it entails electing a regime that then sets out its own economic preference ordering, based on its own ideological predilections. The relationship the other way round is not so obvious and operates far more subtly as it is heavily influenced by the politics of perception.

That is exactly why the BJP led by Prime Minister Narendra Modi continues to do well in elections, especially at the national level where it notched up a second consecutive majority of its own—a record of sorts given the more than two decades of coalition rule that preceded their runaway win in 2014. Prime Minister Modi has, despite his trenchant critics, managed to create a trust quotient with the electorate. That is exactly why demonetization, a doubtful economic idea, generated such unexpected political dividend and this when the entire Opposition had deployed this as their primary electoral weapon.

The latest India Today Mood of the Nation poll published in mid-August, a good dipstick on popular perception, shows that despite a range of negative economic news, including prolonged agricultural distress, a rapidly slowing economy, the promised jobs growth not materializing and duly amplified by various critics, most people still bet on Prime Minister Modi. Not only have they shrugged off the bad news, an overwhelming number, 60%, believe they are better off under the NDA than they were under the Congress-led United Progressive Alliance.

Worse, from the point of view of the critics, nearly three in four people surveyed were convinced that India would, as claimed by the Prime Minister, transform into a $5 trillion economy in the next five years.

Comforting while this may seem to those manning South Block, it would be, in my view, politically fatal to assume that this would endure. Perception is fickle, can swing both ways, and is extremely vulnerable to noise. The Opposition parties have sensed this and have begun to belt out a negative narrative almost in concert, coincidentally or otherwise, with the government's critics.

Botched handling of recent challenges, such as rejecting an unfavourable official survey on consumption, and defensive responses by senior ministers to criticism levelled by the Opposition is only worsening this negative perception.

The big question is are we close to the tipping point when the national mood turns? The bubble in Delhi and Mumbai would suggest this is indeed the case. However, elections are neither won nor lost in these two metropolises.

While this debate will continue, it can be safely concluded that economics is not (and cannot be) delinked from politics. To assume otherwise can be nothing but a gross electoral misjudgement.