Poll-bound states: Current regimes outdid earlier ones on inflation control

However, most previous regimes had lower inflation than national level; now the situation is opposite

At the outset, it may seem that the Yogi government has managed inflation better than the previous Akhilesh Yadav regime in Uttar Pradesh. This is apparent in the fact that the average annual consumer price index (CPI)-based inflation rate stood at 4.47 per cent during the Bharatiya Janata Party (BJP) government, against 6.98 per cent under the Samajwadi Party.

However, if seen in the context of the overall inflationary environment in the country, the SP government seems to have controlled inflation a bit better than the BJP government. Official data showed that average annual inflation at all-India level stood at 7.03 per cent during the previous five years and 4.4 per cent in nearly five years since April, 2017. Adityanath Yogi took over as UP chief minister in March, 2017.

But does inflation count in the minds of the electorate amid the religious and caste-based campaign by political parties in Uttar Pradesh?

Yashwant Deshmukh, founder editor of C-Voter, says inflation is an issue in the minds of electorate but it does not become a political issue unless it goes out of hand as had happened in Delhi assembly elections in 1998 when skyrocketing onion prices drove the Congress to power, ousting the BJP government.

He says while people are concerned about inflation, the opposition has not made it an important issue as it is also busy in raising matters on the lines of secularism and caste based identities.

Yashvir Tyagi, former head of the department of economics in the Lucknow University, points out that inflation may not be an overriding factor in deciding the voters preference, but if inflation is high it strengthens the anti-incumbency sentiments.

He says the present inflation is mainly driven by fuel prices and its cascading effects have bearing on all sections of the society.

The state government is also conscious of this fact, he says. "That is why it has tried to cushion its impact. For instance, the UP government is giving double the ration than allotted by the Centre under the Pradhan Mantri Garib Kalyan Yojana," he points out to buttress his view point.

When asked that average inflation was much more in the previous Akhilesh regime, he says inflation pinches more in the current times when people's income and purchasing power have been eroded due to loss of jobs following Covid-induced lockdowns.

"The public memory is short. People don't remember now what the inflation rate was at the time of the SP government. It is for us academicians to compare the inflation rates between the two regimes. People bother more about their present lives," he says.

Inflation in Punjab tells the same story. The average annual inflation rate has been much lower at 4.43 per cent during the present Congress government than 6.19 per cent during the previous five-year rule of Akali Dal-BJP alliance. However in the context of all-India average inflation rate, the previous five years were a bit more benign than the current ones.

As the parties from Aam Aadmi Party, Akali Dal to the Congress make promises of cash doles in Punjab, it seems that inflation is an issue in the state.

"Inflation counts," asserts Ashutosh Kumar, professor of political science in the Punjab University.

But who are people blaming--the Centre or the state-- for inflationary woes? To this, Kumar says unless you have economic measures as big as demonetisation, the Centre would not be blamed. "It is the state government which will have to bear the brunt of high inflation," he opines.

In all the five poll-bound states except Manipur, average annual inflation rates were higher in the previous regimes than those during the incumbent ones. This was probably due to flexible inflation targeting by the Reserve Bank of India's monetary policy committee (MPC). MPC was set up in October 2016 and was given a mandate to keep the inflation rate within four per cent with the tolerance limit of plus and minus two per cent at the national level. The mandate was renewed for another five years from April, 2021.

So, high average inflation rates at the national level at 10.2 per cent and 9.49 per cent during 2012-13 and 2013-14 respectively may not recur now.

"The average inflation rates have moved down in recent years, as the maturing of the inflation targeting regime has helped to anchor inflationary expectations," Icra chief economist Aditi Nayar said.

Even then, the average annual inflation rate in Manipur was high at 12.53 per cent in 2017-18, 8.84 per cent the next year and 6.95 per cent in 2019-20. The next year too, it was quite close to six per cent -- at 5.93 per cent. The first nine months of the current financial year was exceptional as average inflation stood at just 2.18 per cent.

In fact, Manipur had an average inflation rate of 9.35 per cent even in 2016-17, the year when MPC came into being from October.

In all the five states that are poll-bound, average inflation was lower than at all-India level during the previous regimes, except for Uttarakhand. The hilly state had the same average inflation rate in those five years at 7.03 per cent. In the case of the present regimes, the situation is just opposite in which Goa is an exception.