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November 13, 2015

Briefing Paper #1: Impact of Inflation on Electoral Outcomes in India

IDFC Institute launches its Briefing Paper Series with Praveen Chakravarty's paper on the "Impact of Inflation on Electoral Outcomes in India". For many years, it has been established that prices of household commodities play a significant role in impacting voting choices. Praveen tests this hypothesis by using Consumer Price Index data sets and actual electoral data across 38 elections from 2000-2014 in the 12 largest Indian states. 


He writes: "Contrary to the seemingly plausible expectation of inflation affecting voter behavior, this analysis shows that there is no significant relationship between CPI and voter behavior. We define voter behavior as voter choices expressed towards their ruling party. We test both the electoral outcome as well as change in contested vote share for the ruling party in each election. In other words, we tested whether voters expressed anger against their current government in elections held during times of high inflation versus otherwise. The result, according to this analysis, is that they did not.


However, this analysis does not prove conclusively that price rise does not matter to the Indian voter. It merely postulates that the relationship between the two is unproven. There could be prices of select commodities or goods that affect households much more than a basket of goods, as determined by CPI. Also, this is not a forward looking analysis, i.e., it tests for actual price rise in the month of elections versus a past time frame and does not capture future expectations of inflation by households".

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