Reserve Bank surveys show where the battle is during the elections
The Reserve Bank of India’s (RBI’S) surveys provide a fair assessment of how the present government has done on inflation and employment. The Bharatiya Janata Party (Bjp)-led government has for sure won the war on inflation. The credit, of course, goes to RBI. The central bank’s adoption of an inflation target and the steadfast adherence to achieving the 4% mandate has, to a great extent, reduced the fear among Indians on price rise.
The proportion of households that expects prices to rise faster are lower now than they were in March 2014, just ahead of the elections that brought the BJP to power. Chart 1 shows that household inflation expectations have been reined in considerably in the past four years.
Historically, elections have been won and lost because of inflation. In 1981, soaring onion prices claimed the Janata Party-led government. However, this time around, it is not just the cost of living, but the opportunity of earning a livelihood that matters. Hence, for a poll-bound country, the perception on employment and growth outlook are far more important.
In the absence of robust employment data, a look at RBI’S survey of consumer confidence shows that the government needs to remedy the employment situation urgently.
Chart 2 on employment expectations from the survey of consumer confidence shows that Indians have become less optimistic on their employment prospects. In September 2014, which was a few months after the general election, about 36% believed that employment opportunities have improved. Now, this proportion has come down to 33.9%. What is more disturbing is the percentage of respondents, who said Household inflation expectations have fallen in the past five years largely due to RBI’S adoption of inflation targeting. employment opportunities have worsened, has increased sharply to 47.2% now from just 28.7% in September 2014.
Indians are less optimistic about their employment prospects in the coming year as well. The net response—which is the difference between the respondents who believe employment prospects will improve and those who believe it would worsen—was 23.1 percentage The optimism over employment prospects and income have dimmed under the Bjp-led government.
51.9 points, far lower than the 51.9 percentage points in September 2014.
Put simply, the government has not lived up to its promise on employment generation.
Much of the dent in consumer sentiment has been due to the demonetization shock in 2016. The goods and services tax (GST), which sought to formalize the economy, resulted in many small businesses going under.
That said, the optimism given by The proportion of households that expect prices to rise faster are lower now than they were when the BJP came to power
About 47.2% respondents feel that employment prospects have worsened
Demonetization and GST have dented consumer sentiment
rising Purchasing Mangers’ Index shows that businesses are more confident than before on demand conditions. This agrees with RBI’S October survey, which showed that the business sentiment index is rising, indicating optimism on prospects.
The general election, scheduled in just under six months, will be a litmus test for the present government. So far, its biggest promise of jobs is where it lacks.