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Dear Readers,
Last week, the Reserve Bank of India released the “Handbook of Statistics on the Indian Economy, 2020-21”. This is an annual publication and contains detailed historical data on a variety of parameters not just for India as a whole but also for the individual states. On the political front, past few months and weeks have seen heightened activity in the states that are bound for Assembly elections next year. Already three states — Uttarakhand, Gujarat and Punjab have seen the ruling party change its Chief Minister in a bid to retain power. Can the RBI’s handbook throw some light on how the poll-bound states have performed? Indeed it can.
A key variable contained in the RBI’s handbook is the “per capita Net State Domestic Product”. In simple terms, this variable can be used as a proxy for the per capita income in a state. It is, thus, a quick way to ascertain the economic well-being of an average resident in a particular state. It is crucial to note that several academic studies — both in India and elsewhere — have found a strong link between economic indicators such as per capita income and electoral performance. Of course, economic performance isn’t the sole determinant of electoral outcomes.
For this analysis, we shall limit ourselves to the five states — Uttar Pradesh, Uttarakhand, Punjab, Goa and Manipur — that go to polls in March 2022 because, by the time the other two states — Gujarat and Himachal Pradesh — go to polls in November-December 2022, the RBI would have updated the current handbook.
There are three main questions that are worth asking when we look at the per capita NSDP data.
One, what is the absolute level in each of the five states, and how does the income of an average resident of a particular state compare with the national average?
The chart below provides the answer to both these questions. As can be seen, per capita incomes in Goa (Rs 3.04 lakh), Uttarakhand (Rs 1.59 lakh) and Punjab (Rs 1.19 lakh) are higher than the national average (Rs 95,000). Manipur (Rs 54,000) and Uttar Pradesh (Rs 44,600) are barely half of the national average.
But state elections are state-level matters and it is unlikely that either UP’s or Goa’s election will be affected by the vast variance — almost 7 times — between the per capita income levels of Goa and UP.
What is more likely to matter is the growth rate in per capita incomes in the five years leading up to the elections. This is the third big question.
In this regard, the chart below provides a picture of how things may look to voters on the election eve. This chart plots the (compounded annual) growth rates (or CAGR) of real per capita income for…
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