WHO WILL GOVERN INDIA? Wait till May 23rd

India is now in the midst of national elections to determine who will govern the country for the next five years: which party or parties will form the government, and who will be the Prime Minister.

There will be Starkly Different Policies Depending On The Outcome

The electoral outcome will determine the choice of starkly different policies.

· India’s foreign policy will be largely aligned with the United States, or it will be more nuanced and responsive to European and Domestic interests.

· India’s economic and fiscal policies will be geared more towards encouraging Foreign Direct Investment and Capital formation, or they will be more focused on eradicating poverty and creating jobs directly.

· India’s social policies will be designed to build a more robust Indian ethos, or they will they be more inclusive even at the cost of cohesion sometimes.

Accordingly, it is not surprising that everyone — global policy and business leaders, financial institutions and citizens — wants to know the outcome of these elections. But don’t trust the polls, and make assessments. Wait for the results to be announced on May 23rd.

Polling Results in India Have Not Been Reliable

For a variety of reasons, polling in India has been dismal. The data — actual outcomes and predicted outcomes — for the last three national elections are available here: 2014 elections; 2009 elections; and 2004 elections.

Why Have The Polling Results Been So Error-Prone?

Why is it that the Indian electoral polls don’t perform that well? The answer is simple: It is a very challenging task — devilishly difficult. There are many challenges. Including the bias of the pollster, intimidating size and diversity of the electorate, sample size, design, and weightings, correlated error structures, and lack of transparent data. But let us assume all this away.

The methodology itself is inherently error-prone. It is a two-stage process. In stage 1, the poll first measures a party’s vote share. In stage 2, the poll then converts that vote-share into number of parliament seats. There are errors in both stages, and they become compounded to make the estimates unreliable.

For instance, assume the standard error is 3 percent in the measurement of shares. This is a very reasonable assumption. To get a reasonably confident estimate (95 percent confidence level), we need to consider 2 standard error measures. So, vote share can vary by12 points (plus 6 and minus 6.) Such huge variations in vote share estimates will naturally produce wildly varying predictions of number of parliamentary seats a party is likely to win. Accordingly, the estimates of number of seats can be devastatingly incorrect as reflected in the last three national elections.

Plausible Electoral Outcomes and Consequences

Here are the plausible outcomes of the elections and the consequences of their outcomes in terms of policy prescriptions.

Scenario 1: This is the least probable outcome. Bharatiya Janata Party (BJP) led by Narendra Modi wins about 230–240 parliamentary seats and is able to form the government with its allied parties enjoying a reasonable majority, may be support of 280 parliamentary members (a simple majority requires support of 272 parliamentary members.) If this were the case, BJP’s policies will be the governing thrust of the Government of India.

In this case, the Government will be responsive to US sensibilities and demands on all foreign-policy matters. For instance, the Government will certainly comply with the US demand that India not import oil from Iran further complicating the efforts of European countries to save the Iran Nuclear Civil Agreement from completely unraveling.

The Government will also adopt less accommodating stance towards China. This will also include adverse posture even when India’s national interest is not threatened directly in any manner. For instance, recently the Indian Navy has joined Japan, Philippines and the US in naval exercises in South China where China has claimed its sovereignty. As another illustration, the Indian government may shun Huawei, China’s telecommunications giant to keep the US leadership happy though Huawei can enrich India’s competitiveness and innovation substantially.

In economic domain, BJP government will be more focused on encouraging increased foreign investment, and greater capital formation domestically — a continuation of its current policy. Fiscal prudence, simplified tax structure and lower regulatory burdens will be the priority.

On social issues, the Government will seek to award citizenship to illegal migrants in Assam and Northeast India on the basis of faith (the eligibility enumeration leaves out Islam, thus apparently discriminating against illegal migrants of Islamic faith.) The Government will also seek to undo Article 370 of the Constitution, which provides special protection to the State of Jammu and Kashmir.

Scenario 2: This is a plausible outcome. Indian National Congress wins about 120–130 parliamentary seats, and forms the core of non-BJP government. The Government will consist of a coalition of over dozen political parties. While this may appear to be a recipe for incoherent policy, this is not necessarily so because all these parties share a common agreement on several core policy elements.

This Government will not adopt a US-centric foreign policy posture. Accordingly, the Government will not necessarily comply with the US demand to stop oil imports from Iran. The Government is also not likely to take an inherently adversarial posture towards China (be it joint naval exercises, or assessment of risk of Huawei equipment.)

The non-BJP government will be more focused on inclusive growth and providing minimum wage guarantee to the economically weaker sections. The Congress has proposed a minimum wage program, NYAY. Some variant of such minimum wage progam will be implemented.

On social policies, the Government will not allow the granting of citizenship based on faith to illegal migrants in Assam and Northeast India. The Government will also not allow any effort at diluting or changing Article 370 of the Constitution.

Scenario 3: This is the most likely outcome. Here, BJP will get about 200 seats or less but it will be able to stitch together a coalition. Necessity of numbers will force BJP to invite parties that do not subscribe to its vision and policies as its coalition partners in governance. Such a Government will be almost like a caretaker government waiting for the next elections.

These elections are consequential, but the outcomes are far from clear. Wait till May 23rd.

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