The biggest hurdle in Modi’s prospects for re-election is the precarious economy with dented consumer sentiment

The problem with looking at numbers in isolation is that they tend to be very misleading. That holds true in sports, in the stock markets and with basic economic data. Therefore, it is always interesting if you interpose other factors alongside these numbers. Ergo, when you look at the Index of Industrial Production (IIP) numbers for November 2018 against last year’s growth, you will see that growth was extremely poor and has led for calls from several people that the Reserve Bank of India (RBI) should downgrade its growth forecasts for the year. But when you consider that in 2017 Diwali was earlier, in October rather than in November, and the fact that several manufacturing industries ramp up production ahead of Diwali and then shut down, sometimes for as long as a week during the festive season, the numbers become slightly more palatable. That said, this is not an excuse the government should use to hide the fact that consumer demand in India and industrial production have been extremely muted in 2018.

Low consumer sentiment is often reflective of a weak economy but is there another underlying cause to the weak sentiment? According to Maruti-Suzuki Chairman, RC Bhargava, there is a historical trend that shows that in the years preceding general elections in India, car sales tend to decline. Although car sales for the first nine months of the 2018-19 financial year from April through December 2018 did grow slightly, that was a mere five per cent, and with exports declining, production growth was negligible. Given that automobiles are the largest category for household spending after real estate, it usually is indicative of the state of the rest of the economy. Of course, the real estate sector has not recovered since the debt-fuelled binge they had in the early part of this decade, but car sales have been rising steadily over the past few years. That said, sales of commercial vehicles, particularly heavy commercial vehicles, have risen smartly in the past year and this is almost always an indicator of future growth. So is this just a case of the restrained Indian consuming public, that for reasons unknown usually holds on to their purse strings really tightly in the year before the election, and the next few months should, in fact, see an economic boom? May be.

But even if growth returns in the next few months, it is unlikely to absolve Narendra Modi of his greatest failing, that on the economy and the failure to create jobs. One that he himself brought to a shuddering halt with the now discredited idea to go about demonetisation. The fact is that job growth has been very weak over the past five years in the formal and informal sectors and while the economy has not shuddered to a halt, private sector and foreign investment have dried up thanks to constant flip-flops in policy and tax rates. There is going to be no easy fix for the problem, and the fact that hundreds of millions of Indians are going to need employment in the next decade. However, whoever gets the hot seat by the end of May, whether it is Modi again or another leader, the job will be a thankless one because, “it is the economy, stupid!”