Narendra Modi needs to win over low-income Indians

DURGA PRASAD YADAV used to be a big fan of Narendra Modi, India’s prime minister, and his Bharatiya Janata Party (BJP). “Back in 2014 they promised jobs and development. I thought they would improve things for ordinary people,” says the 36-year-old farmer from a village near Ayodhya in the northern state of Uttar Pradesh (UP). In January Mr Modi inaugurated a new temple in the city on the site of a mosque that was demolished by a Hindu mob in 1992. The project has been accompanied by a big development drive. Yet Mr Yadav says local people like him have seen little improvement in their day-to-day lives. “All the development around here has meant loss for the people of Ayodhya,” says Mr Yadav. “Only outsiders have benefited.” He is not especially fond of the opposition. But in the national election that ended in early June, he voted for them anyway.

In Ayodhya and across UP, many voters made the same choice, reducing the BJP’s share of seats in the state in its northern heartland from 62 out of 80 in 2019 to just 33, its biggest loss in any state. The party also lost 14 seats in Maharashtra, mostly in rural areas, and ten seats in Rajasthan, another poor northern state, as well as in rural constituencies across India. Besides (unfounded) concerns that a new BJP government could abolish affirmative-action policies benefiting poor or lower-caste groups, the party’s losses hint at a general sense of economic disaffection among the roughly 450m Indians, mostly from the country’s poor north, who get by on odd jobs, small-scale self-employment or farming, supplemented by government welfare.

Mr Modi was swept to power ten years ago on a platform combining Hindu nationalism with anti-elitism, promising better jobs and better lives for poor Indians such as Mr Yadav. But his government has struggled to tackle the lopsidedness of India’s economy that is the source of their dissatisfaction. Fixing those problems is the biggest challenge that his new coalition government will face.

With the exception of a big dip during the covid-19 pandemic, India’s GDP has grown steadily over the past decade. In the year to April it expanded by 8%, more than any other large economy. Yet many ordinary Indians have not seen enough economic improvements in their day-to-day lives, largely because the growth has not generated enough employment and higher wages at the lower end of the scale. The price of food, which forms a large share of poor people’s expenses, grew by over 10% between July 2022 and July 2023, and by 9% in the past year. Since 2018 food inflation has averaged over 6%, eating up a good chunk of wage increases (see chart).

Of the 570m, or just over half of working-age Indians in the labour force, 80% still make a living in the informal economy. This includes agriculture. The share has hardly changed over the past decade. Informal work comes without contracts, guaranteed hours or benefits.

Take the most recent annual survey of “unincorporated sector enterprises” (a big non-agricultural chunk of the informal economy) published on June 14th. Even though the estimated number of such firms grew by 8%, from 60m to over 65m between 2022 and 2023, each new enterprise generated just over two new jobs. The annual wage paid by firms remained stagnant, at 125,000 rupees ($1,500). Among informal rural workers, the poorest of the lot, it barely budged from 90,000 rupees. In agriculture, which employs over 40% of Indian workers, wages on farms have yet to return to their pre-pandemic level.

The government has been supplementing incomes with cash payments, subsidies for cooking gas and free food rations, for which 800m Indians are eligible. It also runs a rural employment scheme which guarantees 100 days of work to rural workers. Some 83m workers used the scheme in the year to April.

Modi’s big challenge

Those interventions have saved many from destitution. Yet life remains hard. In a survey conducted after the election by the Centre for the Study of Developing Societies (CSDS), a think-tank in Delhi, voters’ top three complaints were inflation, cited by 24% of respondents, growing unemployment, highlighted by 23%, and increasing poverty, mentioned by 11%. Even many who support the BJP are unhappy with their lot. “I appreciate that the government is giving us food,” says Rajni Dinesh Kumar, who runs a small shop in a Hindu neighbourhood of Rampur, a town in UP, and approves of Mr Modi. “But what we really need around here are good jobs.”

Will the new government deliver? For now, it has extended the food-aid programme and released fresh funds to build houses for the needy. The first budget, expected in July, is likely to contain measures to encourage job creation and stimulate private investment, particularly in underserved areas. These include reducing compliance burdens and improving the accessibility of credit for small companies, as well as more infrastructure investment in rural areas. That could be a good start. But more will be needed if the government is not to squander poor Indians’ future—and its own re-election prospects. ■

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