Skip to main content

Why pocketbook politics will decide India's election

By John Defterios, CNN
April 8, 2014 -- Updated 1203 GMT (2003 HKT)
  • John Defterios says India's election race will boil down to the economy
  • He says the Indian business community thinks PM Singh lost his zeal for reform
  • Whether it is in the U.S., Europe or Asia, pocketbook issues dominate, he writes

Editor's note: John Defterios is CNN's Emerging Markets Editor and anchor of Global Exchange, CNN's business show focused on the emerging markets. Follow John on Twitter.

Abu Dhabi (CNN) -- A great deal has been said about the five week long election underway in India.

The world's largest democracy. 814 million people going to the polls. A candidate representing a family dynasty versus a firebrand chief minister.

But this race will likely boil down to three simple numbers that impact every citizen in the country: growth, inflation and interest rates.

John Defterios
John Defterios

To be blunt, they do not favor the incumbent Congress party which has ruled for the last decade.

What's at stake?

Economic growth came in at only 4.5% in the last fiscal year, the worst performance in a decade. We are awaiting the final tally for last year, but bets are it will be below 5%.

Consumer inflation for February came in at a 25-month low of 8.1%, but that is incredibly high when the rest of the world is trying to fight off deflation, not the rising cost of food.

With prices soaring over the past year, the relatively new but high profile central bank Governor Raghuram Rajan was forced to raise interest rates three times since last September.

This race will likely boil down to three simple numbers that impact every citizen in the country: growth, inflation and interest rates.
John Defterios

The repo rate for the Reserve Bank of India stood at 8% as Indians began their journey to the polls.

Whether it is on the campaign trail in the U.S., Europe or Asia, pocketbook issues dominate.

By the numbers: The world's biggest exercise in democracy

It is widely viewed in the Indian business community that the competent, but aging Prime Minister Manmohan Singh lost his zeal for reform and that Rahul Gandhi committed too late in the game to express a desire to lead in a party which has run out of ideas to jumpstart growth.

Prior to the global banking crisis India was humming along, with growth of over 9% for a handful of years.

You probably remember when comparisons were being made about the two towers of the emerging markets, China and India.

A state-run apparatus stacked up against the sprawling democratic structure of India, with chief ministers of states controlling so much power.

Biggest election world has ever seen
India's onion economics

In the Congress party era, names like Tata and Infosys came to the fore. We understood the vibrancy and productivity of Bollywood. And we are well aware of the rising middle class in India.

But this is an election where one should keep an eye two core voting blocks: the youth and those in the vast rural lands.

11 things to know about the world's biggest election

India is a young country. Nearly half are under the age of 26. Despite the wealth creation in the past decade, about 850 million Indians live outside major cities and remain dependent on farming.

According to a poll by Pew Research ahead of the vote, both these blocks favor the BJP party by a margin of 3 to 1. They think Chief Minister Narenda Modi is better positioned to cut bureaucracy, tackle corruption and revive growth.

They were probably were led to that position by the three numbers that have clearly undermined support for the Congress party.

More from John Defterios: Why the world is watching the Fragile Five
Emerging markets split into tortoises and hares: Which will win 2014?

Part of complete coverage on
October 9, 2014 -- Updated 0804 GMT (1604 HKT)
Liberia, Sierra Leone and Guinea -- the three countries facing the biggest health crisis -- are also facing huge bills to try and contain the virus.
September 22, 2014 -- Updated 1316 GMT (2116 HKT)
Twitter has lost its position in the top 20 coolest brands for the first time in three years.
September 25, 2014 -- Updated 1554 GMT (2354 HKT)
As the crisis in Iraq escalates, CNN looks at how Iraq could crack down on ISIS' oil riches under the guidance of its new oil minister, Adel Abdul Mahdi.
August 29, 2014 -- Updated 0842 GMT (1642 HKT)
Recep Tayyip Erdogan is Turkey's new president . So can he revitalize its economic fortunes?
September 19, 2014 -- Updated 1724 GMT (0124 HKT)
Experts share their tips on cities they see as emerging financial hubs...they're not where you think.
October 9, 2014 -- Updated 1511 GMT (2311 HKT)
Growing numbers of us are willing to serve as bank, teacher or travel agent to people we have never met, and entrust them to serve us in turn.
August 28, 2014 -- Updated 1244 GMT (2044 HKT)
The European Union is stepping in to save its dairy from going sour.
August 18, 2014 -- Updated 1236 GMT (2036 HKT)
Europe's deteriorating relationship with Russia has hit the region's growth, even before new food sanctions begin to bite.
July 16, 2014 -- Updated 1634 GMT (0034 HKT)
With cyberattacks on the rise and here to stay, it's a modern-day challenge for people and businesses to get smarter about preventing them.
August 14, 2014 -- Updated 1324 GMT (2124 HKT)
Airstrikes, rebels seizing control of oil fields, plus a severe refugee crisis are a recipe for market panic. So why are Iraq oil prices stable?
September 19, 2014 -- Updated 1124 GMT (1924 HKT)
Peer-to-peer finance lets businesses bypass bank loans. Creative companies with quirky ideas find new lending models advantageous.
July 20, 2014 -- Updated 1524 GMT (2324 HKT)
Evidence points to pro-Russian separatists as perpetrators of the attack and Vladimir Putin is facing questions, David Clark writes.
September 3, 2014 -- Updated 0952 GMT (1752 HKT)
CNN's Jim Boulden looks on the future of online shopping.
August 5, 2014 -- Updated 1440 GMT (2240 HKT)
The biggest Ebola outbreak in history is taking its toll in Western Africa, hitting some of West Africa's most vulnerable economies.