The Indian rural story is unraveling amidst poor output, weak prices and slump in wages. It is partly a fall out of the Modi government’s virtuous and successful attempt to tackle food inflation, but exogenous factors—collapse in international food prices and inclement weather—too have played a role. Unfortunately, forecast of sub-par 2015 monsoon, if it pans out, will only worsen the woes. In this interplay of virtue and misfortune, the Modi government is facing its first formidable political challenge. The turn of events assumes significance as Bihar, with ~90% rural population, is gearing for assembly polls during October / November this year.
The Big caste Factor in Bihar Polls – Big Test of Time for Amit Shah
The merger of 2 arch rivals in Bihar—JDU and RJD—to form the Janata Parivar is one such example. This is significant. While the situation is in a flux, the merger has reduced a 3-way contest to a dual duel and has altered the caste math in favour of Janata Parivar. It is revealing that had the merger existed during Lok Sabha polls, BJP’s seat tally could have slipped a significant 18 to just 13 out of 40. Surely, it will not be smooth sailing for Janata Parivar either; the seat-sharing process will undeniably be contentious and break-away/rebel leaders (Jitan Manjhi, Pappu Yadav) will hurt Janata Parivar. But, on balance, BJP’s political challenge has certainly mounted. Can Amit Shah Pull a Magic here like he did in Uttar Pradesh in 2014 Lok Sabha Polls ?
Well-targeted investments can push higher rural wages in a non-inflationary manner, but it demands time. With Bihar polls just 6 months away, BJP faces tough policy choices: (a) undertaking populist measures or pushing out crucial reforms may help in Bihar, but will dent the PM’s image and risks a less accommodative monetary policy; (b) alternatively, avoiding populism and sticking to its course will help revive growth (jobs) in time for other crucial assembly / general polls, but it undermines chances in Bihar.