Free Phones and Toilets: Politicians Vow to Splash Cash on Rural India

  • As parties vie for votes, pressure cookers are just the start
  • Vast spending in rural areas could lead to infrastructure boom

As India’s most populous state heads to the polls, politicians are promising everything from smartphones to pressure cookers in a free-for-all that could signal the start of a spending spree in the country’s hinterland.

In Uttar Pradesh, a state of 200 million people that begins voting in legislative elections on Saturday, parties including Prime Minister Narendra Modi’s Bharatiya Janata Party are offering a range of freebies -- which have also evolved to reflect a younger, more aspirational India.

The promises, combined with Modi’s infrastructure-focused federal budget and a pledge to double farmer incomes by 2022, could spur spending in rural India as parties position to win current and future polls, including the next general election of 2019. 

Analysts expect sustained spending could lift rural incomes and potentially benefit sectors such as autos and consumer goods after a period of depressed consumption following Modi’s November ban on larger-denomination rupee notes.

"Parties are aware that their fate lies in the hands of this part of India," said Shailesh Kumar, an Asia analyst with Eurasia Group, a consultancy. "Politics in India will begin to pivot towards the rural economy as parties seek to show that they are looking out for citizens living in villages."

Laptops To Pressure Cookers

Modi’s party has promised a toilet for each household within five years and a laptop loaded with one year’s worth of free Internet. The BJP has also said it would waive loans for farmers and build 10 universities with free WiFi. 

Modi’s rival in Uttar Pradesh, the incumbent Samajwadi Party, assured roughly 10 million people it would give them free smartphones should they get elected, the Times of India reported on Dec. 7. In its manifesto, the party promised to provide poor women pressure cookers and discounted bus passes.

Giveaways are not illegal and are common in Indian campaigning, even if they don’t always materialize. Political parties have also modified their tactics by promising a hi-tech products to digital have-nots in the world’s sixth-largest economy.

N. Bhaskara Rao, founder and chairman of the New Delhi-based Centre for Media Studies, said giveaways are not new, but have begun to evolve from bicycles to laptops and phones.

"They are nothing new, it’s only now the package consists of hi-tech," Rao said. "The new package consists of this type of gadgetry-oriented goodies. The voters are a little more educated."

‘Hoodwink’ Voters

Not everyone is swayed.

"All these freebies don’t matter," says Rahul Bhati, an unemployed 25-year-old in an Uttar Pradesh village outside New Delhi. "All of this is meaningless if we don’t have development."

And some don’t believe the promises will even come true. Mayawati, a former state chief minister who goes by one name and heads the popular Bahujan Samaj Party, said Modi was trying to "hoodwink" voters after failing to fulfill the promise of economic development that propelled him in to office after 2014 federal elections. During that campaign, Modi pledged to bring reliable power to all citizens. Though there has been some progress, the government reportedly counted one village as "electrified" when just 15 of 170 homes were connected to the grid.

Election declarations are not always empty, though: The Samajwadi Party said it has given out 1.5 million laptops since 2012. Puja Bhati, a 21-year-old college student, received a laptop from the Samajwadi Party and signed up for a smartphone. Her family are party supporters. 

"He’s fulfilled his promises," she said of current chief minister Akhilesh Yadav. "That’s why we will vote for the Samajwadi Party."

Rural Infrastructure

With elections from Himalayan Uttarakhand to tropical Goa, the competition for votes -- along with the federal budget’s $59 billion target for roads, railways, airports and ports -- could lead to infrastructure-building.

Parties are assuring voters of new schools, roads, hospitals and housing, and the trend could continue as state polls unfold ahead of 2019, when Modi will seek a second term. 

Sonal Varma, India chief economist with Nomura Holdings Inc, said she expects investment in roads and irrigation. "If the government has to meet its objective of doubling farm incomes, then a start has to be made now," Varma said.

The BJP said it will create a $22 million agricultural fund and a $148 million start-up capital fund in the state, while using its federal budget to pledge a record $148 billion for loans to farmers across the country. The Samajwadi Party, which allotted more than $2 billion for road construction in its current state budget, said it would to build new expressways and a metro for several smaller cities in addition to Lucknow, where one is under construction.

Crucial Poll

The elections in Uttar Pradesh, which conclude on March 11, are India’s most important sub-national contest. 

The BJP swept the state in the 2014 general election, winning 71 of the state’s 80 lower house seats. 

A BJP loss in the state vote would be interpreted as a referendum on Modi’s leadership. It would prevent him from improving the party’s position in the upper house of parliament, or Rajya Sabha -- where some of Modi’s reform efforts have stalled. Uttar Pradesh sends about one-eighth of lawmakers to the upper house, and one-seventh to the lower house, more than any other state.

Opinion surveys have been divided. But after a recent alliance between Samajwadi and the Congress party, one poll predicted the pair would win between 187 and 197 seats in the 403-seat legislature, compared to around 128 seats for the BJP.

Spokespeople for the BJP and the Samajwadi Party declined to comment.

Consumption

Priyanka Kishore of Oxford Economics Ltd said Modi needs to spend in rural India to offset hardship caused by his Nov. 8 cash ban, which hit spending, demand and manufacturing across India. The purchasing managers’ index, or PMI, showed three consecutive months of contraction to February.

"There is a need to reassure the rural population that the government is there with them," she said.

She suggested spending could benefit sectors such as autos and consumer goods. If his efforts are a mix of populist and productive measures to help farmers, "it will still get a thumbs up from investors.”

— With assistance by Saritha Rai, Manish Modi, and Bibhudatta Pradhan

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE