Economist Arthur Okun created a simple numerical measure to quantify how economic conditions affect citizens. He added up the unemployment and inflation rates in the US to develop a misery index for that country. It has been quite popular over the years in political analysis as it can be used to measure how well average citizens have done under various US presidents.

A similar misery index could be useful at a time when India is headed towards a general election. The Okun index cannot be used here because the data we have on unemployment is dodgy. The Indian labour market is dominated by informal workers whose activities are difficult to track. There is also the paradoxical tendency for employment to rise during economic downturns because women seek jobs to supplement family incomes. Wage data cannot be used as a proxy for labour market conditions because it is patchy.

However, the underlying idea can be adapted to Indian realities. The Mint Misery Index has two components: inflation and economic growth, which have been given equal weights in the index.

Inflation has been measured using the Consumer Price Index (CPI) for industrial workers. The new national CPI should ideally have been used, but it does not provide data going back over the past decade. The other component in the Mint Misery Index is the rate of growth of gross domestic product, which replaces unemployment as a measure of opportunity, or rather the lack of it.

A misery index should give us an idea of when pain sets in. Citizens will feel the pinch once inflation crosses a particular level or when growth falls below a particular threshold. I have assumed that the inflation threshold is 6% while the growth threshold is 7%. This is a purely subjective assumption. It really does not matter what level of pain thresholds are considered when constructing such an index since the trend will be the same.

Quarterly data on inflation and economic growth has then been used to calculate the actual Mint Misery Index by comparing it with our thresholds. An inflation reading above 6% in any quarter is given a positive value to denote pain while an economic growth reading of below 7% has also been given a positive value, and vice-versa. For example, consider the quarter ended March 2011. Economic growth was 2.9 percentage points above the pain threshold (hence a positive value) while inflation was 2.9 percentage points above its pain threshold (hence a negative value). Adding them, the Mint Misery Index for the quarter is zero.

Now take a look at the chart. It shows the movement of the Mint Misery Index since Manmohan Singh first became prime minister about a decade ago. The early years saw negative misery because economic growth was well above target while inflation was far lower than the pain threshold. The 20 quarters of the first Manmohan Singh government were dominated by misery levels that were very low. There was negative misery in all but the last three quarters during that period. Is that one reason why it was voted back to power in 2009?

The record of the next five years has been dramatically different. Misery levels never went back into safe territory of below zero. In fact, they have climbed steeply since the quarter ended March 2011 as inflation soared even as economic growth fell sharply. These stagflationary tendencies have led to the worst possible outcome for citizens: sluggish income growth combined with an erosion of purchasing power. The ongoing mess is a stark indictment of the economic mismanagement over the past few years. It is perhaps one of the reasons for a voter backlash.

The Mint Misery Index suggests that economic conditions for ordinary citizens have deteriorated considerably over the past three years. High inflation has hurt. Low economic growth has hurt. Their combined effect has generated immense pain for ordinary citizens.

It is not clear what role such a rapid deterioration in economic conditions—shown by the rise in the misery index—will have on actual voter behaviour during the coming general election. Indian voter behaviour is a complex matrix of economic, social and identity factors. But it is definitely safe to guess that the way economic conditions have hurt people in general, will hurt the prospects of the United Progressive Alliance. The latest round of opinion polls suggest that the ruling alliance is about to be taken to the cleaners.

The true picture will be evident only when the actual counting of votes is done a few months down the line. But the data from the Mint Misery Index does suggest that there are very good economic reasons why voters could perhaps be gearing up to reject the team that has been in charge of the national economy over the past decade.

Niranjan Rajadhyaksha is executive editor of Mint. Comments are welcome at cafeeconomics@livemint.com. To read Niranjan Rajadhyaksha’s previous columns, go to www.livemint.com/cafeeconomics-

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