Consumer Sentiment and Identity Politics: Evidence from India

Arkadev Ghosh, Aruni Mitra and Ronit Mukherji

MPRA Paper from University Library of Munich, Germany

Abstract: We study how shifts in political power affect economic sentiment and consumption behavior in identity-polarized settings. Using panel data from more than 178,000 Indian households, we find that sentiment about personal finances - but not the national economy - predicts household expenditure, even after controlling for income growth. Exploiting close elections, we find that Muslim households become more pessimistic after electoral victories by the Hindu nationalist party, especially about national conditions. However, this divergence in sentiment is not associated with corresponding differences in spending. A simple Bayesian learning model explains this disconnect through limited transmission from macro beliefs to personal expectations.

Keywords: sentiment; consumption; close elections; identity politics (search for similar items in EconPapers)
JEL-codes: C36 D72 D83 E20 E66 (search for similar items in EconPapers)
Date: 2025-05-28
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:124881

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