Millennium Post

Electioneering extravaganza

There is hope in the air that the money pumped into our doddering economy in the run up to the general elections will considerably lift the fiscal prospects. Poll time spending, expected to touch a staggering Rs 30,000 crore, might prove to be an important stimulus and bring out the economy of the persistent slump that has been bogging it down. Uncertainty over poll results, contradictory stances adopted by political parties and their leaders, as well as a depreciating rupee had been sending the economic graph down. Given that election spending ends up becoming a better stimulus package, thanks to its immediate ‘trickle-down effect’, the markets are likely to be enthused significantly to touch new highs during and after the polls. The increase in government expenditure also sends out a positive signal to investors, who have been scared off by fluctuations in the state positions and the looming doubt over who will clinch the mandate. Since the Third and Federal Fronts have markedly different agenda from more mainstream coalitions such as the UPA or the NDA, it is obvious that the markets have been expressing paranoia, not entirely unjustified, over the election outcome. Their wholesale support for Narendra Modi is expected, given his insistence on governance and efficiency as well as a market-driven development agenda. But that doesn’t mean other parties, particularly AAP and its pro-people manifesto, has not left a lasting impression on market psyche. Hence, in this situation of lingering ambiguity, election spending could be a good way to bolster the sagging fortunes of a poll-bound economy.

 Election spending is likely to add growth of 0.2-03 per cent immediately, thereby considerably upping the poll bounce. Expenditure will go up in sectors such as election advertising, security services, food and beverages, transport, fuel and automobiles and even liquor and entertainment, according to reports, thus proving to be a big boost for the economy. Consumers are likely to see prices going down as pre-poll tactics, and industry will benefit from the padded government spending. However, the only caveat in this otherwise feelgood story is that the political parties must not extract their pound of flesh after the poll mania is over. More often that not, any tangible stimulus, be it in the slashing of utility bills or bringing down staple vegetable prices, is levelled off by steeply raising the prices after the show is over. Politicians tend to resort to serial amnesia and forget their poll-time promises or the agenda stated in their election manifestos, which usually involve stabilising the relentless inflation and lack of jobs. Hike in poll-time expenditure also comes in the wake of cutting down excise duty as a measure in the interim budget, ostensibly to sweeten the pre-election mood. Since spending on awareness campaigns, laws and technology will have positive effects lasting beyond the election, hope still floats on the utility of the extravaganza.
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