How Elections in India Impact the Economy

Updated on January 23, 2019

Indian Voters look for stability

Indian voter’s fascination and involvement

The Indian voter’s fascination and involvement with elections has been a keenly studied phenomenon. Parliamentary Elections in India have always been watched with keen interest by all stake holders and this election will be no different. In fact, this election is being watched even more keenly given the state of evolving equations amongst the political diaspora. The daily changing equation between parties and the intra party squabbles over ticket allocation offers the best of curry and spice in Indian politics. India is in transition and its desire to remain a favorite amongst the emerging economies will remain post elections.

The incumbent government is going to inherit a massive subsidy bill in a weakening currency environment. This will be further compounded by the impact of late season rainfall and hailstorms in March that have already caused losses in excess of Rs 13,000 crore. According to Moody’s Analytics, India is likely to grow between 5.0 to 5.5 % FY’14-15 and around 6% FY’15-16. Kick starting the economy will be a major challenge for the new government while inflation continues to remain a major concern. The International investors will look for stability.

India needs International Investors

The electorate has peaked its point of frustration, while remaining confused on the possible alternates. Given the challenge that AAP has thrown to traditional parties and their approach to elections, all famous political parties has had to revisit the equations to try to stem the opinion swing.

India needs investments to fuel the economy towards a 6% plus growth but both the BJP as well as AAP have not offered any confidence to the industry regarding their policy to drive investment. The negative stand on FDI in retail has not helped. With a coalition government a serious possibility, the role and impact of regional parties on both national politics and the direction the economy takes, will be significant.

In the 2009 elections in India, Congress along with the BJP accounted for 59% of the total seats and 47% of the votes with regional parties taking up the remaining. Interestingly, no single party has won a parliamentary majority since 1989. The Parliamentary constituency fight in the elections of 2014 will see the regional parties playing a greater role in policy making. Regional parties influencing foreign policy is a rising phenomena and the stand taken by AIADMK on Sri Lanka, the Trinamool Congress on the land boundary and Teesta water sharing issues with Bangladesh are all recent examples. The poll outcome could have a significant impact on big ticket projects like the Rs 25,000 crore Sethusamudram project which the current Tamil Nadu government has been strongly opposing. The challenge for the new government will be to bring together diverse local interests of the regional parties and evolve a cohesive national policy.

Voter's Poll

India’s Expectations with 2014 Elections

See results

Role of Indian businessmen in Elections

The role of Indian businessmen in the general elections in India has always been a strongly debated one. We have seen the India Inc come out openly in support of Narendra Modi as the best suited candidate to take over Manmohan Singh’s legacy. Given India’s growing influence as an emerging market the interest and reaction of the international stock markets to the current elections will be interesting.

The government has been spending over two lakh crore per year on fuel subsidies. According to an IMF study, 61 percent of the diesel subsidy benefit in middle income countries like India goes to the upper 20 per cent of the population while the bottom 20 per cent that actually needs the subsidy receives only 3 per cent benefit. The stand taken by the new government on fuel subsidies will be interesting, as will the gas pricing policy.

Elections and the Indian stock market

On the positive side, the CAD has come down while exports are showing an upward trend. Both will help the new government but clarity and continuity of policy remain a concern. The GST is likely to be implemented by the new government. This alone can add 2% to the GDP. Late in the day, the UPA II has tried to seek approval from the Election Commission of India to allow 100% FDI in Railways and Construction sectors; both potential game changers for the economy in the mid to long term.

The outcome of elections i.e Election Results will determine the new government’s stand on reforms process including disinvestment of PSUs, SEBI (Amendment) Ordinance 2013, along with other proposed Ordinances and of course corruption.

The industry has largely accepted that coalition governments are here to stay and has aligned itself to the reality. Sensex is reflecting positive sentiment already by breaking the 22,000 barrier with an overall positive sentiment.

Google Survey Says Indian Voters Undecided

Interest of Foreign investors in Indian Elections

The FIIs inflows have already touched $ 2 billion in March this year. What the industry demands is a stable government and a continuity of policy. Can this election be an opportunity for India to change gears in a new age economy that will offer greater opportunities to the aspiring youth? A tentative but hopeful nation awaits.

Downfalls in prices in my Local Market

I noticed that there is some downfall in the prices of various products like non-subsidy cylinder we can buy less than 23.16 INR, prices of vegetables, fruits and seeds are down, this is that, I was noticed in my local market, the prices of Gold and Silver are also down, share market is jumping-jumping.

So on the basis of this all we can say these are the good sign of our economic progress and independence, lets see what's next.

This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.


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