INDIA GROWTH STORY: 30,000cr stimulus to economy expected from poll spending From Advertising To Travel, Many Sectors Will Gain

Thursday, March 13, 2014

30,000cr stimulus to economy expected from poll spending From Advertising To Travel, Many Sectors Will Gain

NewDelhi:The country’s faltering economy is likely to get a significant stimulus from election spending by political parties, candidates and the government, which estimates suggest could be as much as Rs 30,000 crore.

    The Rs 30,000 crore figure is comparable to the $4 billion (around Rs 20,000 crore at the prevailing exchange rate) additional spending that the government announced in 2008 to shield the economy from the impact of the global financial crisis.
    It is, however, less than the $7 billion raised and spent by political parties in the 2012 US presidential polls. ‘Notes for votes’ will be big part of poll spend
New Delhi: The election spend is often more effective than official economic stimuli as the money is actually spent—virtually without any transmission loss—in a short time. Moreover, there is a “trickledown effect” as it often reaches the poorest voter.
    This poll there will be a sharp increase in expenditure from the 2009 elections, when total spending was estimated at Rs 10,000-Rs 15,000 crore. Experts pointed out that a large chunk of the spending by political parties and candidates is in cash, which makes it difficult to estimate the actual amount spent.
    “Spending will increase significantly in these elections. The estimate is about Rs 30,000 crore,” said N Bhaskara Rao, chairman of the Centre for Media Studies, a New Delhibased think tank, adding that the figure includes the expenditure by the Centre. “No other election can match the 2014 elections.” He said the figure was based on an elaborate analysis undertaken by the think tank, which has been tracking various segments of elections since 1997.
    The 2014 general elections come at a time when growth is estimated to have slowed to a decade low of 4.9% and the industrial sector is weighed down by the slowdown in global and domestic demand.
    Several sectors of the economy, ranging from advertising, air charter services, security services, food and beverages, transport, liquor, fuel and automobiles are expected to see hefty activity thanks to the sharp increase in spending. “Election spending provides a very sizeable boost to the economy. Traditionally we have seen it adds 0.2-0.3% to growth,” said Pronob Sen, chairman of the National Statistical Commission.
    Officially, the spending will only be a fraction of the amounts being talked about. In 2009, 8,070 candidates contested the polls. Assuming a similar number this time, and taking into account the expenditure ceiling for each candidate of Rs 70 lakh for the 2014 polls in most states, spending by candidates should officially be in the region of Rs 560 crore. In addition, government spending on general elections would add up to about Rs 1,000 crore.
    Rao said a large chunk of the expenditure by parties and candidates is likely to involve unaccounted money, which is used for what he described as “notes for votes”.
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