Thursday, Oct 23, 2014

Election spending to push up GDP numbers by 0.3%

ENS Economic Bureau | New Delhi | Posted: March 17, 2014 2:59 am

Election spending by candidates and the state machinery for the upcoming General Elections is expected to bring about only a marginal rise in the GDP growth of the world’s largest democracy.
Poll expenditure, which is estimated to touch Rs 11,000 crore by candidates in the country’s 543 Lok Sabha constituencies could increase the country’s gross domestic product by about 0.2-0.3 per cent.

“Elections almost always have an impact on GDP growth. There is a sudden injection of demand into the system. It is for a very short period of time of about four months but is very concentrated,” said Pronab Sen, chairman of the National Statistical Commission.

That figure can be determined through a back-of-the-envelope calculation.

For each of the 543 Lok Sabha constituencies, there would be four serious candidates. It is also known that most aspirants spend higher than the official campaign limit of Rs 70 lakh per candidate set by the Election Commission.

Anecdotal evidence shows each candidate spends about Rs 5 crore each — business chamber Assocham also estimated as much. This would result in additional consumption expenditure of close to Rs 11,000 crore this fiscal.

This could give some stimulus to the economy, which is in the midst of a slowdown, expanding at less than five per cent in the first three quarters of the fiscal. In FY14, the government is banking on a recovery with GDP growth estimated at about 6 per cent.

Further state assembly elections in seven states —Andhra Pradesh, Arunachal Pradesh, Haryana, Maharashtra, Orissa and Sikkim — would give a further stimulus to the economy.

“All of this is purely consumption expenditure and results in no tangible capital formation. It does not last long but certainly has a multiplier effect,” said Sen.

Sectors that benefit immediately include transport and hospitality, both high employment intensive sectors. Along with them advertising, printing and FMCG sectors too would register higher demand as a fallout of election campaigning.

Moreover, the component of community, social and personal services in the GDP would also see an increase through government spending on the polls.

According to official data, the government’s expenditure in the 2009 General elections stood at Rs 844 crore. Meanwhile, according to filings with the Election Commission, the Bharatiya Janata Party spent Rs 448.66 crore in the 2009 General Elections while the Congress spent Rs 380 crore.

Other estimates believe that spending would be much higher. Industry chamber Assocham has pegged election related expenditure at Rs 15,000 crore- Rs 20,000 crore with a multiplier effect of at least Rs 60,000 crore.

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