Elections: Another Booster For The Economy? Free Press Journal: 28th October 2023

 It is said that in India people love a ‘tamasha’. A tamasha can be an IPL match or any celebrity being spotted in a public place, or even an accident anywhere on the road. People just like to come together and watch and talk even if it does not lead to anything of material value. Therefore, when it is elections time, the buzz is already there. Everyone gets involved in following what is happening and what is said by various candidates which triggers debates across the spectrum. In short, no one like to be left out.

There are five states that go for elections in November and this will be followed by the general elections next year. It has a lot of economic value not because there will be budgets formulated by the parties that come into power but because of the expenses that will be incurred for the same. The ruling governments already have buffered in certain expenses on various schemes that appeal to the masses which are there in the Budget. When it comes to the general elections the Budget in February, though an interim one, will have something to allocate on welfare. These are known expenditures which may be existing schemes disguised in new cloth. But what goes on behind the curtains is more important from the economic standpoint.

Officially there are some covenants laid down by the Election Commission on expenses that can be incurred by candidates. For the Lok Sabha it is between ₹75-95 lakhs depending on the state, while for the Assembly elections it ranges at ₹28-40 lakhs. The difference is because of the pecking order of importance in the federal structure. But at the ground level, states are closer to the masses than the centre as they have the last mile connection. Ironically citizens point their fingers at the centre when there is inflation instead of the state, even though the inflation numbers vary across states in a significant manner. But then that is how the voters behave.

While the Election Commission has set these ground rules, the amounts mentioned are what is officially permitted and has to be audited which means that there will be cheque payments made. But at a realistic level, the expenditure incurred will be at least three times what is allowed. Hence if a mid-value of ₹85 lakh is taken for the Lok Sabha elections, there would be an amount of ₹5500 crore spent assuming there are four serious candidates per constituency who would be putting in this amount to make a difference. In case of these five states there are around 680 seats which on a similar basis would entail around ₹2750 crore. If the expenses of the other candidates are added it can take the candidate expenditure to close to ₹10,000 cr.

Now it was estimated in 2019 that the Lok Sabha elections in India entailed an expenditure of $ 7-8.5 bn which worked out to over ₹50-55,000 crore, and was even higher than the outlay for the US elections which was officially put at $ 6.5 bn. If this were so then the amount this time should be even higher considering that cumulative inflation has been closer to 30% over these five years. But this expense includes not just what the candidates spend but also the administrative costs of the government which entails using services of government officials at all levels, transportation, setting up election booths (there will be upward of 10 lakh booths to cover 900 odd million voters), security, refreshments for the staff, voting machines (they have to be serviced to make sure they are operational) and so on. But all this will be accounted for under various heads across ministries. Similarly when parties spend money from what is received as electoral bonds, the money is accounted for and there is a trail.

The unaccounted part is a matter of conjecture and the multiple of three mentioned here is a conservative one. Based on estimates made by various agencies and institutions on the expenditure patterns, the following can be surmised. The middlemen used to garner crowds for a rally get paid around ₹10,000 for every 50 people brought, which is counted by the number of buses that ferry the passengers. Then the people who are brought could come without any cost, but have to be provided with meal boxes and water besides cold drinks, where the outlay can be upwards of ₹200 per head. If musclemen are involved, the people have to come while there could be a cash component inducement otherwise. In some states, liquor is also provided besides physical gifts like clothing articles. Once the campaigning goes into urban areas the payments for leaders of ‘mohallas’ (community) have to be paid ₹2-2.5 lakh for garnering people.

There is big business for MSMEs here. Almost all the cash expenses which are not accounted for would be to these outlets. Therefore tent houses, tempos, tractors, buses, refreshment centres, props like flags, etc. would see business rise in both rural and urban areas. The expenditure on fuel would tend to increase as campaigning takes off in a big way. While vehicles are rented from agencies, there could be fresh purchases too of SUVs for this purpose. As this comes along with the festival season in 2023, these units can expect very good demand. In fact, informal employment will also receive a boost. Volunteers who move around with party members are paid between ₹200-400 a day besides food and refreshments.

All this put together means that there will be a boost for spending which is good for the economy. It has been observed that the currency in circulation has increased effectively by around ₹2.25 lakh crore since March as the withdrawal of ₹2000 notes resulted in currency falling by ₹3 lakh crore while the present position is deficit of around ₹75,000 cr. People have been accumulating currency for use during this time. The irony of course is that given the concept of secret ballot, no one can be sure on where the die will be cast and who gets the final vote.