The Economics of Elections!

For a moment if we ignore all the shady politics & power games associated with the Indian General Elections and view it purely from a macro-economic perspective, the timing of polls couldn't have been any better this time around! We can expect that the Lok Sabha polls would do their bit to ease the nerves frayed by this massive monster we've come to know as the 'economic recession'.

Here's how: The famous Keynesian economics advocates interventionist government policy, by which the government would use fiscal and monetary measures to mitigate the adverse effects of economic recessions, depressions & the like. The oft-quoted proverbial example is that of the Government employing people to dig a large hole and then paying them again to fill it up! In summary, this school of thought advocates massive public spending to distribute money to the people to bolster their buying capacity, which ultimately instills liquidity and cash-flow in the system, that in turn helps an economy to recover from the recession.

Now contrast this with our case at hand. With the country going to the polls, one cannot expect any new major investment action directly by the Government. However, this would be more than compensated by the pseudo-Governmental spend by the aspiring 'netas' who are sure to blow up wads of cash during the course of this election - by way of public campaigning, rallying party cadres, wooing the voting public with legal pompous shows & illegal cash-for-vote schemes (or scams!) etc. If we look at the possible beneficiaries, they would be: media (printed, digital & electronic), flower industry, unorganized logistics & travel industry, food & consumables, and the public at large! All this money would go into the pockets of the lower-middle & middle class segments that is sure to improve their spending power. With the possibility of thousands of crore rupees being spent this summer by the various contesting parties & candidates, this could go a long way towards improving liquidity & cash flow in the economy.

Thus, while it remains uncertain whether the elected party will ride the country out of this recession, the potentially huge expenses during the course of this election would definitely ease things with the economy!