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Elections to give Rs 60,000 crore GDP boost to economy: ASSOCHAM
Wednesday, March 12, 2014

With electioneering picking up fast, the estimated Rs 15,000-20,000 crore to be spent on the general elections in all, will create a huge multiplier GDP effect of at least  Rs 60,000 crore giving a shot in the arm of the Indian economy, an ASSOCHAM study has said.


The ASSOCHAM study has arrived at the realistic figures of election expenditure by the government and candidates. While the official limit for each of Parliamentary candidate in 543 constituencies has been fixed at Rs 70 lakh, the previous experience of different agencies at the ground level shows that this time around, each of the contestants, in majority of the cases , may end up spending Rs five-seven crore , the scanner of the Election Commission notwithstanding.

“It is extremely difficult for the official machinery to minutely monitor the expenditure details of the candidates…The past experience shows that the number of crorepatis fighting the elections far exceeded the commoner, who would even find Rs 70 lakh difficult to raise unless he or she is from a cash rich big party..”, the ASSOCHAM study said.

With multi-cornered contests in most of the constituencies between NDA, UPA, regional parties like SP, BSP, AIADMK, DMK, Trinamool Congress, TDP, YSR Congress and the new kid on the block Aam Admi Party, it is assumed that each of the Parliamentary seats will have at least 3-4 serious candidates…Thus, each of the constituency may witness Rs 20-25 crore being spent on tough electioneering.

This would add up Rs 12,000-15,000 crore for electioneering. With addition of the official expenditure of at least Rs 1,000 crore and the other undefined extra spend on logistics by the Central and State Government, the total election expenditure – official and unofficial, permitted and non-permitted could go near the Rs 20,000 crore mark. 

The Assembly elections in Andhra Pradesh and Odisha will give another booster of Rs 1,000-1,500 crore, the chamber study said.

The businesses in the media –like television channels, newspapers, city hoardings, printers, social media, transport and hospitality – bus/taxi operators, tents/scaffoldings, caterers, airlines, will see the direct positive impact of the election budgets of the political parties as also the state machinery.

“However, the greater economic impact would be seen in the form of GDP multiplier effect since those earning from these would be spending at least 80-90 per cent of such earnings. The propensity to save is small among the workers , employees and even the owners of the unorganised businesses which will generally be more useful for electioneering excepting TV channels and newspapers,” ASSOCHAM President Mr Rana Kapoor said. However, he said that the study has sought to capture the ground situation and in no way reflects endorsement by ASSOCHAM on use of money power in elections.

“We stand for elections which are free from money and muscle power and do not support huge budget, even though the economy may get a consumption boost,” he said.   

The ASSOCHAM study said it would be conservative to assume a multiplier effect of one:four to this expenditure.

The debate of accounted or unaccounted money notwithstanding, the Rs 60,000 crore booster to an economy resulting from multiplier election spend will make a big difference to the economic sentiment. In case, the country is luck to get a stable government after elections, the sentiment will further improve breaking the vicious circle of slow investment and demand that the Indian economy has been witnessing for the last two years.
 

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