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Poll spending set to boost Indian economy

Political campaigning could add about $10bn into various sectors, from chartered flights to liquor distribution.

Last updated: 03 Apr 2014 09:16
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Political parties offer daily-wage rates for people to attend their rallies [EPA]

India's billion plus people have pinned their hopes on the next government to fix the faltering economy, but an increased spending by political parties in the upcoming elections could boost the economy even before the next prime minister is announced.

From stock-markets to the transport industry, the media industry to the agricultural labourers, all of them are looking forward to India’s parliamentary elections to be held in nine phases from April 7 to May 12.

Although temporarily, the money - much of which comes from India’s infamous black-money chest - could trickle down to the common man's pockets too.

A study published by the Associated Chamber of Commerce and Industry of India (ASSOCHAM) indicates that the economy as a whole could receive a $10bn (Rs 60,000 crore) boost.

Election expense of each candidate in the 543 parliamentary constituencies is limited to up to $117,000 (Up to Rs 70 lakh). However, it is an open secret that candidates spend five to ten times that amount.

The money is used in a variety of ways ranging from publicity material and campaign logistics to cash-bribes and liquor distribution.

Supported by big corporates, the "big two" political parties (the ruling Congress party and the main opposition Bharatiya Janata Party) and several other regional parties have upped their campaign and spending.

BJP has got further funding boost from the corporate sector due to the "investor-friendly" image of its prime ministerial candidate Narendra Modi.

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However, the new entrant, the Aam Aadmi Party (AAP) that briefly held power in Delhi, has given rivals the shivers over transparency in election spending. The AAP party led by anti-corruption crusader turned politician Arvind Kejriwal has attacked main political parties of indulging in crony capitalism.

While in the past candidates depended on funding from their respective political parties, recent elections have shown that spending by individual candidates far surpasses party spending. Election managers of the BJP and the Congress party have confirmed this with Al Jazeera.

Multi-cornered contest in many constituencies are expected between the BJP, Congress, AAP and regional parties such as Trinamool Congress, Samajwadi Party, Bahujan Samaj Party, All India Anna Dravida Munnetra Kazhagam (AIADMK), Dravida Munnettra Kazhagam (DMK), Telugu Desam Party, Janata Dal (United) etc.

Each of the 543 constituencies could see at least three-four serious candidates in the fray. In effect, each constituency could witness $3.5-4.5m (Rs 20-25 crore) being spent, adding up to $2-2.5bn (Rs 12,000-15000 crore) approximately to the nation.

Temporary boost

Government spending on elections, including the Election Commission’s spending of $163m (Rs 1,000 crore), is expected to be in the order of about another $800m-1.2bn (Rs 5,000-7,000 crore).

The total cost - formal and informal - of elections will be in the order of $3.3bn (Rs 20,000 crore), according to the ASSOCHAM study estimates.

Albeit temporarily, some of the businesses such as media, transport, liquor and hospitality will get a boost. The coconut sellers, the public address system operators, caterers and drivers alike are also banking on elections to make quick money.

"…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," Rana Kapoor, the ASSOCHAM president, said in a press release.

The stock markets too have gone up expecting a new dispensation in Delhi and on March 24, the Sensex breached the 22,000 mark.

Shriram Subramanian, founder and managing director of Ingovern Research Services told Al Jazeera that foreign investors were pouring in in anticipation.

"Stocks are moving up on the assumption that Modi will be a decisive leader who will take hard decisions and bring the economy on the path to recovery," he said.

The media business in general and the print industry in particular are immediate beneficiaries.

"Print advertising is expected to grow at 8.5 percent in 2014, up from 4.6 percent last year, largely on the back of advertising by governments and political parties ahead of the general election in the first few months of the year,” according to the annual advertising market projection by GroupM, the media investment management arm of the WPP Group.

Overall, the advertising market is expected to grow to $8.5bn (Rs 43,065 crore), the company said in a report titled "This Year, Next Year", an expansion of 11.6 percent as compared to 10 percent in 2013.

Although figures cannot be ascertained on the increase in liquor flow during the elections, secret distribution of free liquor - like distribution of cash -  is a part of Indian electioneering.

Stocks are moving up on the assumption that Modi will be a decisive leader who will take hard decisions and bring the economy on the path to recovery

Shriram Subramanian, Ingovern Research Services

It comes to light only when the Election Commission (EC) raids unearth large quantities of illegally stocked liquor. Karnataka’s Chief Electoral Officer Anil Kumar Jha told reporters last week that his team seized 10,700 litres of liquor in the state since March 5.

The EC has issued express orders that liquor shops which show a spurt in sales of 30 percent would be scrutinised. Shops stocking 50 percent more liquor than in the same period last year would also come under questioning.

Although one would expect elections to jump-start its sagging fortunes, transport industry insiders say that a parallel economy in the transport sector will make hay while formal transport business will pocket little of the election windfall.

A bulk of transport business during the elections will benefit the black-market operators, according to KG Ravindra of the All India Motor Transport Congress.

The EC’s ceiling of expenses forces poll candidates to source private vehicles instead of the yellow-registration-plate transport vehicles. As candidates do not want receipts, several operators source private vehicles and rent them out at higher costs.

"Of course, the EC, the police and the army hire our commercial vehicles, but the tariffs the government pays is lower than the market rate. And the period of work is just a couple of days during polling," Ravindra said.

Nevertheless, the number of taxis, buses and trucks doing duty during elections - both legally and illegally hired - and the fuel they consume, one expects, will turn the wheels of the economy.

Chartered flight windfall

High-flying politicians, however, prefer helicopters and private jets to air-hop from one election rally to another. Chartered flying service companies, which have been in a spot of recession, are seeing a windfall too.

At the Hyderabad Air Show, held between March 12-16, there was not a single helicopter on show because almost all the 250 civilian helicopters available in the country had been hired for election-related work.

"This is the only time that the chartered market makes money. Political parties pay cash in advance and, given the huge demand, tariffs have gone up by around three times the operating cost," Robin Cherian of K-Air, a Cochin-based charter-brokering company, told Al Jazeera.

The normal tariffs, as indicated by the government-owned chartered service Pawan Hans, starts from $900 per hour (Rs 55,500) for helicopters.

Even the incomes of farmers, unemployed youth and daily-wage agricultural labourers in the villages get a boost as they are a big part of election campaigns. Political parties offer much more than the daily wage (which ranges from $2-3 per day or Rs 130-190) rates to attend rallies.

Active campaigners could even get a motorcycle and a mobile phone to boot.

"I have not spent any money this month. Everything is taken care of," a village-level party campaigner in Gulbarga in Karnataka told Al Jazeera.

Booth-level committees formed by political parties are a much sought-after source of employment for unorganised sector workers.

Economists, however, say that elections are about an artificial spurt in business.

"The boost will be a temporary thing, like a shot of adrenalin. But it (the economy) will go back if there is no stable government after the results," Dr Vinod Vyasulu, founder of the Centre for Budget and Policy Studies, told Al Jazeera.

"What the economy needs is a political direction. I doubt if we will get a decisive result."

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Source:
Al Jazeera
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