Elections time is a busy period for the economy even though officially it is the slack season since businesses normally do not invest much during this period. Also production tends to be subdued as spending is low. However, when Elections are around there is a new kind of Economics which comes into play.
The Elections economy is quite robust and has been growing in size as it involves a different set of activity that leads to spending. This directly involves various industries as money spent can be linked with some sector which gets a boost, which can also be the unorganized tea vendor where sales move upwards.
Cash is very useful when it comes to bribing voters as it is hard to track and easy to use as giving monetary incentives for votes, though illegal works well for candidates. This amount will never be known except when it is confiscated. The Election Commission allows officially expenditure of Rs 50-70 lakhs per candidate for the Elections. In 2014 there were over 8,000 candidates who contested in the game which means around Rs 6,000 crore as candidates tend to spend at least this limit.
It was also calculated that a total of $5 bn was spent during the Elections which is around Rs 35,000 cr. The expense will definitely be higher this time given the cost escalation as well as the level of competition across parties. While the actual number involved will always be a matter of conjecture, the fact that this is almost half the size of the Rs 75,000 farmers’ transfer programme by the government provided for in the Budget says a lot of the quantum.
First, the direct illegal payments made to individuals would directly add to spending across the country and considering that the amount individually involved would be small and range between Rs 500-2000, this would go as discretionary expenditure. Depending on the bribe given it can be used for household goods, electronic items, clothing, or food and recreation.
Second, bribes for votes could also go in the form of kind which can directly affect the sales of the product that is being offered. This can range from sweets to kitchen appliances depending on the contestant. The former is popular in the rural areas where there is a personal touch with the voter.
Third, the paper industry is one which sees an upsurge as a lot of publicity material is through leaflets which cannot be tracked. This would come as a big relief to the industry as it comes at a time when use of paper has come down with the advent of technology. The collateral benefits goes to the unorganized printing outlets which will witness and upsurge in demand.
Fourth, the media would be witnessing a boom as it coincides also with the IPL where there is competition for viewers’ mind space. This would be more at the level of the party which can be accounted for as it comes under legitimate spending. The language newspapers in particular tend to benefit when the achievements of the party or the promises are articulated.
Fifth, the transport sector would witness a boom as vehicles ranging from bicycles to helicopters are very much in demand for campaigning purposes. While national level leaders keep travelling across regions to support the local candidates, the involved contestants would ensure that they meet as many voters as possible in the period leading to the voting day. A large quantum of fuel would be consumed on this score.
Sixth, the event managers of different sizes would be busy with work as campaign meetings are held which involves setting up of the infrastructure to ensure that facilities are in place when these events are held. This would include tents, stages, podium, security, loud speakers among others.
Seventh the payments made to supporters would also be mind boggling as the daily rates for having people come along for campaigning ranges from Rs 200-500 depending on the place with clothing (party dress) and food also added to this amount. These are costs that have to be borne as candidates always like to move in groups to convince the voters that they have the support of the people.
Therefore, there is a lot of money involved during these 2-3 months which can be substantial. Currency in circulation increased by around Rs 3.1 lkh crore in FY19 and could also partly be due to the refilling of cash in houses post demonetization. But a lot of this currency would have also been routed into the Elections campaigns.
The government on its part would also be spending money to conduct these Elections. The amount involved could be around Rs 5000 cr (it was around Rs 4000 cr last time). This would involve moving officials around, getting the EVMs ready, having arrangements in the voting stations etc. In 2014 there were 9.27 lkh voting stations and at the lowest level would involve an expense of at least Rs 1,000 cr (@ Rs 10,000 per station which includes rent, allowances to polling staff, physical facilities, security etc.).
Therefore Elections are big business for several businesses especially in the unorganized sector. The money spent is direct and rarely leaves an audit trail and hence there can be only conjectures on the amounts involved. The money does lead to a churn which is useful for an economy which is still stagnant and waiting for a push. This one will be of a reasonable magnitude considering that it would be spent in the short period of 2 months or so.
Madan Sabnavis is chief economist, CARE Ratings. The views are personal.