Need Stimulus – Hold an Election

by Manshu on March 3, 2009

in Opinion

The Indian economy grew at just 5.3% in the last quarter, which is quite bad considering the fact that it grew at 8.9% an year ago.

Exports form only about 22% of the economy and that is the reason the Indian economy had not seen the kind of contraction that is being witnessed elsewhere around the globe. The fact that there are stringent banking regulations also helped protect Indian banks against sub-prime loans and such.

But, the global recession seems to be catching up with India. Luckily, for the Indian economy – the general elections are planned for this year and that will act as a stimulus to the Indian economy.

Business Line estimates the amount of money that will be spent on the elections to be in the vicinity of Rs.15,000 crores. That is about 3 billion dollars at the current exchange rate, and is a about 0.23% of the GDP, which is about 1.2 trillion dollars.

Traditionally, politicians have been criticized for spending large sums of money on their election campaigns and influence voters with endless propaganda. With this in mind, the Election Commission (the body that regulates elections) has put a cap on the maximum money that a candidate can spend on elections at Rs. 35 lakhs (70,000 dollars).

Needless to say, the candidates get their friends, relatives and party workers spend on their behalf and circumvent the limit. To that extent, the limit is not really enforced at all.

Rallies form a large part of the campaigns and candidates spend a large amount of money on paying people to attend those rallies. Candidates need to gather large crowds in order to make their rallies successful and therefore they end up paying people to attend these.

Party workers gather people from various places, both – urban and rural, and then these people travel from one place to another attending rallies of the respective parties. It is common to see truck loads of people traveling through states in order to attend political rallies.

The money made by people who attend rallies is direct economic stimulus, as there is a very high chance that this money will be spent (and not saved).

The transportation sector benefits quite a lot from election spending as politicians buy SUVs, hire buses and trucks, charter planes etc. This is a good thing as one of the first sectors to take a hit during a recession is the transportation sector.

I think the election spending needs to be encouraged this year, instead of being criticized, as is the usual practice. There are obvious ethical questions about this, but, I think it is an illusion to think that the cap on spending really works, and we are much better off removing this cap than keeping it.

If the cap is lifted – candidates may spend more than what they are used to, as it will become slightly easier to raise funds and spend money. That will provide a much needed stimulus to the economy and will channel some funds to the class of society that needs it the most.

So, what do you think? Should the cap on election spending be raised or eliminated completely?

{ 4 comments… read them below or add one }

Ancella March 3, 2009 at 9:50 am

I think the cap on spending should remain. Allowing political parties to spend as they fancy will lead to certain groups / lobbies donating the cash being able “to get their way” with them. Also, it will lead to a scenario in which the party which has spent the most, to go on to win the election (obviously). In India, where you have politicians handing out sarees and what-not during election time to “influence” the people into voting for them (especially the poorer sections of society), this is simply going to aggravate the situation. Trying to save the economy is one thing, alright, but giving the politicians a free reign to exploit the situation….is another thing altogether!

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Manshu March 3, 2009 at 11:38 am

Thanks Ancella, I am fairly sure that even now the cap is not working and candidates are spending what they want, albeit through other means.

The other interesting assumption in this whole debate is the gullibility of the massses. The whole thing basically says – spend more and gain votes. How true do you think that is?

I have not seen any research on this, but I do feel that there must be a very high correlation in the money that a candidate spends and a positive election outcome.

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Biplab Das March 4, 2009 at 12:29 am

Finally something on Indian economy!! I thought you have forgotten India..

Reply

manshuv March 4, 2009 at 4:04 am

How Can I forget the Indian economy πŸ™‚ you didn’t answer the question though.

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