Problems Driving GDP Growth? Hold an Election
Apr. 29 – As countries around the world suffer with the global financial crisis, a little known economic factor has crept into view in India as a means to drive up your GDP, holding national elections.
The 15th General Elections in the country are being perceived as a counter cyclical event that is helping to revive the economy. The reasoning is simple: the money is spent by politicians, the government and candidates in trying to win and maintain power.
The demographics are huge with 650 million voters; all of whom need to be managed and given the right to vote for free, quite apart from the sums spent on trying to get them to vote for a particular candidate or the other. The current elections are expected to inject about US$2 billion into the Indian economy.
This is a marked jump up from the previous 2004 elections, with expenditure of less than half that. In comparison, the U.S. Federal Election Commission stated that about US$1.8billion was spent in the campaign that recently provided elected Barack Obama to presidency. The Indian amount is not only larger, it is also being spent in only four months as opposed to the year long process of U.S. elections and campaigning.
In India, the Center for Media Studies shows that about 20 percent of the total US$2billion is spent on organizing the elections, issuing of ID cards, electronic voting machines, polling stations and labor costs. About 60 percent is spent by political parties in their campaigning, with another 10 percent being funded by individual candidates as they travel, host publicity campaigns, and hold hundreds of thousands of election meetings right across the nation. The remaining 10 percent is defined as “illegal” expenditures, usually used for cash-for-votes in states such as Andhra Pradesh and Karnataka. This expenditure goes directly into key economic sectors, such as payment for services and products related to auto and air travel, FMCG, and the catch all ‘entertainment’ service sector relating to anything from hotels to liquor.
It is also directly related to the governments infrastructure programs – the software platform to handle the elections was provided by Infosys, whose relationship with the government now is certain to make it a major player in national IT infrastructure development.
While a one-off blip in expenditure, holding an election does boost domestic economy and will almost certainly do so for India’s second quarter figures this year.
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