How Elections Affect Indian Economy

The What:

Any economy feels the before and after effects of a change in regime. Elections per se have an effect whether there is a change in management or not. Popular research shows that in election years there is a greater effort from Politicians towards public works. This is quite clearly comprehensible. The greatest visibility which they can achieve is by making radical changes through the department which directly affects the public life – Public works or PWD. People today vote for one thing alone – economic development. The ever changing dynamics and internal equation changes between political elements mean that some projects which were viable will suddenly get delayed approvals or some fund allocations will suddenly freeze.


  • The expectations from the international community are towards stability for a business environment which can be suitably projected.
  • The Indian currency has been taking a beating in the past few years. This situation needs to be addressed along with massive subsidy bills. The new government has constantly been grappling with these issues even now.
  • The last election saw a single party acquiring the required number of seats for majority after 1989. This is a welcome change for business sector since it means lack of congruity in policy design and curb on unnecessary state intervention on central policy making.
  • International studies indicate that the stand the governments takes on key impact issues such as fuel subsidies and pricing of gas will be the factors to watch out for.



  • Statistics show that in election years there is an increase in spending on investments.
  • Commodity taxes often see a negative trend.
  • More loans to states where the ruling regime had won by a low margin or lost.
  • Deficits are not impacted. This may be due to consumption spending going down.
  • The state public works departments come into full bloom with major road constructions getting completed or getting underway.
  • A hike in government spending however also meant a hike in inflation.
  • An industry which has suffered the effects of election as per data of the past two decades is steel. Consumption of steel has experienced sharp drops in election years.
  • A hike in farm loans by almost 5-10% in election year has also been recorded.
  • The price essential food items are often seen to go up as well due to sharp curve which commodity inflation tends to take.
  • The stock markets also see effect in that if the new regime is the one which is expected to boost financial reforms, then an upward trend and a negative if it is otherwise.

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