General elections spending could provide stimulus to economy

The General Election related expenditure could impart a much-needed spending stimulus of about Rs 15,000-16,000 crore to the economy.

The 2009-10 Budget has allocated Rs 9,700 crore for it. To this must be added the spending per constituency by parties and candidates. If there are two serious candidates, the average spending could be as high as Rs 5 crore to Rs 12 crore per constituency per candidate, say political parties. Each candidate is allowed to spend only Rs 35 lakh but there is no limit on how much his or her friends, and the party, can spend.

Thus, at an average, the spending per constituency can be as much as Rs 14 crore. With 544 constituencies, the spending by candidates comes to another Rs 7,086 crore. Added to what the Government will spend, the total spending could exceed Rs 15,000 crore.

The money is spent on aircraft, vehicles, fuel, posters, tents, audio equipment, food and paying the daily expenses for the core workers.

Past data show that the bulk of this expenditure takes place in the month immediately preceding the election. In 1999, when the election was held in October, the sale of utility vehicles in September came to 9,788 units, up from 8,098 units in August. In 2004, the election was in May and SUV sales in the month came to 12,224 units compared with 12,366 units in April. However, there had been sharp increase in the previous two months, possibly on account of advance purchases by taxi operators ahead of the election. This time round, with the drop in call-centre demand for taxis, operators are unlikely to augment their fleets, say automakers.

Diesel sales in September 1999 went up by 9.6 per cent. In May 2002, diesel sales went up 26 per cent.

The trend in aircraft induction is less clearly discernible. “In the last four-to-five years the general aviation fleet in India, which includes non-scheduled, private and Government, has almost doubled to about 600 aircraft," the Chief Executive Officer, CAPA, Mr Kapil Kaul, said.

The two main political parties - the Congress and the Bhartiya Janata Party - spent Rs 8.71 crore and Rs 76.46 lakhs respectively on air travel during the last general elections, according to data on the Election Commission website.

Industry sources point out that the expenditure shown is miniscule as more often than not the aircraft is chartered by a third person who also makes the payment, thereby easing the financials on the books of the political parties.

But with election charters being ad hoc charters, the rates are 25-30 per cent more than the Rs 25 lakh monthly and Rs 25,000 to Rs 30,000 an hour charged by most PSUs having helicopters.

(Source: Business Line)