Parties' Lok Sabha polls spend may top Rs 1 lakh crore, spur growth in Q4

Spending by political parties for this year's general election could top ₹1 lakh crore, pushing up consumption and providing a 0.2-0.3 percentage point boost to growth in the last quarter of FY24, according to economists.

Candidates of political parties will likely accelerate their spending from this quarter (fourth), increasing travel for campaigns and use of publicity material, among other things, thereby pushing up consumption.

"In 2019, it was estimated that ₹60,000 crore was spent, which, when adjusted for inflation, more parties/candidates can touch the ₹1 lakh-crore mark. A lot of this would be in cash and not accounted for," said Madan Sabnavis, chief economist, Bank of Baroda.

General election in India is scheduled for the middle of this year, and economists say rural households and lower-income groups could benefit from the increased spending by political parties.

"We are expecting that pre-election spending, based on historical trends, would lead to an increase in consumption, but the rise would be more for rural consumers and people in the lower-income bracket," said Sakshi Gupta, principal economist at HDFC Bank.

Gupta said some of the impact of elections on consumption was visible in the third quarter itself, owing to state elections. The government increased fertiliser spending and announced cuts in LPG prices this year.

Radhika Rao, senior economist at DBS Group Research, said there may be a slight uptick in discretionary consumption, which benefits the lower- and middle-income stratas. "Growth may receive at best a 0.5 bps uptick in the final quarter due to elections, but even that may be subdued by base effects," Rao said. Paras Jasrai, senior analyst at Ind-Ra, said the growth impact may be limited to 0.2 -0.3 percentage points, but pointed out that GDP growth would still remain below 6% in the last quarter of FY24.

The RBI's monetary policy committee has projected growth to ease to 6.5% in the third quarter and to 6% in the last quarter of the current fiscal.