Introduction
Elections and economies are closely intertwined. The decisions we make when we vote can significantly impact our financial well-being, influencing factors such as taxes, wages, trade agreements, and regulations. Understanding how elections affect the economy enables us to make informed voting decisions that directly impact our wallets. Campaign promises can have ripple effects throughout the entire economic system, affecting everything from the cost of groceries to job stability.
Impact of Campaign Promises on Taxes
Political parties in India often use tax-related promises to sway voters and address socio-economic issues. These promises may involve tax reforms, deductions, wealth allocation, corporate tax policies, GST reforms, and social welfare programs. However, fulfilling such promises requires balancing tax advice and feasible policies while considering political consensus, economic conditions, and administrative capacity.
Government Spending and Your Wallet
Government spending profoundly affects citizens’ finances and the economy. It influences essential sectors like healthcare, education, infrastructure, and welfare programs. Unfortunately, corruption and mismanagement can cast doubts on the transparency and efficiency of public spending. Citizens demand accountability and tangible benefits from their hard-earned money. Government spending decisions directly impact subsidies, welfare schemes, public services, transportation costs, property values, and job opportunities. Therefore, it is imperative for the government to ensure that every rupee spent is beneficial and contributes to the overall well-being of the economy.
The Indian Government has provided budget estimates for 2022-2023, 2023-2024, and 2024-2025, organized into various sectors. The cost of establishing new establishments has gradually increased from 2022-2023 to the revised estimates for 2023-2024, with a slight reduction in the 2024-2025 estimates. Over the years, central sector schemes and project costs have risen, with 2023-2024 reflecting the highest spending. Other central sector expenditures have also increased significantly, particularly from 2023-2024 to 2024-2025.
In terms of transfers, costs on centrally funded schemes, finance commission appointments, and other grants/loans/transfers have generally increased, with no significant changes in certain categories. The budget estimates for 2024-2025 show a significant increase in capital expenditure compared to the actuals recorded in 2022-2023. The data highlights the percentage share of total expenditure for major items such as transport, rural development, agriculture, education, health, energy, and social welfare. Expenditure on transport, rural development, and agriculture received a significant share, indicating a focus on infrastructure development and rural improvement.
The government’s investment in infrastructure development, including building facilities and other essentials, is a commendable step towards boosting the economy and improving various aspects of the country. For example, before 2020, Dixon Technologies’ share price was 455.64 INR, and it currently stands at 8,568.05 INR.
Political Campaigns and the Stock Market
Promises and Plans: Campaign promises can influence investor sentiment towards different companies.
Feeling Confident or Nervous: If people believe the election will go smoothly and the government will be strong, they are more likely to invest in stocks. Conversely, uncertainty can cause investors to hold back, leading to stock market volatility.
Rules and Changes: New leaders may introduce new regulations affecting how companies operate, influencing investors’ decisions to buy or sell stocks.
Different Businesses, Different Effects: Depending on campaign promises, some sectors may perform better or worse. For example, promises to increase infrastructure spending can benefit construction companies.
Money Coming In or Going Out: Foreign investors also pay attention to elections. Perceived risks may lead them to withdraw their investments, impacting the stock market.
Big Changes, Big Reactions: Elections can cause temporary market fluctuations, but it is essential to consider the broader economic picture and company performance when making investment decisions.
Conclusion
Elections can impact the economy by altering government policies, spending, and regulations. Understanding how elections affect macroeconomic factors such as taxes, public spending, and stock market fluctuations is crucial for making informed decisions. While election results can cause temporary market changes, assessing overall economic conditions and corporate fundamentals is vital for strategic investment planning. Balancing political promises with financial responsibility ensures that government spending benefits citizens and contributes to economic growth. By understanding the relationship between elections and the economy, voters can make informed choices that positively impact their financial security.