Sunday, March 1, 2009

Elections as stimulus - II

This blog has consistently argued that the coming general elections has the potential to provide one of the cheapest and most effective boost to the economy. In fact, the multiplier of such spending is likely to be the largest in view of the fact that most of the spending will be on goods and services which are produced and delivered by the local eocnomy itself.

The Businessline estimates the total spending would be in excess of Rs 15,000 Cr (this blog had estimated between Rs 15000-20000 Cr), mainly on aircraft, vehicles, fuel, posters, tents, audio equipment, food and paying the daily expenses for the core workers.

As good fortune would have it, many of the larger economies of the world are all set for elections in the next two years. Indonesia votes for COngressional and Presidential polls in mid-2009, and Brazil for Presidential polls in October 2010. Argentina, Chile, Colombia, Hungary, Poland, South Africa, and Ukraine too are set ot go to vote over the next two years. And as the graphic below suggests, the quantum of spending in elections, especially in India, Brazil, and South Africa is substantial enough to provide significant boost to the local economy. In other words, teh biggest contribution the politicians can make to these nations is by bringing forward their elections and then spending as much as they can afford in the ensuing elections!

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