how various state and assembly elections affect economy of a country in the various years.

2. ELECTIONS
 An election is a formal decision-making process by which
a population chooses an individual to hold public
office. Elections have been the usual mechanism by which
modern representative democracy has operated since the
17th century. Elections may fill offices in the legislature,
sometimes in the executive and judiciary, and
for regional and local government. This process is also used
in many other private and business organizations, from
clubs to voluntary associations and corporations.
 Elections are very important from the aspect of the
economy and market situation changes drastically
according to results of elections.

3. Elections are designed to serve different purposes for various political
voting systems.
 In a parliamentary system, a general election is an election in which
all or most members of a given political body are chosen.
 A by-election is an election held to fill a political office that has
become vacant between regularly scheduled elections.
 A primary election is an election that narrows the field
of candidates before the general election. Primary elections are one
means by which a political party nominates candidates for the next
general election.
 In the case of closed primaries, only party members can vote. By
contrast, in an open primary all voters may cast votes on a ballot of any
party.
 A referendum is a direct vote in which an entire electorate is asked to
either accept or reject a particular proposal, usually a piece
of legislation which has been passed into law by the
local legislative body and signed by the pertinent executive official(s).
 A recall election is a procedure by which voters can remove an elected
official from office through a direct vote before his or her term has
ended.

4. .
 Elections affect who is in power in a democratically-
elected country like India and the US. Who is in power
affects the economy in two ways: it determines the
laws that shape and drive our markets, and the taxes
and credits that slow or build new businesses.

5. To give a few examples:
 In the US, new laws can make products that were once
freely available, restricted purchases or even illegal like
guns, marijuana etc. When items change from freely
available to restricted, that can create an underground
market and make the prices go up.
 As for taxes and credits, consider the tomato.
Taxonomically it is a fruit. Most of the world calls it a fruit.
in the US most people consider it a vegetable, because
Congress enacted a law over a century ago regarding
tomatoes as vegetables for their status as imports for tariff
purposes. The Supreme Court upheld this even though
they acknowledged that tomatoes were fruits.

6. Ways in which elections affect an economy
Formation of
Economic policies
International
Trade
GDP per
capita income
Income
Inequality
War and
disturbances Scams and
corruption

7. Industrial production
• Political risk insurance cannot be a universal remedy for every
conceivable political risk that can confront an international trader or
investor. But in a world filled with political change, obtaining
political risk insurance can make the difference between operating a
profitable business and making a costly mistake.
Inflation
• Most economists acknowledge that differences in monetary and
fiscal policies among countries are the main reasons behind the
inflation variability they sustain.
Businesses
• The political factors affecting business are often given a lot of
importance. Several aspects of government policy can affect
business. All firms must follow the law. Managers must find how
upcoming legislations can affect their activities.
Investment
• It depends whether a favourable government is coming not. If not
then there are chances of reduced investments.

8. Economic Policies
•Political instability is likely to shorten policymakers’ horizons leading to
sub-optimal short term macroeconomic policies. It may also lead to a more
frequent switch of policies, creating volatility and thus, negatively affecting
macroeconomic performance.
Economic Growth
•Growth is significantly lower in countries and time periods which have a
high propensity of government collapse. Some economists also have found
that higher degrees of political instability lead to lower economic growth.
Employment
•Self-serving political actions can negatively influence social groupings,
cooperation, information sharing, and many other organizational
functions. It is the use of power and social networking within an
organization to achieve changes that benefit the organization or
individuals within it. Some of the personal advantages may include access
to tangible assets, or intangible benefits such as status or pseudo- authority
that influences the behavior of others.
Economical Rates
•Investment decisions’ sensitivity to tax rates is well known among
academics and policy makers. As a consequence countries are lowering
their tax rates in order to retain and attract investments. Political scientists
have shown an interest in tax rate determinants and naturally focused on
political variables but early studies tended to consider limited
determinants, such as party color and election.

9.  Economy typically slows down before an election
 A study of key economic variables over the past 30
years shows that economic activity lost pace
significantly every time there was a general election.
 New project additions dry up in an election

10.  The pace of industrial credit growth decelerates
 The average increase in nominal government spending
during election years is 15.84% as compared to 11.38%
in non election years.

11.  In election years, more loans are made to the districts
in which the ruling state party had a narrow margin of
victory in the previous election.
 The average inflation during election years is 8.56%
since 1980, as compared to 7.55% for non election
years.

13. The major reasons for the Economy Downfall during
Election are:
 Government spending rises
 Slowdown in investment
 Slowdown in economic activity

14.  Elections may affect the economy of a nation positively
or negatively.
 The Effect Depends On Various Factors Including-
Current state of the nation
Political parties involved in polling
Ruling political party
Current policies
Political campaigns

15.  A vibrant democracy creates a positive image of the
country: This ensures social harmony, order and peace in
the society. A bad law and order situation and frequent
clashes in society are bad for economy
 Generate revenues for media houses: The
advertisements in print and electronic media generates
revenue for media houses, thereby boosting the economy
 Accountability: Having to face electorate more than once
every 5 year enhances the accountability of politicians and
keeps them on their toes .
 Jobs: Many jobs are created during elections, boosting the
economy at the grass-root levels

16.  Rising cost of elections to the taxpayer : Cost of elections has been
steadily rising over the years. This affects the Indian economy adversely
as it consumes the money which could have been used for development
of India.
 Frequent elections delay decision making :Frequent elections to
state assemblies impact the decision making process of governments
due to the model code of conduct imposed on all parties . This delays
projects and progress of various sectors, thereby affecting the economy
adversely. This can’t be quantified, yet it is an important concern.
 Role of black money or unaccounted money in elections : This is a
well known issue. This affects the economy during and after the
elections. Since candidates are keen to recover their investment on
elections, they indulge in widespread corruption which hurts the
economy.

18. Where does the money go??
 Wooing voters with benefits like clothing, trips etc
 Posters and Banners
 Dummy candidates
 Renting crowd
 Party workers
 Commuting and transportation costs

20. Economic impact of polls
 There are always high hopes from polls when it comes
to economic momentum of the country, but
economists are of the view that Indian economy is
much more dependent on the global economic cycle
than who rules in Delhi.

21. What all happened during Indian
elections??
The period from 1971-72 to 1975-76 registered an average inflation quite high. Due to
a few drivers of these inflations like oil shocks, drought and currency devaluation,
persistence of inflation were a common pattern when inflation was high. The
decade of the 1970s stands out as the most turbulent period in India in terms of
inflationary uncertainty, witnessing very high inflation mainly driven by the supply
shocks emanating from agricultural and oil prices. Independent India’s highest
inflation occurred in September 1974 when it reached 33.3%. Country’s worst
inflationary episode was from November 1973 to December 1974when inflation never
dropped below 20% and was above 30% for four consecutive months starting June
1974. Referring to the severity in inflation, particularly that of agricultural
commodities in1972-73 and 1973-74, the RBI Annual Report 1974-75 observed that
“even the seasonal decline in prices, particularly agricultural commodity
prices, to which the Indian economy is traditionally accustomed, did not take
place during the last two years”. Indira Gandhi won the parliamentary elections in
1971 .Despite the victory against Pakistan, the Congress government faced numerous
problems during this term. Some of these were due to high inflation which was in
turn caused by war time expenses referring to the 1971 indo-Pakistan war, drought in
some parts of the country and more importantly, the 1973 oil crisis. In May 1971,
taxes were imposed on abroad travel that devalued the rupee further to around
7.5rupees against US dollar.

22. The deficit as percentage of GDP increases in the pre-election period by around 17%. And as there
were no significant events that affected the economy in that period,
the increased spending during the election year could be the very reason why the deficit
increased by such a rate. India was going through a period of deflation during 1975-76 owing to the
political unrest and emergency in that period. However inflation rose in 1977 because of poor
food grain production leading to food unavailability and inflation dropped again in the next year
1978 because of the bumper crop production.
The Janata government could not leave a positive impact through economic reforms. It
launched the Sixth Five-Year Plan, aiming to boost agricultural production and rural industries in
1977. They tried to promote economic self-reliance through indigenous industries, the government
required multi-national corporations partner up with Indian corporations. The policy proved to be
controversial, diminishing foreign investment and led to the high-profile exit of corporations such
as Coca-Cola and IBM from India. But the government was unable to address the issues of
resurging inflation, fuel shortages, unemployment and poverty. We can’t be sure of inflation, as
agricultural output declined because of drought in that period which could also have been driver for
this inflation rise.

23. In the build up to election, the investors started taking interest in India
as the 1980s reforms proved to be crucial in building the confidence
of politicians regarding the importance and ability
of policy changes such as trade liberalization, devaluation
and delicensing of investments to improve growth without
disruption.
A similar pattern is seen where inflation rose in the election year and
dropped back to normal in the post-election year. In absence of any other
significant event during that period, this presents a strong evidence in
favor of the fact that government spending increased in that election year
that led to increased inflation. The elections and change of government,
government proposed changes played an important role in impacting the
stock market.

24. Move toward liberalized industrial policies launched by Rajiv Gandhi
government (Mr. Pranab Mukherjee was Finance Minister). Beginning
of industrial liberalization process, marked 1st phase of shift in
policy toward freer markets as key to poverty eradication and growth.
These reforms and policy changes towards the pre-election period in
1984 attracted a lot of investors which is why stocks shot up in that
period and went down to normal in the post-election period. This
provides strong evidence that elections were responsible for the above
event. On the contrary sudden death of Indira Gandhi led to this
election, so we cannot predict any effect of policies on economy.

25. Due to the Gulf war, price of the crude increased and in the same period,
demand for the crude oil increased a lot. This resulted into higher import but
there was no significant increase in the exports. Due to balance of payment
crisis, dollar value was appreciated in 1990-91 and in 1991-92, dollar appreciated
much more. Inflation was at its peak due to low agricultural outcome
in1990-91, but inflation reduced a bit in 1991-92 due to good agricultural
production. Because of BOP crisis, government was not able to import also to
inflation. But new government took lot of new measures to control the
situation which resulted in Sensex value increasing and deficit reduction. Both
the previous and new governments had no control on exchange rate and Sensex
movement which were mostly affected by balance of payment crisis. But the P
Narasimha Rao government was able to reduce the deficit and inflation with its
policy measure. Less agricultural output and BOP crisis impeded previous
government from controlling inflation.

26. During this election, there were not many external influencing factors to affect the economy. H. D.
Dev Gowda government took many policy measures in areas like industrial delicensing,
foreign investment, trade policy, financial and capital markets. Because of these, economy was
well recovered. During the tenure of previous government also economy was growing well with
economic factors showing positive indication. During this election previous government might have
taken some measures to allure the voters, but figures show the different story. This may be the result
of economic growth.
Asian crisis was the reason for many economic changes in India, especially Sensex
movement. Sensex went up just after crisis was about to over. Inflation was suddenly decreased
after the election which may have been the effect of new government’s strict measures to
control the economy. Previous Government launched a new public distribution system and sluggish
industrial growth caused shortfall in collection of indirect taxes. This caused the Deficit to increase
rapidly in the pre-election year. Exchange rate was also growing up as exports declined (because
of tighter quality, standard and testing requirements as well as low export prices) before and after
the elections. Deficit and inflation was high in pre-election year, which reduced after the election.

27. Atal Bihari led NDA government could not sustain for long leading to immediate reelection
after one year. As this government was collapsed just after 13 months (when AIADMK
removed its support from government), they didn’t get much time to change their policy to
allure
the voters. Most economic changes were naturally affected by government and external factors.
But once again when new government was formed, they took certain measure to improve
the economy. During his term, Atal Bihari Vajpayee was faced with India- Pakistan Kargil war.
This was very important election as India was growing fast and first
time non congress government completed 5 years of their term. But after
the election new government with different party was formed. During first
year of congress government headed by Dr. Manmohan Singh, Sensex was
booming because of good IT development, and high expectations
from Dr. Manmohan Singh (Good reputation as an economist) as the
prime minister. Sensex improved because of previous government’s
policies. Exchange did not show much change after the elections.

28. This election happened during the global financial crisis.
Many economic factors were affected by this recession.
Also before the election, government increased the
MSP for agricultural produce, waiving off the famers’
loans which increased the inflation, fiscal deficit as
well as affected the exchange rate. We can see the
existence of political budget/business cycle in this election.
But most probably we can never say that it was due to
politics because economy was declining, so government
had taken measures to control it which resulted in very
high fiscal deficit, high inflation as government was
pouring money into markets. Also Sensex was under the
pressure from worldwide situation.

29. During 2009-14, government (UPA) announced many
schemes to lure the voters as government was facing
many corruption charges and government wanted to
save face and make a comeback in the election with its
subsidies and schemes. But data shows that these all
schemes were launched during the full term, not in
the pre-election year only. New government (NDA)
had taken many strict measures to improve the
economy. Also reduction in the crude oil prices
helped the new government reduce the deficit,
inflation as well exchange rate.

30.  There was a growing perception that the 2014 elections
could kick start the investment cycle.
 Indian stock market had seen a lot of positive and
negative trends in the election month. Lot of volatility
was seen in the market in the last 5 weeks before
elections. Many traders lost their money while
investors were the big gainers.

31. What happened after BJP won
2014 elections
 The country's economic indicators were performing well in
advance of the result in expectation of a BJP win, on the
perception that Modi is business-friendly. The benchmark BSE
Sensex and CNX Nifty indices hit record highs and the Indian
rupee strengthened following months of poor performance. On
the result day, as early vote counts gave the BJP a majority lead,
the Sensex reached a record high of 25,375.63 points. It ended
the day at a new closing high of 24,121.74. The Nifty reached a
record high of 7,563.50, before ending the day at a new closing
high of 7,203. The Indian rupee rose to an 11-month high of 58.62
against the US dollar and closed at 58.79. Deutsche Bank revised
its December 2014 target for the Sensex to 28,000, and
Macquarie revised its 12-month target for the Nifty to 8,400 from
7,200. Edelweiss set its December 2014 targets for the Sensex and
Nifty at 29,000 and 9,000 respectively.

35. 2016- US democratic elections

36. The two candidates could not have been more different
from each other. Here are the differences.
Hillary Trump
With more than 30 years of political
experience (including as the first lady, as
senator and as secretary of state),
Democratic nominee Hillary
Clinton knew how the political system
works to a fair degree of precision. If she
had won, she would have been the first
woman to become the President of USA.
Republican nominee Donald Trump, a
real estate tycoon with extreme views and
zero political experience (which he used
to his advantage, claiming that he’s not
“one of them”), Trump had shaken up the
conservative setup of the Republican
Party.
Hillary’s campaign had been clouded by
an FBI investigation of her improper use
of a private email server while secretary
of state.
Ever since he was selected as the
presidential candidate, he had been
embroiled in one controversy after
another, from his often divisive remarks
to the scandal of being an audio tape in
which he was heard bragging about
sexually assaulting women.

37. There’s more to it…
Hillary Trump
India has had a long association with
Hillary Clinton who is seen as someone
who understands India’s concerns.
In New Delhi’s political circles, the
general belief is that Republican
presidents are generally better for India
than Democrats. However, Trump is
hardly a typical Republican, having taken
up foreign policy positions that conflict
with the Republican ethos
Hillary was not that much aggressive on
combating terrorism.
Trump had been more vocal on fighting
terror. He had made many comments
about India during the last leg of his
election campaign. He had also sent a
message that under his administration,
the US would talk tough with Pakistan on
the issue of cross-border terrorism.

38. What was in the newspapers?
 Impact on India, China and Russia
 Benefits and dangers to Indian economy
 IT and immigration
 Effect on the global economy
 How a Trump presidency will affect 12 industries

39.  The implications of a change in American trade terms is different
for India than it is for Russia and China, due to India’s strong
economy. It has been predicted by the World Bank that India will
be the fastest growing economy in the world for the next three
years, and remarkably it has the potential to surpass China.
Simply put India does not need improved trade deals with the
United States. It is doing just fine as is.
 India’s remarkable recent growth is due to a variety of factors: it
is an importer of oil as the price of oil has declined; jobs have
been created at a rapid pace and it is anticipated that over 85% of
Indian companies have hiring plans as well as the government
salary increases; the technology industry continues to attract
investors into new products validating the growth of the service
industry.

40. Effect on China Effect on Russia
The anti China trade views of all the
candidates came at the worse time for the
Chinese economy. All candidates were
mentioning the 2015 American trade
deficit of $365 billion with China. Given
China’s economic slowdown what China
doesn’t need would be for the rules of
trade with the United States to change.
China’s problems are well known, and
despite it being a major importer of
resources, its economy may turn out to be
a house of cards. In January, exports from
China dropped by 11.2%, the worst fall
since March last year. Its imports fell by a
massive 18.8%, the 15th month in a row of
declines.
Russian economy is faltering. Russia as an
exporter of oil has seen the price of oil
tumble and the economy follow suit.
American and Western European
sanctions are only making matters worse.
Russian military involvements have been
another drain on the economy. Right now
Russia has an actual economic need for
an American President with whom a deal
can be made and sanctions can be
removed. Despite Trumps claims of being
able to negotiate with Putin; it was
unclear, no matter which candidate got
elected President, what changes in
Russian international policy Putin would
make that would end sanctions.

41. How a Trump presidency will
affect 12 industries
 Defense
 Oil and Coal
 Infrastructure
 Real estate
 Banks
 Brokers
 Hospitality
 Healthcare
 Media
 Retail
 Auto industry
 Telecom

42. A Trump Presidency - Blow to
India on Many Counts
 He wanted to scrap all H-1B visas, which is very worrying for
India’s export-led growth going forward
 India’s software services accounted for $82 billion-worth of
exports in the financial year ending in March 2015, according to
the Reserve Bank of India; 60% of that figure came from North
America.
 Indian outsourcing giants Tata Consultancy Services, Infosys and
Wipro are heavy users of the H-1B visas. The IT industry had
genuine concerns as Trump had shifted his position several times
on the H-1B program. Early in his campaign, Trump proposed
restricting the program and criticised it for giving away popular
entry-level IT jobs to workers flown in cheaper from countries
like India.
 Then, during the third Republican debate, he complained that a
paucity of H-1B visas was making America lose talented people

43. A Trump Presidency - Blow to
India on Many Counts
 Bringing jobs back to America could mean harsher
conditions for entry of immigrants from India.
 Trump’s call for Muslims to be banned from entering
the US. India has the second-largest Muslim
population in the world and Trump’s anti-Muslim
rhetoric is completely against the secular character of
Indian democracy.
 Trump also advocated a 15% tax on companies for
outsourcing jobs to places like India, and a 20% tax for
importing goods and services.

44. What India may gain:
 Although Trump wants to put stricter immigration rules, he also says
he wants to woo Indian entrepreneurs and students to the US.
 Trump criticised China throughout his campaign, described it as one of
the US's top adversaries. That could make for an advantage to India.
 He said he would label China a currency manipulator and impose
heavy tariffs if China didn't agree to rewrite trade agreements.
 He labeled Pakistan as semi-stable and a safe haven for terrorists.
 This could mean the continuation of US' Pivot to Asia policy where
India is seen as a counterbalance to China.
 Trump's hard stance on terrorism could also result into deeper Indo-US
defence and strategic ties.
 And finally, closer defence ties might give a further push to Indo-US
business ties as well.

45. 7
Country
Ban
Iran
Sudan
Somalia
LibyaIraq
Syria
Yemen

46. “Blanket entry ban on citizens from certain
primarily Muslim countries is not the best way to
address the country’s challenges. many people
negatively affected by this policy are strong
supporters of the US. They've done right, not
wrong and don't deserve to be rejected".
“I am here because I am a refugee.”
while taking part in protests at
San Francisco International
Airport opposing the travel ban.
Google's founder Sergey Brin

47. “This move would create
barriers to bringing great
talent to the US".
He sent a letter to employees
saying Mr Trump's policy was
"not a policy we support" and
pledged to support affected
employees.

48. He said that the company will
compensate drivers from the seven
countries who cannot return to the
US. "This ban will impact many
innocent people”.
He posted a lengthy message that reminded Mr.
Trump that the US was a nation of immigrants
and said that if there had been a ban on refugees
two decades ago his wife, Priscilla, would not
have been allowed to enter the country.

49. Recent assembly elections in India

50. Present Scenario
 India has been one of the fastest destinations for
investments: KPMG
 Experts say that foreign portfolio investors (FPIs) and
other investors could now start investing in the India
in the next few months. It is expected that even private
equity, venture capital funds too could look at raising
and investing more money in India after the election
results. This is mainly because of the relative stability
that is expected in the Indian economy at least for next
couple of years before the country again goes for
another election.

51. Present Scenario
 Industry trackers already expect that the Indian listed
capital markets may just see a spurt. Even the merger
and acquisition space that has seen some slowdown in
last couple of months too could now see a spurt.
 Business leaders said now the path of reforms would
ensure increased ease of doing business in India.
 The stock market has seen appreciation in last week.
The Sensex of BSE closed flatly on Friday. Sensex was
up by 0.06% to touch 28,946.23 basis points on Friday.
Industry trackers say that some of the infrastructure
stocks may see some jump in the coming weeks.