The 'One Nation, One Election' proposal could add economic output worth Rs 4.5 lakh crore, or increase real GDP growth by 1.5%, estimates submitted by the former president Ram Nath Kovind-led panel have claimed.
The report also noted that simultaneous elections will not only lead to higher average real GDP growth, but also result in lower inflation, higher investments and relatively higher public spending, particularly, capital expenditure than revenue expenditure.
This is the elusive magic potion that all economies aspire for, but barely manage to crack. For India to transition into an advanced economy by 2047, getting a high growth-low inflation, high investments-quality public spending mix is crucial and the panel's report suggested that simultaneous elections holds the key.
In contrast, asynchronized election cycles, the paper concluded, will result in lower economic growth, likely through greater disruption of economic activity, but possibly also through higher uncertainty, with implications for investment, health, education, and security.
The findings are based on the paper titled, "Macroeconomic impact of harmonizing electoral cycles. Evidence from India," by NK Singh and Prachi Mishra.
The authors analysed both national and state-level elections (simultaneous and non-simultaneous) and found that on a national level, simultaneous elections could increase real GDP growth by an 1.5%, which is equal to Rs 4.5 lakh crore based on FY24 growth projections. "This (Rs 4.5 lakh crore) is half the public spending on health, and one-third that on education," the authors noted.
Similarly, state-level analysis suggests that on average, economic growth is relatively higher by 2.4% post-simultaneous elections compared to non-simultaneous elections. While the authors didn't present an estimate, they noted that publicly available projections estimate the cost of conducting national and state elections at about Rs 3-7 lakh crore. On average, India experienced six elections per year over 1952-2023, and there hasn't been a single year since 1986 when a state assembly election did not occur, which perhaps indicates the amount of money being spent every year.
As for inflation, on average, inflation rate was lower during simultaneous election episodes in the pre-election period compared to the non-simultaneous ones. While inflation rates tend to fall around both episodes, they tend to fall more during simultaneous elections. As per the authors' estimates, inflation tends to fall by about 1-1.1% during simultaneous elections compared to non-simultaneous elections.
That said, the paper found fiscal deficit to be higher after simultaneous elections and the difference outpaces that in case of non-simultaneous elections. On average, the 2-year difference-in-differences is a higher fiscal deficit of 1.28% of GDP following simultaneous elections, compared to non-simultaneous episodes.
"At the outset, the result that simultaneous elections may be associated with higher fiscal deficit, and possibly higher public expenditure, may appear counterintuitive, as conventional wisdom would suggest that more frequent elections for non-simultaneous elections should be associated with higher spending and deficits, while we find otherwise," they noted.
So how does higher government spending post simultaneous elections relate to the expenditure priorities of the government? On average, the pre-post difference in the capital-to-current spending ratio is estimated to be higher by 17.67% for simultaneous elections compared to non-simultaneous election episodes. In other words, not only do the findings suggest relatively higher public spending post-simultaneous election episodes but spending that is also skewed towards capital compared to revenue – again consistent with the evidence for relatively higher growth post simultaneous elections, the authors noted.
Likewise, for investment decisions, more frequent elections can directly disrupt activity but also indirectly affect the economy through greater uncertainty. The pre-post difference in the ratio of investments to GDP is estimated at 0.5% higher for simultaneous election episodes compared to non-simultaneous ones, which is consistent with lesser interruptions in economic activity and lower uncertainty.
According to the report, there are myriad ways in which the synchronicity of electoral cycles can have implications for the macro economy. For one, teachers' election duties can take time off from teaching and the use of public schools for electoral activities such as polling and counting can all have effects on educational outcomes. Like wise, the deployment of police and paramilitary forces can take them away from their regular jobs, with a direct effect on crime and security.
"Overall, the myriad of direct and indirect mechanisms can be far more substantial than official expenditures by the government in conducting elections. From an economic perspective, the resources employed in electoral cycles can be associated with significant opportunity costs, all with implications for the macro economy," it observed.
