How Election affect Indian Economy
Instability is the word that comes to the mind of market veterans when they hear about the General Elections. This fear of a shaky market and lack of predictability has made many wary about the General Election 2019. However, We should have deeper knowledge when we think of how elections affect the Indian Economy. But Market experts assure this election won’t impact the market. They point out that it won’t even affect the market in the short term if a stable government comes into power. This looks very likely after the exit polls
How the general election will affect the Indian Economy
Each time the general election brings a slowdown. The reason for the slowdown is obvious. The government spends excessively during the election year. And this spending doesn’t bring much growth rather inflation. Looking at data of the past five elections, It’s been observed that the consumption of key elements of growth like steel reduces in an election year.
How industry reacts before elections
Industries react negatively due to the fear of the next government and its probable policies. It results in reduced industrial credit growth. Companies don’t ask for a loan and start projects during the election. At the same time, they wait till the election results, to fuel their operations with fresh liquidity.
How did election affect the stock market in the past
While the future may not be a surety, the past is. One can analyze the Past to make a more informed opinion about the future. Let’s see how the elections affected the Indian economy in the past
2004- Congress in Power as UPA
While initially, the market fell flat by 15% due to the high expectations of NDA being in power. The market, however, says a bully rally till 2007 with a High GDP growth rate.
2009-Congress continues to be in Power
While initially, the market gained 17% in a single day, the repeated scams made for an inconsistent market. The overall confidence in the government was low
2014- BJP in Power as NDA
Initially, the promise for a stable government made the market growth extreme high and reduced its volatility. However overall the market was disappointed by its stagnant state.
Affect of this election on Indian Market
While the market always is fluctuated during the elections it is almost always short -term and this time should be no different. The long term impact on the market will be due to policies of the government and its stable