Consumption may not get election booster

UBS skeptical Of impact of coming polls

Those hoping for largesse from political parties during poll season to help growth in consumption may be in for disappointment. 

 

Global financial services firm UBS suggested that the correlation between election spending and consumption growth cannot be taken for granted in its India Market Strategy report dated October 1. 

 

“...we can’t see any distinct growth due to increased election spending historically,” said the report authored by UBS Analyst Gautam Chhaochharia and Sanjena Dadawala, Associate Analyst.

 

The amount of money actually spent by political parties during elections is not readily available but the UBS report relies on estimates by the Centre of Media Studies (CMS) which pegged the figure at Rs.10,000 crore for 2009.

 

The report noted that there are many estimates regarding expected spending for 2014, though it regarded these forecasts with some skepticism. 

 

UBS examined data for revenue growth in various segments including consumer staples, and consumer discretionary companies, which revealed little pickup in growth around the election period in 2009.

 

Government spending too may not pick up in light of strained finances. 

 

“Fiscal consolidation is a course that the Government will likely stick with in our view, despite impending elections, further dampening economic growth even for rural part of the economy,” said the report.