Much ado about nothing: Analysts on economic impact of polls

Tags: Economy
There may be high hopes from the 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.

There is a growing perception that elections could kick- start the investment cycle with various leaders blaming the recent slowdown in growth momentum on policy inaction due to the upcoming Lok Sabha polls even as some others pin hopes on a regime change.

However, economists, including those at some large global financial conglomerates, believe that such high hopes may not come true, at least in entirety.

"We disagree with the consensus that elections can revive the investment cycle," economists at Credit Suisse said, adding that "such misplaced optimism ignores the realities of the business cycle and overestimates the power of the central government".

Echoing those sentiments, Bank of America Merrill Lynch analysts said, "We can only continue to emphasise that the global economic cycle drives India's growth far more than who rules in Delhi."

Credit Suisse as well as Bank of America Merrill Lynch have conveyed these views in the research notes prepared for their respective clients in India and abroad.

The Indian stock market had seen a massive 15.9 per cent sell-off in May 2004 after the surprise defeat of NDA, while a 15 per cent Sensex rally was witnessed after the emphatic re-election of UPA in May 2009.

On both occasions, the markets failed to get the poll outcomes correctly, experts opine.

According to analysts at BNP Paribas, the risk of political uncertainty after elections remains for India, notwithstanding the current opinion polls predicting a strong showing by BJP.

Economists have broadly listed four post-poll scenarios: Narendra Modi-led NDA government with two-three allies; Modi- led NDA government with five-six allies; other leader led-NDA government with 8-10 allies or a Third Front government supported by Congress.

EDITORIAL OF THE DAY

  • Right to reveal

    Delhi is India’s first state to announce a scheme for witness protection. But what about the witnesses in other states?

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

Sarthak Raychaudhuri

vice-president, HR, Asia South Whirlpool of India

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

TODAY'S COLUMNS

Urs Schoettli

New masters of the Financial Times

A few days ago, Japan’s leading financial daily Nihon Keizai ...

Anuja Sharma

Focus mindfully to get the result

Have you ever tried to light a fire using the ...

Gautam Gupta

Our fashion schools need to notch it up

“Creativity is the key to success and primary education is ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture