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.

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.

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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 taxesand credits that slow or build new businesses.

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.

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

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.

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.

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

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.

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.

The major reasons for the Economy Downfall during

Election are:

Government spending rises

Slowdown in investment

Slowdown in economic activity

Elections may affect the economy of a nation positively or negatively.

The Effect Depends On Various Factors Including-Current state of the nationPolitical parties involved in pollingRuling political partyCurrent policiesPolitical campaigns

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

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.

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

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.

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.

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.

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.

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.

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.

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 Sensexmovement. Sensex went up just after crisis was about to over. Inflation was suddenly decreasedafter 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 sluggishindustrial growth caused shortfall in collection of indirect taxes. This caused the Deficit to increaserapidly in the pre-election year. Exchange rate was also growing up as exports declined (becauseof tighter quality, standard and testing requirements as well as low export prices) before and afterthe elections. Deficit and inflation was high in pre-election year, which reduced after the election.

Atal Bihari led NDA government could not sustain for long leading to immediate reelectionafter one year. As this government was collapsed just after 13 months (when AIADMKremoved its support from government), they didn’t get much time to change their policy to allurethe 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 improvethe 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.

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.

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.

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.

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.

2016- US democratic elections

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.

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.

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

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.

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.

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

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

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.

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.

7 Country

Ban

Iran

Sudan

Somalia

LibyaIraq

Syria

Yemen

“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

“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.

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.

Recent assembly elections in India

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.

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.