- India will hold the world’s largest general elections in April-May 2024.
- We analyse the impact of the elections on the economy and markets through an event study framework.
- Growth, on average, slows a quarter before the elections but rises subsequently.
- We expect the centre to stay committed to fiscal consolidation.
- Keep an eye on the ‘polycrisis’ era.
For the detailed note, please download the PDF file
In summary
We head into a busy election period for the country. Five states will go to the polls in November 2023 – Madhya Pradesh, Rajasthan, Telangana, Chhattisgarh, Mizoram – with results to follow on 3-December. This will be the last round of state elections before the 18th Lok Sabha (Lower house) polls in April-May 2024.
In the past cycles, the outcome of the state polls has had little bearing on the results of the general elections. States’ votes are driven by more local sensitivities rather than national issues. Nonetheless, market participants will focus on the December’s outcome to gauge broader direction for the incumbent government and opposition coalition. Early opinion polls are still mixed (anti-incumbency wave in one-two states, a close call in another) as not all major parties have announced lead candidates as yet.
In this note we delve into what one could expect from India’s economy and markets around the general elections, i.e., what tends to happen to growth, fiscal, inflation, investment flows, stocks, and the rupee in the quarters prior and subsequent to polls.
For this study, we take stock of the five lower house elections since 1999. Apart from averaging the outcome, we also account for the volatility around the data. Our event study charts therefore contain 1 standard deviation bands around the mean of the variables under observation. Highlights of the past elections are in a table in Appendix 1 (see end of the report).
In the next few sections, we discuss impact on growth, inflation, fiscal math, rupee, equity markets and portfolio flows.
In conclusion
The event study brings to fore interesting observations across the different macro indicators around past elections. We also note that the global economy has undergone and continues to face a period of concurrent ‘polycrisis’ i.e., multiple event risks which have tested the resilience of financial markets, national governments, and policymakers. This includes geopolitics, supply chain fragmentation, trade tensions and conflicts, tighter policy conditions, weather vagaries, climate transition, above-target inflation, amongst others. In this midst, domestic and global developments have become more intertwined by way of supply-side shocks (commodity price swings, trade protectionist measures, supply chain fragmentation etc.) and need for balance of payments strength, suggesting that as we head towards India’s elections in mid-2024, domestic developments will certainly matter, but global events also warrant a close watch.
To read the full report, click here to Download the PDF.
Topic
Explore more
E & S FocusThe information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). This report is intended for “Accredited Investors” and “Institutional Investors” (defined under the Financial Advisers Act and Securities and Futures Act of Singapore, and their subsidiary legislation), as well as “Professional Investors” (defined under the Securities and Futures Ordinance of Hong Kong) only. It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 13th Floor One Island East, 18 Westlands Road, Quarry Bay, Hong Kong SAR
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.