Election season may hit govt capital expenditure spending, FDI inflows

A study by Bank of Baroda analysing the past data shows economic variables like government capital expenditure (capex) or foreign direct investment (FDI) inflows could be impacted by the election season. However, it said for most economic variables, it is hard to ascertain definite tendencies.

During the election months (April-May) in 2019, of the total capex target of Rs 3.3 trillion in the FY20 Budget, only 14.1 per cent share of capex was utilised. 
 

“This was lower than the shares witnessed in the previous two years. It is possible to conclude that the ongoing elections could have had an impact on government capex spending as certain decisions could have been deferred due to the ongoing elections. It would be interesting to see how this turns out in 2024,” the report said.
 

 

In case of FDI, the total FDI inflows was over $50 billion in FY20 and its share during the election months of April-May 2019 turned out to be 18.1 per cent. 
 

“This share was lower than that in FY19 as well as post-covid years which can mean that foreign investors could be studying the progress and result of the elections before taking decisions. This may also hold in 2024,” Bank of Baroda said.