Record-breaking election spending set to ignite rural demand, feel experts

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As the Lok Sabha Elections 2024 begin, emphasis is focused not only on politics but also on how they will affect the economy, particularly in rural India. Experts are calling this election the most costly in Indian history, with an estimated cost of Rs 1.35 lakh crore, according to N Bhaskara Rao, who has been tracking election expenditures for 35 years.

A major chunk of this expenditure is expected to benefit India's rural population, increasing sales and economic activity. In the 2019 Lok Sabha elections, over 35% of the money was given to campaigns and publicity, with the second greatest spending being towards payouts to voters through various means such as hiring personnel, purchasing campaign materials, and direct cash transfers, reported PTI.

According to the report, industry leaders predict a good economic impact, particularly in rural areas. Keshav Bhajanka, Executive Director of Century Plyboard, predicts a significant increase in rural expenditure as a result of the confidence and economic activity produced by political campaigns. Similarly, Shreeram Bagla, Managing Director of Annapurna Swadisht, anticipates a rebound in demand for FMCG products in rural and semi-urban regions.

"The considerable election expenditure anticipated over the next two to three months would ignite a notable increase in rural spending. Propelled by optimism and economic activity stemming from political campaigns, this surge in rural demand will be fortified," Keshav Bhajanka, Executive Director of India's top plyboard maker, Century Plyboard, told PTI.

"The company also plans to intensify its efforts to expand its distribution network and enhance brand visibility in rural areas to capture a larger share of the anticipated post-election market growth," Bhajanka further added.

"We are expecting a steady recovery in demand in the rural and semi-urban markets in the wake of higher spending on election-related expenses. The government seems to be laying a major thrust on boosting the rural economy. This is likely to spur consumption in villages, thereby shoring up the demand for FMCG products," Bagla noted.

According to the report, Emami Ltd, another FMCG company, is confident about the economy's recovery, citing factors such as a strong monsoon and lower raw material prices.

"We expect the economy to bounce back on multiple counts in the backdrop of the election. First, anticipation of a good monsoon is expected to boost the rural economy. Secondly, with the softening of raw material prices, while companies are gearing up to pass on the benefits to the consumers, they will also invest more in brand building. The combination of these will definitely push the demand for the FMCG sector up," Emami Wholetime Director & Vice Chairman, Mohan Goenka, told PTI.

However, Amnish Aggarwal of Prabhudas Lilladher provides a nuanced perspective, arguing that given current cash movement constraints, election spending may not have the same influence on rural demand as it did previously, the PTI report added.

While political parties admit higher demand for vehicles during election seasons, overall sales were down in April due to model code of conduct-related restrictions. Grassroots workers report increasing purchases of food, beverages, and FMCG items for election activities, with certain products also serving as handouts at political rallies.

A shopkeeper in the Hooghly region noted that sales surged during election seasons, indicating the benevolence of local political leaders. West Bengal's Chief Electoral Officer said that freebies worth Rs 57.67 crore had been seized since the model code of conduct went into effect.