Election months typically see less capex utilisation: Bank of Baroda report

New Delhi [India], April 15 (ANI): It is apparent that the government and the corporates maintain a watchful stance on capital expenditure during the election months, said Bank of Baroda in a report.
A study conducted by economist Jahnavi Prabhakar looked at various macroeconomic factors in the last election cycle back in 2019 and how they looked in the present calendar year.
The focus was on the months wherein the election is scheduled specifically, the April-May period.
"It does look like that during the Elections there is a watchful stance taken by the government on capex. This is also witnessed for company investment announcements as well as foreign investors," the report noted as part of its conclusion.
Watchful stance is also witnessed for company investment announcements as well as foreign investors, the economist noted.
A capital expenditure, or capex, is used to set up long-term physical or fixed assets.
"During the elections months (Apr-May), of the total capex target of Rs 3.3 lakh crore in the Budget for FY20, only 14.1 per cent share of capex was utilized in the election months. 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."
Economist Prabhakar noted it would be interesting to see how this turns out in 2024.
But indicators like inflation, credit, currency, bond yields, and stock markets have not quite shown any specific tendency in the last elections, particularly during the polling months.
"It would be interesting to see if there are any such exogenous shocks for these variables this time," the economist noted.
In the coming six weeks starting from April 19 to June 1, India will go through the 18th General Elections.
Lok Sabha elections will be held in seven phases for a period of over 44 days and the results will be announced by June 4. Back in 2019, the elections were held during April and May with the results being announced on May 23.
For inflation, in 2019 it started going up post July and peaked in December. It was steady for the Apr-May period.
For the current year, the Bank of Baroda economist noted that inflation is expected to remain at the current levels with the possibility of some moderation during the election months.
The retail inflation in India though is in RBI's 2-6 per cent comfort level but is above the ideal 4 per cent scenario. In March, it was at 4.85 per cent.
Coming to stock market, Sensex had registered modest gains in April 2019. However, these gains were wiped out in May 2019. The pattern was jagged again in the next two months. Hence, no clear pattern emerged on the stock market front.
So far in 2024, stable gains have been recorded in domestic market. (ANI)