Record-Breaking Election Spending Set To Ignite Rural Demand, Feel Experts

Even as the 2024 Lok Sabha polls have started to unfold, anticipation remained high not only in the political landscape but also about the ripple effects on the economy, particularly in rural India, as experts described the elections as the most expensive one ever fought in the country's history.

With an expenditure of a staggering Rs 1.35 lakh crore estimated by N Bhaskara Rao, who chairs the Centre for Media Studies and has been tracking election spending for 35 years, significant parts of the amount spent during the polls will reach the pockets of India's rural population boosting sales, business houses feel.

According to a study, about 35% of election expenditure in the 2019 Lok Sabha elections in India was made on campaigns and publicity. The second highest expenditure head was payments to voters via various means – hiring workers, purchasing campaign materials, freebies and direct cash transfers in some cases.

Industry leaders expect these will have a positive impact on the economy, especially in India's countryside.

"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.

He said his company aims to leverage this opportunity by monitoring rural market dynamics and adapting its product offerings and marketing strategies to align with the evolving preferences and needs of rural consumers.

"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 said.

Shreeram Bagla, Managing Director of city-based snacks major Annapurna Swadisht, highlighted that rural demand for the FMCG sector as a whole had been slightly subdued during the second and third quarters of the 2023-24 fiscal.

"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.

Emami Ltd, another FMCG major with considerable rural dependence, also expressed a positive outlook.

"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.

Amnish Aggarwal, head of Institutional Research at Prabhudas Lilladher, while offering a nuanced perspective, pointed out that in present circumstances election spending may not be boosting rural demand in the manner it did before.

Reflecting on the trends observed in past elections, Aggarwal underscored that the correlation between poll expenditure translating into a surge in rural demand is over-hyped in current times due to cash movement restrictions which are imposed with the model code of conduct.

"This direct correlation was perhaps true a decade or more ago. Factors like the anticipation of a good monsoon and inflation play pivotal roles in shaping consumer behaviour in current times compared to cash flow during polls," he said.

Political parties, though, acknowledged that demand for vehicles goes up during poll seasons, whether sourced from rentals or new purchases for use in election activities. Automobile sales in March this year were up by 10% over last year, totalling 3.7 lakh vehicles.

However, a senior official of a major car company said that on account of model code of conduct-related restrictions, overall sales of both passenger and commercial vehicles were subdued in April.

Grassroots-level workers of political parties said that there has been a high purchase of snacks and beverages and certain FMCG items required for workers. FMCG products are also used as freebies for audiences brought to political rallies, they said.

A shopkeeper in Hooghly district stated, "Local political leaders become more generous during election times, and we sell more." West Bengal's Chief Electoral Officer confirmed that since the commencement of MCC, freebies worth Rs 57.67 crore have been seized from the state.