‘One Nation, One Election’ can boost India’s economic growth

The Model Code of Conduct (MCC) is a set of guidelines outlining the dos and don’ts for political parties, candidates, and ruling parties during elections. It has been developed through consensus among political parties, which have committed to upholding its principles in both letter and spirit. The MCC comes into effect from the date the Election Commission announces the election schedule and remains in force until the election process is complete. During Lok Sabha general elections, the MCC applies nationwide, while for Legislative Assembly elections, it is enforced across the respective state. Essentially, apart from routine administrative activities, most development programmes, welfare schemes, and capital projects are largely put on hold within the jurisdiction where the MCC is in effect.

Bibek Debroy and Kishore Desai analysed this in a discussion paper.  “To understand the extent of impact of this point, an analysis of the period over which Model Code of Conduct remained operational since the announcement of the 16th Lok Sabha elections in March 2014 has been done. The analysis indicates that in the year 2014, governance and developmental activities due to imposition of Model Code remained largely suspended for about 7 months: 3 months across the country and about 2 months in Jharkhand and Jammu and Kashmir and another 2 months in Maharashtra and Haryana.”

The Parliamentary Standing Committee has articulated problems arising from the imposition of the MCC in its 79th report. The committee states: “…The imposition of Model Code of Conduct (MCC) puts on hold the entire development programme and activities of the Union and State Governments in the poll-bound state. It even affects normal governance. Frequent elections lead to the imposition of MCC over prolonged periods of time. This often leads to policy paralysis and governance deficit.”

Impact on GDP

Simultaneous elections have a significant impact on the Gross Domestic Product (GDP) of the country. According to the Kovind committee report, “Comparing changes in real national GDP growth before and after episodes of simultaneous and non-simultaneous elections, the estimates suggest that on average, real GDP growth is higher following episodes of simultaneous elections, while we find a decrease post the non-simultaneous episodes.”

“The magnitudes suggest approximately a 1.5 percentage point higher post-pre difference in real national growth during simultaneous elections as compared to non-simultaneous elections. To put these magnitudes in perspective, a 1.5% of GDP is equal to INR 4.5 lakh crores in Financial Year 2024—half of public spending on health, and one-third of that on education. Publicly reported estimates of conducting national and state elections, beyond the official costs, range from INR 4-7 lakh crores, which are close in magnitude to our growth estimates.”

Reduced Inflation

The Kovind Committee report analysed the impact of simultaneous elections on inflation and found that, on average, the Consumer Price Index (CPI) annual inflation rate was lower for simultaneous elections than non-simultaneous elections during the pre-election period. Inflation rates generally drop around both types of election cycles, but more so during simultaneous episodes. The magnitude suggests a difference-in-difference estimate of 1.1%, with a larger fall in inflation of around one percentage point during simultaneous elections compared to non-simultaneous elections.

Impact on Migrant Workers

The impact of non-simultaneous elections on migrant workers is an important rationale for moving to a synchronized system of elections. According to the 2011 census, migrant workers—both intra and inter-state—now number more than 450 million. They have to travel multiple times in five years to cast their votes. This puts a huge financial burden on them. At times, the travel costs are not affordable, so many choose not to return to their native places and forgo voting. Additionally, when migrants travel long distances, production activities in which they are engaged get disrupted, as there is often uncertainty regarding their time of return. Such repetitive disruptions, forced by non-simultaneous elections, have significant costs, as they often affect the ability to meet domestic and foreign contractual commitments by businesses and other establishments.

Private Investments 

Non-simultaneous elections also affect private investment, as there is a general sense of caution among investors. Polls generate an environment of uncertainty for investors. It is better to have this kind of uncertainty once every five years rather than multiple times per year.

Earlier Sanghnomics columns can be read here.