Here’s What’s Getting Cheaper for You Amidst General Elections

However, to ensure sufficient security forces in the area, the elections in Jammu and Kashmir would take place after the 18th Lok Sabha elections are over. The 2024 election will be the largest democratic exercise in history.

India surpasses even the United States in having the most expensive elections globally. Parties and candidates are projected to have spent USD 8.7 billion in 2019 to win over 900 million eligible voters. India's sitting lower house of parliament (Lok Sabha) began its existing term on June 15, 2019, which is set to conclude on June 16, 2024.

The National Democratic Alliance (NDA), led by the Bhartiya Janata Party, has been in power for two terms in a row since 2014, when it first took control of the lower house of Parliament or Lok Sabha. With the goal of forming a government at the federal level for a third straight term with an overwhelming majority of more than 350+ seats, this year seems to be more crucial for the Modi-led NDA than the previous year.

[Read: Power Your Portfolio: 5 Sector & Thematic Funds to Consider Around General Elections]

The results of the general elections will likely influence macroeconomic conditions, geopolitics, and society as a whole in addition to influencing government policy. We are in for some exciting moments in the future.

With general elections heating up, comes a flurry of promises from candidates. But beyond the political noise, there's a real question: will anything actually get cheaper for you? there's a possibility that you could see a price drop for some items you use on a daily basis amidst the election frenzy.

In this article, we will cut through the campaign rhetoric and explore what everyday items and services might actually see a price dip during this election cycle.

Drop in LPG Prices

Prime Minister Narendra Modi, on the occasion of International Women's Day, announced a cut of Rs 100 per cylinder in cooking gas prices to ease the financial burden on households.

As per the reports, the reason for the price reduction is the relaxation of global oil and petrol prices, which serve as the standard for domestic fuel rates. Nearly 33 crore households utilising Liquefied Petroleum Gas (LPG) as cooking fuel are expected to benefit from the price drop.

In October last year, the government increased the subsidy to Rs 300 per cylinder from Rs 200 for 14.2 kg cylinders, with up to 12 refills allowed annually. But two weeks ago, the government, at a cost of Rs 12,000 crore, also extended the Pradhan Mantri Ujjwala Yojana's Rs 300 LPG cylinder subsidy for eligible recipients for the next fiscal year (FY25).

A drop in LPG prices generally positively affects the general public, particularly those who rely on it for cooking. Lower LPG prices mean people spend less on this essential cooking fuel. This frees up money for other household expenses like groceries, transportation, or savings. This can be especially beneficial for low-income families who dedicate a larger portion of their budget to basic needs.

LPG is a key component in the Consumer Price Index (CPI), which measures inflation. Lower LPG prices can contribute to a decrease in overall inflation, benefiting everyone.

With the recent cuts in liquefied petroleum gas (LPG) and compressed natural gas (CNG) prices, speculation was rife that a reduction in petrol and diesel prices may be in the offing in view of the impending Lok Sabha polls.

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Reduction in Fuel Prices - (Petrol & Diesel)

Ahead of the announcement of the Lok Sabha election schedule, the Centre, on March 14, slashed petrol and diesel prices by Rs 2 per litre. With the revision in prices, in the capital, Delhi and metro cities like Mumbai, Kolkata and Chennai, the fuel will be sold at the following prices:

These rates are applicable since March 15, 2024. The petroleum ministry, in its tweet, said: "Reduction in petrol and diesel prices will boost consumer spending and reduce operating costs for over 5.8 million heavy goods vehicles running on diesel, 60 million cars and 270 million two-wheelers."

Since petrol and diesel are used for transporting goods by trucks, a decrease in their price can lead to lower transportation costs for businesses. This can trickle down to consumers in the form of lower prices for a variety of goods, including groceries (it could also help food inflation report a lower reading), clothing, and electronics.

Lower fuel prices can help reduce inflationary pressures, which means the general cost of living may decrease slowly. This can be especially beneficial for low-income households who are more sensitive to price changes.

However, do note that fuel prices can be volatile and may rise again in the future. Just like any other product, fuel prices are affected by supply and demand. If there's a disruption in the supply of crude oil or refined fuels (due to natural disasters, political unrest, etc.), prices can rise. Similarly, if demand for fuel suddenly drops (like during a recession), prices may fall. So, the positive effects of a price drop may not be long-lasting.

Apart from this, Union Minister Piyush Goyal - heading the ministry of food and consumer affairs stated that the government will do everything in its power to prevent price spikes for essential items like onions, tomatoes, and pulses, especially during election seasons. He cited the Modi government's history of bringing rates under control within days of any brief increase.

The Modi-led NDA government is expected to take prudent steps to ensure that individuals' household budgets are not burdened.

[Read: Key Investment Risks to Watch Out for in 2024]

The relationship between elections and a nation's economy is complex and can go both ways. During elections, economic issues often take centre stage. Politicians may propose policies aimed at stimulating economic growth, creating jobs, or improving living standards. If enacted, these policies could benefit the economy.

Political parties often use elections to propose policies that could impact prices. For example, a party might promise to reduce taxes on certain goods, which could lead to lower prices for consumers. Conversely, another party might propose subsidies for specific industries, potentially leading to price increases for those goods.

If a party wins the election and implements policies that affect prices, we might see price changes in specific sectors. For instance, reduced taxes on fuel could lead to lower gas prices, while increased import duties on certain goods could make them more expensive.

Elections may influence prices through uncertainty around future policies and expectations based on campaign promises. However, the overall impact depends on various factors, and price changes might not always be directly attributable to the elections themselves.

To conclude...

While election cycles undeniably introduce short-term volatility to the Indian market, historical data suggests a more nuanced picture. The long-term trajectory of the economy ultimately hinges on the policy initiatives implemented by the incoming government and their subsequent impact on the business environment.

[Read: Do General Elections Matter for the Indian Equity Markets]

A government's ability to foster stability, growth, and investor confidence will be the key determinant of long-term market performance. Furthermore, the historical patterns emphasise how crucial economic reforms and policy continuity are to influencing market performance.

Elections bring instability, but the main emphasis should be on the ability of the government to maintain stability and carry out sensible policies that promote long-term economic progress. Ultimately, wise investment choices shouldn't be based only on election results; they should also take into account the broader economic landscape and reforms.

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MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.
She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.
 

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