Understand the link: data, elections, and finances

In a world where data and knowledge abound, it’s easy to feel overwhelmed more frequently than not. Making sense of employing information is the greatest course of action when it comes to investing and saving.

You may be concerned about how the next general election in India would affect your finances. Political parties will likely throw a lot of material at you, so you may want to pare things down and concentrate on simplicity. To do so, you’ll need instruments that let you create a link between the results of the election and the public data at your disposal. The government must prioritize economic development above inflation in order to protect your savings and assets. a government with effective revenue and spending management.

The Reserve Bank of India published a wealth of information in the form of policy statement papers along with the announcement of the credit policy last week. You might concentrate on a few data sets that may help you understand the situation on the ground.

The scenario of inflation

High inflation in the run-up to an election is disliked by politicians. Nonetheless, the IDFC Institute’s 2015 analysis made clear that there was no connection between inflation and the result of elections. In spite of high inflation, governments were re-elected or ousted from office in spite of low inflation. However, it is an aspect that cannot be disregarded. The anticipation of rising household prices is often captured by the RBI’s forward-looking surveys.

The study would show whether or not households are feeling the heat from price increases. When the RBI implemented the bi-monthly credit policy framework in April 2014, it released a series of surveys with an outlook. According to the household inflation anticipation poll, 94.1 percent of consumers anticipated price increases in the next quarter and year. India saw a change of administration in May 2014.

According to the study conducted in April 2019, 74.8% of consumers thought prices will rise over the next three months or a year. That year, India had elections, and the ruling party was re-elected. According to a study that was released last week, 76.5% of respondents said they thought prices will rise.

The assurance of customers

An indicator of consumer confidence is produced by the RBI. The consumer’s present status in relation to the previous year and their impression of the next year are explained by the perception index. It provides an idea of how much money individuals spend in relation to their income and work status. A score of more than 100 denotes optimism, whereas a score of less than 100 denotes pessimism. The index of the present condition was 99.9 in March 2014, while the index of future expectations was 114.9. The future expectation index stood at 133.4 in March 2019, while the present situation index shot to optimism at 104.6.

The present condition index dropped to 98.4 in March 2024, compared to March 2014. The index saw a significant decline into the pessimistic zone during the epidemic and has had difficulty rising into the optimistic zone. With a one-year forward score of 125.2, it was less confident than in 2019 but more confident than in 2014.

marketplaces for finances

Election seasons tend to see an increase in volatility, according to financial market trends. The roadway has an air of tranquility. The share price volatility is reflected in the India VIX index. It was much greater in April 2014 and April 2019 than it is at the moment. In a similar vein, 10-year government bond rates are much lower now than they were before the last two elections, suggesting that the bond markets do not anticipate any major danger.

What does it signify?

You have to pay attention to the promises made in political manifestos that seem inflationary during an election. You need a government that prioritizes controlling inflation. You have to bring up inflation if it isn’t a voting concern for you. According to experts, identity politics have a greater influence on voting decisions in India than economic factors. But when you cast your ballot, you have to put your health first. Your government’s financial stability is essential to your financial security. In the near run, the government may provide cash or tax benefits if its policies are inflationary. On the other hand, it would eventually increase inflation and devalue your money.