Political instability in coming Lok Sabha elections to affect economy: ASSOCHAM

With the fast unfolding political situation in the country post the recent assembly elections in some key states, uncertainty over the outcome of the coming Lok Sabha elections is likely to cast its shadow on the state of economy which is battling the twin challenge of slowdown and unabated inflation, an ASSOCHAM study has noted.

The study that captured the contemporary political economic situation observed that there was an increasingly concern among the investors, industry leaders and economists over the prospects of an unstable government which may be forced to follow more of the populist and Left of the centre policies.

Such prospects increased after the results of the recent Assembly elections and strong emergence of the Aam Admi Party (AAP).

As the much- awaited green shoots in the economy still look evasive in several segments of industry and all important services sector, the new government will be faced with a difficult fiscal situation. "On the one hand, there would be increasing expenditure due to populist and mega schemes in the social sector, on the other, the taxation kitty would not be robust enough in the face of slowdown," pointed out the study.

Commenting on the unfolding situation, ASSOCHAM study revealed, "The prospects of a highly fractured mandate look real and that would not be a good development for the economy, ironically at a time when we are getting desperate for a turnaround".

The study listed the main challenges which will have to be fixed immediately for the new government. These would include maintaining a tight leash on the government finances, chalking out and implementing a blueprint for restoring high growth which can generate large scale employment, especially in the less developed states which are now trying to catch up.

Dion Global Solutions Ltd.

Story first published: Monday, January 6, 2014, 9:11 [IST]
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