Economics of India's Vote Machine

Economics of India's Vote Machine

For a couple of years now, India’s Congress-led coalition government has been in a tizzy trying to revive what Prime Minister Manmohan Singh called the “animal spirit” of the Indian economy. Even as annual growth slipped to below 5 percent, the lowest in a decade, and the current account deficit rose to alarming levels, causing the rupee to plunge against the dollar, the government pulled rabbit after rabbit out of its hat. It announced it was opening India’s protected retail sector to foreign investment, tried to foist retrospective taxes upon multinational corporations, changed finance ministers, stopped subsidizing gasoline, and even pleaded with citizens to stop buying gold. None of these measures were fruitful in a time when what was needed was a measure that would reverberate through the entire economy. Then, in March, the government gave the Indian economy the quasi-Keynesian boost it was looking for, rich with multiplier effects from boardroom to tea shop. In truth, it had no other choice. It called the next general election.

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