India is celebrating democracy with year 2014 elections but how this may impact all of us in coming weeks? MBA Aspirants are expected to know the current trends of political fall outs on Indian economy. This general awareness article ‘hung parliament’ will help you in WAT/Essay/GD and PI also.
Read: How Hung Parliament can impact Economy?
Before we look into the impact of a hung parliament on the economy, it is important to understand what a hung parliament is. A hung parliament happens when no major political party has an absolute majority of seats in the parliament.
In most general elections, with a two-party system, one party will have an absolute majority and this party will form a government; however, when no party has an absolute majority, the main parties may form a coalition government.
In February 2014, seven regional parties and four Left parties in India decided to form a Third Front to defeat established parties Congress and the Bharatiya Janata Party (BJP). However, political analysts claimed that the prospects of a Third Front were not looking good and that India needs a single established party to form the government and lead the country through the economic turmoil.
When there is a merger between two parties, there should be a basic understanding too. When there is no proper understanding, a number of problems may arise and this will ultimately lead to political instability. No investor wants to put his money in a country which is unstable or has the potential to break out into riots.
If the two parties do not have a common understanding, they will not be able to come up with proper rules and regulations for the benefit of the country. As such, investors and businesses may lose confidence in the government and the Indian economy could worsen.
In addition, we have to be wary of the motives of our politicians. There are a number of politicians in our country who are corrupt and seek power for their own gain. If two political parties join hands for the sake of enhancing their personal gains, then the country and its people will be in deep trouble – we will face the brunt of high inflation and corruption.
However, it is not fair to say that a hung parliament will only have a negative impact on the economy. In fact, it could have a positive impact too. All of us know that a lot of money is required to conduct elections.
So, if no major political party has an absolute majority of seats, there is a possibility of a re-election and this will result in the wastage of funds. Politicians will spend money on their campaigns and there is a possibility that they will bribe the public for votes.
So, a hung parliament will help save public funds and this will definitely have a positive impact on the economy. Instead of spending public funds on re-elections, a hung parliament will be able to utilize the money for people’s welfare. Every political party espouses a different ideology and when two parties come together, they can bring the best of both the ideologies and boost the economic growth of the nation.
So, a hung parliament can have either a negative or a positive impact on the economy depending on the motives of the politicians and the relationship between the two parties that are forming a coalition government.