Government to embark on a spending spree, suggests Deutsche Bank analysis

Deutsche Bank conducted an analysis which showed that spending by any government in India picked up in last two years of its five-year term. As per this observation, Prime Minister Narendra Modi will now start spending as he has completed three years in office. The next general elections are in 2019.

Like all democracies in the world, the government in India also wants to show the voters how well it works to boost the economy and create jobs by spending on infrastructure projects, and to keep the memory fresh, that would be done in the last two years of the PM term.

Also read: Infrastructure development is now the prime aim for the Modi government. Here's how

"Governments need to show that things are happening, that jobs are being created," Deutsche Bank analyst Abhay Laijawala told Bloomberg in an interview.

In an April 26 note, Laijawala had estimated that in the 1990s, the year-over-year expenditure of the then Congress-led Indian government increased 12.1% in the last two years in office, while this increase was 14% for the BJP government in the early 2000s.

However, the last Congress government which was held office between 2009 and 2014, the y-o-y rise in government expenditure in the last two years did not pick up, since the government was marred by corruption scandals.

This probable spending spree will be benefiting companies in materials like cement, industrials, utilities and IT services, said Laijawala.

However, he didn’t forget to include the possible impact of the upcoming implementation of Goods and Services Tax, which he said could cause some near-term economic disruption.