If fear and panic are palpable in markets, they are clouding political decision-making as well. As reported by Mint on Saturday, the general election may be brought forward by the United Progressive Alliance government. The thinking in political circles being that poor economic outcomes imply poor electoral fortunes, hence the need to speed up the normal electoral process.
Such thinking is reckless at best: It ignores the fact that announcing early elections will add fuel to the fire in financial markets. The last thing needed at the moment is political uncertainty.
This, however, could not bother politicians. Their attitude is that of someone in an experiment: A decision is likely to be taken depending on the results of assembly elections in six states in the next two months.
This “wait and watch” attitude will, by itself, fuel uncertainty. Until the political fog clears, new investments could very well be on hold. Industrial production figures released last week show a precipitous decline in manufacturing growth. Industrial output has slumped. Politicians and the government should be mindful of the perverse consequences of “sound” political calculations.