April 11, 2019

The Biggest Election - Ever

We are about to witness one of the biggest demonstrations of democracy ever. It happens every time India holds an election. This year, 879 million voters are expected to participate.

To say that this election is complicated is an understatement. It is held in seven phases from April 11 to May 19, with the results announced on May 23. There are 1.72 million voting machines in use, located within two kilometers of every Indian voter. As you can imagine, it is an immense undertaking.

Current projections are that Prime Minister Narendra Modi's party will emerge as the largest, but fall short of a majority, requiring him to put together a governing coalition. Although India is still considered a high-growth country, Modi is on the defensive these days, as India's growth rate slows along with the rest of the world.

The most visible move made by the current Indian government was a shocking “demonetization" that occurred on Nov. 8, 2016, the same day as the last U.S. presidential election. Over 15 trillion of rupee banknotes were declared obsolete, with new currency notes issued to take their place. People had to prove their cash was not used in tax avoidance schemes to get full credit for their old notes. The government aimed to root out tax cheats, but in the end almost all notes were turned in with credible documentation.

This election will measure voter support for the idea of merging a secular economy with a more Hindu-focused government.

Meanwhile this week, another smaller – but still important - plebiscite wrapped up in Israel. Benjamin Netanyahu won a fifth term and will become Israel's longest serving prime minister ever.

As to the economic implications of that development, the news is that there is little news. The Israeli shekel and equity markets barely moved in the wake of the results.

My View: Maybe this is just a symptom of modern life these days, but with so many moving parts in the global economy, even really important events compete for attention in the currency markets. Nevertheless, elections do matter and can have major economic consequences, which we will continue to follow and discuss as they occur.

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