Study on poll funds says cement sales linked to elections

Cement consumption in India is related to the electoral cycle. There is a significant drop in cement purchase during the four-week campaign period prior to election day, especially in the case of Assembly elections, with the biggest dip in Andhra Pradesh and the smallest in Delhi. This slowdown speaks of an off-the-books builder-politician quid pro quo.

These are the provocative findings of a new study that turns the spotlight on one channel of the opaque and understudied field of illicit campaign finance. In a yet-to-be-published paper, titled 'Quid Pro Quo: Builders, Politicians and Election Finance In India', Devesh Kapur, who teaches political science at the University of Pennsylvania, and Milan Vaishnav of Columbia University track the black money flows in the construction and real estate sector.

The authors attempt to empirically describe and quantify the under-the-table compact between politicians and builders. The quid pro quo goes like this: Politicians park their illicit assets with builders because "they require a place to invest these assets where they can avoid public scrutiny while earning a decent return". Builders rely on politicians for discretionary policy favours.

Come elections, however, builders must re-route funds back to politicians as indirect election finance, as a result drying up liquidity in the real estate sector.

Using state-wise data on the monthly consumption of cement and the timing of elections in India's 17 major states over a period of 15 years, the authors assessed whether fluctuations in construction activities are linked to electoral cycles in India.

The 17 states in the study account for over 92 per cent of the country's population; the 15 years between 1995 and 2010 encompass a total of 52 state elections and five parliamentary elections.

The reason they picked cement, say Kapur and Vaishnav, is because "what money is to elections, cement is to construction" and because "industry research estimates that real estate accounts for between 65 and 75 per cent of India's domestic cement demand".

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