"The second reason is the need for election funding, which tends to be profound in the runup to a general election. The higher spend will give a legup to the rural economy and rural wages, Ambit Capital said as has been noticed in previous election cycles. "An analysis of the constitution of CPI suggests this differential is largely driven by higher food inflation. Although the finance minister has promised to reach the 3 per cent fiscal deficit target by the end of FY2018, higher subsidy spend near an election could worsen the equation.There is a winner though. Higher subsidies are usually targeted at the most under-privileged populace, which are largely part of the rural economy.

Source: Economic Times August 02, 2016 07:07 UTC