Research exposes Politicians - Builders deep nexus and role of Black Money in elections

[dheerajjain]

Times of India published an interesting article yesterday (6th Feb) exposing nexus

http://articles.timesofindia.indiatimes ... eal-estate

Study links polls to slump in real estate business
Priya Yadav, TNN Feb 6, 2012, 07.05AM IST
Tags:
University of pennsylvania|real estate

CHANDIGARH: A study focusing on election funding and cement consumption in at least 17 states of the country, including Punjab, has highlighted the role of black money in elections. The study, done by two Indian-origin US political scientists, has established how cement sales are linked to elections due to a deep nexus between politicians and real estate developers.

While electoral activity in Punjab ended recently and wait for results is on, the state has registered an overall slump in construction activity in the past two months. The authors of the study, Devesh Kapur of University of Pennsylvania and Milan Vaishnav of Columbia University, compiled information on the monthly consumption of cement and the timing of elections in India's 17 major states from 1995 to 2010.
The research investigated whether the presence of elections is associated with an observable drop in cement consumption, which is consistent with a drying up of liquidity in the real estate sector around election time.

Data collected from the Cement Manufacturers' Association of India (CMA), an industry trade group, has been studied. Kapur said, "We chose to study cement as we believed that cement is to construction what money is to elections."

The study finds that the election-related decline in cement consumption is stronger for urban as opposed to rural states - 16% versus 10%. Using population figures from the 1991 and 2001 census, it identifies Andhra Pradesh, Delhi, Gujarat, Haryana, Karnataka, Maharashtra, Punjab, Tamil Nadu and West Bengal as urban states.

The two authors have sound an alarm bell for the electoral system, backed by scientific investigation. Raising money from "supporters" has the potential effect of post-election paybacks in terms of distorting public policies.

"Indeed, the builder-politician nexus has implications for decisions on land acquisition and conversion; land and housing prices and land inequality; and the overall public management of urbanization," said Kapur.

How the quid pro quo works

Politicians accumulate resources while in office. Although the salaries for MLAs and Members of Parliament (MPs) are modest, studies have shown that the asset holdings of many elected politicians are often disproportionately large.

Once politicians accumulate assets, they require a place to invest these assets where they can avoid public scrutiny while earning a decent return. Because land is a valuable commodity, many politicians are thought to deposit a portion of their assets with real estate developers.

In the third and final stage of the quid pro quo, builders transfer back to politicians assets that can be used to offset election expenses.