The good, the bad and the ugly: A policy debate on the political budget cycle in India with an ARDL model

Fiscal tools can be used to signal voters mainly spending by the incumbents; this study attempts to verify empirically the same in the Indian general election during 1980-1981 to 2020-2021. The study has used the autoregressive distributed lag model to find evidence of the presence of a political budget cycle (PBC). The study assessed the stationarity of the series, selected the lag-length criteria, and even performed the diagnostic test to verify the credibility of the model. There is clear evidence of the presence of the electoral cycle in the pre-election budget, and the outcome seems to be aligned with past empirical studies. The incumbent influences the capital expenditure for the long run and revenue expenditure for the short run before the election year. The Fiscal policy has reduced non-development expenditure in long run; otherwise, the fiscal tools remained insignificant. The study suggests encouraging voters' awareness to enrich their voting decisions.