Economic theory was at play all through the Lok Sabha election

livemint.com:

The outcome of India’s election was quite singular, compared with 2014 and 2019. All major parties celebrated it. The NDA was happy because it returned to power, the Congress and INDIA were happy that they did better than in the past, while regional parties were pleased they came out stronger in their states.

This is what in economics would be close to a ‘Pareto optimal’ situation, where everyone is better off and no one worse off. All through election season, one could see several concepts of economics at play. The most startling was the ‘irrational exuberance’ witnessed on 3 June when the Sensex closed at a peak of 76,468 on the back of exit polls on 1 June which indicated a huge mandate for the ruling establishment.

The premise was that a landslide majority of 350-360 Lok Sabha seats for the NDA would accelerate economic reforms, thus reviving the Keynesian ‘animal spirits’ of industry. When the results on 4 June revealed a majority for the NDA (though not for the BJP), the market index crashed to 72,079 amid worries that reforms would slow down. In market parlance, stocks tend to ‘revert to the mean,’ and not surprisingly, on 5 June, the Sensex closed at 74,382, which was higher than its closing level on 31 May.

The exit polls were another exercise that saw economic laws prevail. These polls went wrong in the last Lok Sabha election, as well as during recent state assembly polls. Hence, this time, all of them seem to have followed a policy of ‘adaptive expectations,’ by which the last outcome is simply scaled up in an effort by pollsters to look good.