Abstract
This paper utilizes a balanced panel data-set comprising of data on 29 Indian states and Union Territories for the period 2003-2017 for both Legislative Assembly and Parliamentary elections at the state-level to address the following questions. First, whether an incumbent government manoeuvers fiscal policies for opportunistic gains, especially in light of tight electoral competition? Second, whether ideologically distinct or partisan electoral groups exhibit different economic policy positions during an election term? And third, whether clientelist practices undertaken by political candidates or parties contesting elections significantly translate into biasing policy choices in favour of their patrons? The analysis has been done for two categories of policy variables: expenditure and deficit parameters of the incumbent state government. The regression estimations include various political controls such as, electoral competition between political parties, voter participation rate, government’s ideological leaning, centre-state alignment and government incumbency. Apart from these, the estimations also control for political lobbying by using the data on monetary contributions provided to different political parties. The results for both Legislative Assembly and state-level Parliamentary elections provide remarkable evidence in favour of a significant presence of various interest groups, lobbying and monetary transfers at work in Indian politics, especially via a strong and organized industrial sector, which trickles down to influence the numerous policy positions of distinct political parties.
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Source: Reserve Bank of India
Source: Reserve Bank of India
Source: Reserve Bank of India
Source: Association of Democratic Reforms (2019)
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Notes
In order to study the corporate lobbying scenario in a comprehensive manner, it would be better to either segregate the political contributions made by industries and businesses or employ an industrial concentration index (constructed on the basis of the Hirschman-Herfindahl index) to measure the extent and influence of the lobbying power of big corporations and business groups in a state to evaluate their impact on firm or industry specific policies implemented by the incumbent governments across states.
On August 5, 2019, the Jammu and Kashmir Reorganization Act was passed in both Houses of the Indian Parliament, which revoked the special status of Jammu and Kashmir and reorganized the state into two union territories, namely the eponymous union territory of Jammu and Kashmir, and that of Ladakh.
The states and UTs included in the empirical estimation are: Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Chattisgarh, Delhi (Union Territory), Goa, Gujarat, Haryana, Himachal Pradesh, Jammu and Kashmir, Jharkhand, Karnataka, Kerela, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Orissa, Punjab, Rajasthan, Sikkim, Tamil Nadu, Tripura, Uttarakhand, Uttar Pradesh and West Bengal. The state of Telangana has been excluded from the analysis because the time-period of the data-set is 2003-17 whereas the state of Telangana was formed on 2nd June 2014.
1 crore = 10 million.
General services include interest payments, repayment of debt, defence, law and order, running of different organs of the state such as judiciary, auditing, etc. and pensions. Economic services include agriculture, irrigation, industry and minerals, employment generation, transport, communications, energy (power). Social services include education, health and family welfare, water supply and sanitation, welfare of marginalized sections, welfare of handicapped and destitute people and youth affairs and sports.
In India, it is the number of seats won during elections (state-level or national level) and not the number of votes that matters for government formation. And, since this study analyzes the impact of electoral competition on different policy outcomes of the incumbent state governments, the measure of political competition based on seat-share difference seems more suitable as compared to the measure based on vote-share difference.
INC (Indian National Congress) or Congress is treated as a centrist political party in this analysis.
Refer to Appendix for a detailed list of all the political parties considered in this analysis along with their ideological stands. The ideological stands and political leanings of distinct political parties in India have been compiled from Dash and Raja (2012).
In case of a state experiencing President’s rule during a financial year, it has been considered as aligned with the centre for the purpose of this analysis. This notion is in conformity with the proposition that state administrations under President’s rule will typically be in compliance with the central government.
Government continuation dummy has been dropped from the state-level Parliamentary election estimations since it is invariant over the time period of the analysis.
The yearly population of the state has been calculated by dividing the GSDP of the state (at constant prices) by the per-capita state domestic product (at constant prices).
It should be noted that while the two terms: lobbying and clientelism, have been used together, they are not strictly synonymous with each other. In particular, lobbying is associated with efforts to influence government’s decisions and policies, while political clientelism, in very basic terms describes the distribution of selective benefits to individuals or clearly defined groups in exchange for political support. Nevertheless, lobbying and some forms of clientelism have been observed to moderately overlap with each other. For example, “new” clientelism is closely associated with the expansion of the economic and social role of the state including the provision of a wide range of financial benefits (welfare and pensions, industrial and agricultural subsidies, public housing) and public services (education, health), which in turn provides a greater ability to the incumbent party in a state to manipulate and channel these resources in exchange for political support (Hopkin 2006). Such fiscal maneuvering might very well be driven and intensified by the presence of organized interest groups which provide monetary contributions to the incumbent party in question, for they can coordinate amongst themselves and thus have a better ability to extract transfers from incumbent politicians. Utilizing this line of reasoning, the analysis in this paper relates the clientelist practices of the incumbent government as being an auxiliary supporting mechanism through which lobbying activities (channelled via political contributions) can influence the incumbent government’s spending decisions.
file:///C:/Users/HOME/AppData/Local/Temp/103120000000009096.htmlof methodological issues.
These are the donations received by BJP (Bharatiya Janata Party), INC, NCP (Nationalist Congress Party), CPI (Communist Party of India), CPM (Communist Party of India (Marxist)) and AITC (All India Trinamool Congress). Even though BSP (Bahujan Samaj Party) is also a national party but it was not considered in the analysis as it declared no receipt of voluntary contributions over INR 20,000 from any donor during the said time period.
In the descriptive statistics for state-level Parliamentary elections, apart from the political controls like political competition, voter participation, government ideology and political contributions, all other variables are identical to the variables in Legislative Assembly elections.
Since both the dependent as well as the independent variables have been normalized by dividing them with variables measured in correspondingly identical respects, therefore, they are expressed in absolute terms. In consequence, the original measurement standards of these variables become defunct for this analysis. Hence, for all the regression estimations, “unit” has been used as a reliable terminology to interpret the regression coefficients of all the normalized variables.
The estimated coefficients for the political competition variable should be interpreted in a reverse manner. This is because the extent of political competition in a state has been calculated by dividing the seat-share difference between the winner and the runner-up party by the total seats in that state and, a lowering of the seat-share difference between the winner and the runner-up political groups is synonymous with a greater degree of political competition. Thus, a negative coefficient for this variable, for say capital spending to GSDP ratio, indicates that a lowering of the seat-share difference entails an increase in the average share of capital expenditure.
I would like to thank an anonymous referee for pointing out the need to highlight the corruption incentive of the incumbent working through the political competition variable constructed using the seat-shares data and its influence on capital spending to GSDP ratio.
A more liberal government is perceived to be more left-oriented.
The corporate sector accounts for a major share of donations received by the political parties in India according to a report by ADR (2019).
Since the special category is a dummy variable and is constant over time, it is dropped from the Difference GMM regressions.
A study by Dash and Mukherjee (2014) shows that states belonging to special category on an average have lower HDI (Human Development Index) scores as compared to the general category states, thus, indicating the prevalence of relatively sub-standard social conditions in the special category states.
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Kohli, D. Elections, lobbying and economic policies: an empirical investigation across Indian states. Const Polit Econ 33, 255–300 (2022). https://doi.org/10.1007/s10602-021-09353-7
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DOI: https://doi.org/10.1007/s10602-021-09353-7