Elections, lobbying and economic policies: an empirical investigation across Indian states

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.