Economic Liberalization, Electoral Coalitions and Private Investment in India

Abstract

What are the political conditions conducive to growth-oriented policies in poor democracies? An extensive literature on redistribution suggests that poor democracies are unlikely to focus on growth-oriented policies. Yet, as a largely poor and highly-competitive democracy that has witnessed a notable growth transformation, India challenges this hypothesis. To address the broader question of political conditions conducive to growth-oriented policies in poor democracies, my dissertation focuses on a specific empirical puzzle - subnational policy variation in the competition for private investment in India, which ensued after the adoption of extensive market reforms in 1991. Despite being bound by similar institutional conditions and being subject to a common shock, some subnational governments have been far more proactive and business-friendly in the competition for investment than their counterparts; both speed and scope of policies has varied. I examine this variation and ask why some subnational governments have been more proactive and investor-friendly than others.

My dissertation makes two main claims. First, I focus on the social base of voters backing governments, which I refer to as electoral coalitions, and argue that certain configurations of electoral coalitions with a confined class basis are more favorable to growth-oriented policies than others. Specifically, narrow-right coalitions, characterized by the joint presence of core groups with similar economically-advanced profiles and substantial representation of business interests, are most conductive to growth-oriented issues. How do such narrow class coalitions emerge in the midst of a poor electorate? The second claim of my dissertation is that narrow growth-oriented coalitions can arise in poor democracies when the primary logic of electoral politics is non-economic and rests instead on symbolic concerns such as identity, ethnicity or nationalism. In such cases, both party strategies of mobilization and voter attachments are driven by social factors rather than economic interests. Where social attachments cut across economic interests, class-based electoral collaboration is impeded and narrow coalitions can emerge, even in the midst of poor electorates.

In the Indian case, I focus on the influence of identity politics, specifically on caste politics, on both party strategies and voter motivations. The primacy of identity politics has meant that underlying social cleavage patterns critically affect party strategies of coalition construction. The association between social cleavage patterns and party strategies is complemented from below by the effect of identity on voter attachments. Both these factors allow for the emergence of narrow, growth-friendly coalitions in a poor electorate.

I use a nested research design, which combines both qualitative and quantitative analysis. Specifically, four in-depth case studies are combined with a time-series cross-section analysis of 14 states between 1992 and 2010.