Party Nationalisation and Sub-national Budgetary Allocation: Evidence from India

• In Event: Politics of Inequality in Developing Contexts

Abstract

The paper contributes three perspectives to the literature on party nationalisation and its consequences. First, it studies party nationalisation and not party system nationalisation. The latter has received considerable attention in the literature. Second, it operationalises party nationalisation in three dimensions: ‘Distributional nationalisation’, ‘Dynamic nationalisation’, and ‘Party-linkage nationalisation’. Third, the consequences of party nationalisation are assessed for sub-national (or state) budgetary allocations. The data for the study was collated for 15 large sub-national units (states) in India over 25 years between 1995 and 2020. We find that the dimensions of distributional nationalisation and party-linkage nationalisation have a negative effect on the state budgetary allocation towards development. However, there is no effect of dynamic nationalisation on development allocation. Furthermore, a breakup of development expenditure suggests that the negative effects of party nationalisation are pronounced with revenue expenditure and social sector allocations. The robustness of these results was verified through an instrumental variable analysis. The findings show that party nationalisation has a negative effect on development expenditure allocation, but the effect is contingent on the dimension of party nationalisation.

Authors

• Minali Grover, Indian Institute of Management (IIM) Indore

• Ajit Phadnis, IIM Indore