University of Sussex
(2012.12.07)_Mathew,_Athakattu_Santhosh.pdf (4.2 MB)

State incapacity by design: unused grants, poverty and electoral success in Bihar

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posted on 2023-06-07, 16:21 authored by Athakattu Santhosh Mathew
This thesis offers a perspective on why majority-poor democracies might fail to pursue pro-poor policies. In particular, it discusses why in Bihar, the Rashtriya Janata Dal (RJD) party led by Lalu Prasad Yadav, which claimed to represent the poor and under-privileged, did not claim and spend large amounts of centre–state fiscal transfers that could have reduced poverty, provided employment and benefitted core supporters. Despite this failure, the RJD and Yadav enjoyed repeated electoral success between 1990 and 2005, in a context of credible elections and a majority of poor voters. I have called this combination of events the ‘Bihar paradox’. I explore this paradox by: 1. Creating two panel data sets on fiscal transfers in the form of Centrally Sponsored Schemes and State Plan Allocations made from the Government of India to sixteen main states over an eight-year period from 1997-98 to 2004-05. 2. Using the panel data sets to show that, during this period: a) Poor states in India claimed and spent less of the centre–state fiscal transfers available to them than wealthier states b) Relative to other states, the Government of Bihar claimed and spent less fiscal transfers than expected of a state at its level of poverty. 3. Explaining how Yadav’s electoral strategy contributed to this under-claiming and under-spending. For Yadav, the political imperative was to marginalize the upper castes and provide selective benefits to key supporters. This led to large numbers of public sector vacancies which eroded state administrative capacity in all but a few ‘pockets of productivity’, which in turn led to poor results for general development outcomes. The Bihar story is relevant to areas of research variously labelled as ‘state-building’, ‘capacity development’ and ‘public sector reform’. It is another warning about how easy it is to foster pessimism by attributing governance problems in poor countries to deeply embedded historical or cultural factors, when they may have more immediate, political and tractable causes.


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