Political Economy of Infrastructure Spending in India

42 Pages Posted: 20 Apr 2016

See all articles by Stuti Khemani

Stuti Khemani

World Bank; World Bank - Development Research Group (DECRG)

Date Written: September 1, 2010

Abstract

This paper examines a puzzle in the political economy of infrastructure in India -- the co-existence of relatively low shares of capital spending in public budgets alongside evidence of large demand for village infrastructure from poor voters. It argues that this pattern is due to infrastructure projects being used at the margin for political rent-seeking, while spending on employment and welfare transfers are the preferred vehicles to win votes for re-election. New suggestive evidence on the variation of public spending composition across states, and within states over time is offered that is consistent with this argument. This evidence underscores a growing argument in the development literature that the level and composition of public spending per se may not be sufficient metrics to assess the quality of public goods policies -- greater infrastructure spending in some contexts may go to political rents rather than to the actual delivery of broad public goods for growth and poverty reduction.

Keywords: Public Sector Economics, National Governance, Public Sector Management and Reform, Parliamentary Government, Debt Markets

Suggested Citation

Khemani, Stuti, Political Economy of Infrastructure Spending in India (September 1, 2010). World Bank Policy Research Working Paper No. 5423. Available at SSRN: https://ssrn.com/abstract=1678352

Stuti Khemani (Contact Author)

World Bank ( email )

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United States

HOME PAGE: http://econ.worldbank.org/staff/skhemani

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

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