Fiscal Transfers, Natural Calamities and Partisan Politics - Evidence from India

Do some sub-national governments receive higher transfers from the Central Government than others? Which channels exist for the Central Government to practice partisan politics? Taking note of the significant gap between the relief sought by the states in the context of natural calamities such as drought and the assistance given by the Centre, the present study attempts to contribute to the vast literature on fiscal transfers from the Centre to different states in India with particular focus on partisan politics. The empirical analysis based on total and non-plan fiscal grants from the Centre to different states and an index of drought over the past three decades suggests that the grant allocation in response to drought is higher when political alignment exists between the Centre and the states. The study further shows that the allocation of grants in response to drought is affected by the nature of political alignment and has changed over time.