Sinha, Aseema. "Rethinking the Developmental State Model: Divided Leviathan and Subnational Comparisons in India". Comparative Politics, Vol.35, No.4 (2003): 459-476.

Sinha, Aseema. "Rethinking the Developmental State Model: Divided Leviathan and Subnational Comparisons in India". Comparative Politics, Vol.35, No.4 (2003): 459-476.

• The idea of the development state, invented by Friedrich List, is that state invention is needed not only to correct for market failures, but also to support capital accumulation and other elements of economic development. Although these claims were widely accepted following WWII, it was not until the 1990s that organizations like the World Bank admitted that states played an important role in development and that this was an important factor behind East Asian economic success (459).
• India is regarded as a developmental failure, largely because of predatory state intervention in the economy and widespread rent-seeking. India has been used as the poster child of how state interference cripples economic growth, including by the pro-market radical movements of the 1980s (459).
• Negative perceptions of India as an overly bureaucratized state remain, with the reforms of the 1990s only demonstrating that getting rid of regulations increases economic growth (459-460).
• Both neoliberal and statist, or Keynesian, accounts of Indian economic development are wrong because they ignore disparities in regional development. Neoliberals assume that the central government is the cause of slow economic growth, but this would not explain why some states were able to grow much more rapidly than others if they are all subject to the same central government. Statists claim that slow growth is caused by failure to correct for market failures, but the most successful Indian states have enhanced market forces rather than controlled for them (460).
• India displays a large amount of regional diversity in economic growth rates, demonstrating that some states have managed to avoid the negative constraints of Indian bureaucracy. States used different investment strategies, with some promoting public investment and others encouraging public-private partnerships (460-461).
• This is demonstrated by very different investment breakdowns even during periods of major state involvement in the economy. In 1978, West Bengal and Tamil Nadu around 70% to 80% of investment was public sector, while Gujarat had around a third of investment come from the public sector, a third from the private sector, and another third from joint public-private deals (461).
• Differences in rates of public sector investment could be explained by funds being withheld as political punishment for election of non-Congress governments, as West Bengal elected the Left Front in 1977 and Tamil Nadu elected the Dravida Munnetra Kazhagam [DMK] in 1967. But this theory would not explain why these states still had more public investment that states with Congress governments, like Gujarat (464).
• Some scholars have pointed to ethnic differences in business communities, particularly the domination of West Bengali business by Marwari merchants from Rajasthan, to explain divergent rates of investment. This, however, fails to account for the predominance of public investment in states like Tamil Nadu, with a local industrial class, or for private investment in Maharashtra, which lacks a native business elite (464-465).
• Indian states already had high levels of regional inequality at the time of independence, with areas like West Bengal, Maharashtra, Tamil Nadu, and Gujarat being favored by the Raj. To account for this initial inequality, the author only looks at areas with high levels of development prior to independence (463).
• Economic development during the Raj concentrated around the Presidency cities of Calcutta, Bombay, and Madras, and ignored most of the rest of the country. At independence, the majority of infrastructure, industry, and companies were based around these cities (463). This development was also reflected in higher rates of literacy and urbanization (463-464).
• Comparison of Maharashtra and Gujarat demonstrates that initial conditions cannot explain divergent economic development complete, because Gujarat today outpaces Maharashtra in industrialization and development, but was less industrialized than Maharashtra at the time of independence (464).
• The implementation of developmental plans is a joint endeavor between central governments and local governments. Developmental choices are restricted by central government rules, but still depend on local government agency for implementation. Development studies needs to look at both levels of government in decision-making (466, 472-473).
• States sought to oppose or mitigate the Indian government's plans for state-led development by either bargaining or lobbying the central government for privileges or exemptions, as did Gujarat and Tamil Nadu, prior to 1967, or by openly resisting these initiatives, as did West Bengal (467).
• Government officials in Gujarat sought to attract as much private investment as possible and aimed to work with the central government to help make bureaucracy more efficient and circumvent some regulations. Gujarati officials made personal connections with federal bureaucrats and regulators, and work alongside Gujarati businessmen to ensure that development projects in Gujarat were approved (467-469).
• Gujarati businessmen also understood the importance of getting the state on your side, and tried to direct large amounts of investment through public-private partnerships like the Gujarat Industrial Investment Corporation, which gave Gujarati business direct access to key government regulators and bureaucrats (469).
• Gujarat made an active attempt to distribute information about industry and business opportunities to entrepreneurs both with Gujarat and in émigré communities in East Africa, Mumbai, and Kolkata. This information about government initiatives helped develop the chemical industry in the 1960s and the electronics industry in the 1990s (471).
• West Bengal made no effort to work with the central government, and opposition only intensified after the election of the Communist Party-led Left Front in 1977. This convinced the Bengali population of discrimination by the central government and kept the Communist Party in power, but led to federal discrimination against Bengali business and lots of regulatory difficulties (469-470).
• Tamil Nadu, under DMK and then the All India Anna Dravida Munnetra Kazhagam [AIADMK], had a tense relationship with the central government, as its political platform was based on anti-Hindi sentiment and a narrative of government oppression. This is reflected in the state generally missing out on development opportunities because it did not lobby the central government for favors (470).
• This changed in the 1980s, when Marudur Gopalan Ramachandran, the Chief Minister of Tamil Nadu, began supporting Indira Gandhi in return for the central government funding a number of industrial projects (471).
• Economic liberalization by the central government in India has not uniformly decreased economic regulation, but instead given regional governments more freedom to develop their own economic policies, including increased regulation (473).