📈 economics

Do Aligned States Deliver for SC/ST? Central Welfare Transfers, Partisan Alignment, and Reservation Utilisation in India, 2000–2022

This paper analyzes Indian state-level data from 2000–2022 to find that while partisan alignment between state and central governments increases SC/ST-targeted welfare transfers, the "alignment premium" for these specific funds is significantly smaller than for general transfers and fails to translate into proportional improvements in reservation outcomes due to binding demand-side and administrative constraints.

Original authors: Kunal Dhanda

Published 2026-07-23

📖 6 min read🧠 Deep dive

CC BY 4.0

Original authors: Kunal Dhanda

Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). ✨ This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer

Imagine the Indian government as a massive, bustling kitchen run by a Head Chef in New Delhi (the Central Government). This kitchen has to cook meals for 28 different regional branches (the States), each run by its own local Head Cook. Sometimes, the Head Chef and a local Head Cook are from the same family or political club; other times, they are rivals. In the world of political science, this relationship is called "partisan alignment."

For decades, researchers have known a simple rule: when the Head Chef and the local Cook are on the same team, the local branch gets extra ingredients. It's like a secret handshake that unlocks a bigger budget. But this paper asks a sharper, more specific question: Does that extra budget actually reach the people who need it most? Specifically, does it fill the special "reserved seats" meant for Scheduled Castes (SC) and Scheduled Tribes (ST)—communities that have faced historical discrimination? The study looks at three specific types of "ingredients": money earmarked for SC welfare (SCSP), scholarships for SC students (PM-PMS), and similar funds for Tribal communities (TSP). The big question is whether political friends get these specific ingredients faster or in larger amounts than their rivals, and if that extra money actually helps students get into college or people get government jobs.

The Big Discovery: The "Friendship Bonus" Has a Hierarchy

In this study, researcher Kunal Dhanda acts like a detective sifting through 22 years of financial records (from 2000 to 2022) across 20 major Indian states. He wanted to see if being "aligned" (having the same party in charge at the center and the state) acts like a magic wand for welfare.

The short answer is: Yes, but with a catch.

When a state and the central government are on the same team, they do get more money. However, the "friendship bonus" isn't distributed equally. Think of the central budget as a giant pizza. If the state and center are aligned, the state gets a bigger slice of the pizza. But here's the twist: the slice of the pizza that is specifically reserved for SC/ST welfare is smaller than the slice of the general pizza.

The data shows a clear "gradient" or ladder of favoritism:

General Discretionary Funds (The Big Slice): Aligned states get a massive +12.1% boost in general, flexible money they can spend however they like.
SCSP (The Earmarked Slice): For the specific funds meant for Scheduled Castes, the boost is smaller, at only +7.8%.
TSP (The Tribal Slice): For Scheduled Tribes, the boost is even lower at +6.6%.
PM-PMS (The Scholarship Slice): For student scholarships, the boost is the tiniest, at just +3.3%.

This suggests that while political friends get richer overall, the specific welfare programs for marginalized communities don't get the same "VIP treatment" as the general budget. The extra money flows more easily into general pots than into the specific pots meant for SC/ST welfare.

The Plot Twist: It Depends on Which Team You Are On

The paper then digs deeper and finds a fascinating reversal depending on which political party is in charge.

The General Rule: When the BJP is in charge at the center, aligned states get a huge +13.0% boost in general funds. When the INC is in charge, the boost is slightly lower at +10.8%.
The Reversal: But when it comes to the specific SCSP welfare funds, the tables turn! INC-aligned states get a +9.5% boost, while BJP-aligned states only get +6.7%.

It's like two different chefs running the kitchen. The BJP chef seems to hand out bigger general bonuses to their friends, but the INC chef seems to be more careful to ensure their friends get a larger share of the specific welfare ingredients. The paper suggests this isn't just random; it reflects the different "ideologies" or priorities of the parties. The INC party, with its historical focus on social justice, seems to channel its political alignment more directly into SC-specific welfare, whereas the BJP channels its alignment into broader, general spending.

The Reality Check: Money Doesn't Automatically Fill Seats

The most surprising part of the story comes when the researcher asks: "Does getting more of these specific funds actually help?"

He looked at whether more SCSP money meant more SC students filling their reserved seats in colleges or more SC candidates getting government jobs. The result was a hard "no" for the money itself.

The Finding: Having more SCSP funds per person did not significantly predict higher seat utilization. The statistical link was effectively zero.
The Explanation: This suggests that the problem isn't a lack of money (supply), but a lack of eligible candidates or administrative hurdles (demand). It's like having a fully stocked library but no one coming in to read the books because the doors are locked or people don't know they exist.
The Silver Lining: However, being "aligned" did help slightly. Aligned states saw a small but real increase of +0.41 percentage points in seat utilization. This implies that when the teams are aligned, the administration works better—perhaps scholarships are processed faster, or there are better awareness campaigns—but simply dumping more cash (SCSP) into the system without fixing the process doesn't fill the seats.

What This Means for the Story

The paper concludes that political alignment is a powerful force, but it's a "leaky" one when it comes to specific welfare. The "alignment dividend" (the extra money you get for being friends with the center) is real, but it disproportionately benefits the state's general budget rather than the targeted welfare programs for SC/ST communities.

Furthermore, the study rules out the idea that "more money equals more results" for these specific groups. The data suggests that throwing more cash at the problem doesn't fix the bottleneck; instead, administrative efficiency and demand-side factors (like getting students to apply) are the real keys. The paper suggests that to truly help, the system needs to focus less on political favoritism and more on strengthening the rules that ensure these specific funds are actually spent as intended, and on fixing the barriers that stop eligible people from using them.

Technical Summary: "Do Aligned States Deliver for SC/ST? Central Welfare Transfers, Partisan Alignment, and Reservation Utilisation in India, 2000–2022"

Problem Statement
The paper investigates a critical gap in the literature on Indian fiscal federalism. While existing studies (e.g., Arulampalam et al., Dasgupta et al.) establish that partisan alignment between state and central governments generates a significant "alignment premium" in general discretionary transfers, it remains unclear whether this political dividend extends equally to constitutionally mandated, caste-targeted welfare programs. Specifically, the author asks: Does alignment increase SC/ST-specific spending (Scheduled Castes Sub-Plan [SCSP], Tribal Sub-Plan [TSP], and PM Post-Matric Scholarship [PM-PMS]) proportionally to general transfers? Furthermore, does increased fiscal allocation translate into improved downstream outcomes, such as the utilization of reserved seats in higher education and government employment? The study posits that if alignment premiums bypass targeted welfare channels, the political economy of fiscal federalism may reinforce historical deprivation rather than alleviate it.

Methodology and Data
The study utilizes an annual state-level panel dataset covering 20 major Indian states from 2000 to 2022 ( $N = 446$ state-year observations).

Dependent Variables: The analysis focuses on three specific transfer streams:
1. SCSP: Central contributions to the Scheduled Castes Sub-Plan per SC capita.
2. PM-PMS: Central disbursements for the PM Post-Matric Scholarship per SC capita.
3. TSP: Tribal Sub-Plan transfers per ST capita (restricted to states with ST populations >5%).
  Outcomes are log-transformed to interpret coefficients as percentage changes.
Key Independent Variable: A binary indicator for "Alignment" (state and central governments governed by the same party).
Empirical Strategy: The author employs a series of progressive Ordinary Least Squares (OLS) specifications, culminating in a Two-Way Fixed Effects (TWFE) model (Specification S5) that identifies effects from within-state alignment changes over time.
- Heterogeneity Analysis: The model interacts alignment with the central ruling party (NDA/BJP vs. UPA/INC) to test for ideological differences in targeting.
- Utilization Linkage: A secondary analysis links fiscal transfers to SC reservation utilization rates in higher education and government jobs (2012–2022 subset).
- Inference: Given the limited number of clusters ( $G=20$ states), the study utilizes the Wild Cluster Bootstrap (WCB) with Rademacher weights ( $B=999$ ) to ensure robust standard errors and valid confidence intervals.

Key Results
The paper presents three primary findings that qualify the standard partisan fiscal federalism narrative:

The Alignment Dividend Gradient:
While aligned states receive more transfers across the board, the magnitude of the premium varies significantly by transfer type. The alignment premium follows a strict gradient based on the degree of political discretion allowed in the program:
- General Discretionary Transfers: +12.1% (Baseline).
- SCSP: +7.8% (TWFE).
- TSP: +6.6% (TWFE).
- PM-PMS: +3.3% (TWFE).
  The SCSP premium is only 65% of the general discretionary premium, and PM-PMS is merely 27%. This suggests that formulaic constraints and demand-driven structures (like the application-reimbursement model of PM-PMS) insulate these programs from political targeting.
Ideological Heterogeneity (BJP vs. INC):
A reversal in the alignment premium exists between the two major party families.
- General Transfers: BJP-aligned states receive a larger premium (+13.0%) compared to INC-aligned states (+10.8%).
- SCSP Transfers: INC-aligned states receive a significantly larger premium (+9.5%) compared to BJP-aligned states (+6.7%).
  This "reversed gradient" suggests that INC governments translate their alignment advantage more aggressively into SC-specific welfare, consistent with their historical social-justice platform, whereas BJP governments channel their larger general-transfer advantage through broader discretionary channels rather than earmarked SCSP funds.
Fiscal Inputs vs. Utilization Outcomes:
The study finds a disconnect between fiscal allocation and actual utilization.
- Higher Education: SC seat utilization shows a modest but significant alignment premium (+0.41 percentage points). However, SCSP per-capita transfers are not a significant predictor of seat utilization in fixed-effects models.
- Government Jobs: Neither alignment nor SCSP transfers significantly predict government job utilization.
  This indicates that demand-side constraints (e.g., the pipeline of eligible candidates) and administrative capacity bind more tightly than central fiscal allocations. The alignment benefit in education likely stems from administrative mobilization (e.g., faster scholarship disbursement) rather than increased transfer volumes.

Significance and Claims
The paper claims to qualify the standard result that "alignment equals more money." It argues that the political economy of fiscal federalism in India is nuanced:

Inequitable Distribution of the Dividend: The alignment dividend disproportionately benefits general state budgets rather than SC/ST welfare mandates. SC/ST communities receive a systematically smaller share of the political alignment dividend than state governments as a whole.
Mechanism of Targeting: The findings suggest that party ideology shapes how the alignment dividend is channeled. INC governments appear more responsive to SC-specific mandates, while BJP governments prioritize general discretionary spending.
Policy Implications: The study concludes that strengthening formula mandates (to ring-fence SCSP funds) and expanding demand-driven structures (like the PM-PMS model) are necessary to reduce political volatility and ensure stable fiscal flows to marginalized communities. The results corroborate the "demand-side constraint" hypothesis (Bertrand et al.), indicating that simply increasing central transfers does not automatically fill reserved seats without addressing administrative and pipeline bottlenecks.

The paper remains modest in its causal claims, noting that the TWFE identification relies on alignment switches and that parallel trends assumptions are difficult to test fully due to the limited number of switchers. It calls for future work involving event studies and state-level audit data to further disentangle compliance mechanisms.

The Big Discovery: The "Friendship Bonus" Has a Hierarchy

The Plot Twist: It Depends on Which Team You Are On

The Reality Check: Money Doesn't Automatically Fill Seats

What This Means for the Story

Technical Summary: "Do Aligned States Deliver for SC/ST? Central Welfare Transfers, Partisan Alignment, and Reservation Utilisation in India, 2000–2022"

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