Poverty, Heterogeneous Elite, and Allocation of Public Spending: Panel Evidence from the Indian States

In this paper, we explore how in the world’s largest democracy, India, the presence of different elite groups – the dominant landed and capitalist elite and the minority elite (who are the elected representatives of the marginalised women and low caste population) – could affect the nature and extent of public spending on various accounts, especially education. We argue that the productive cooperation between the capitalist elite and the workers may induce dominant capitalists to favour spending on education, while the landed elite tend to oppose investment in basic education because they are fearful of dilution of their political dominance by the educated poor. While the minority elite may tend to favour any redistributive spending, including education, their effectiveness could be limited by their under-representation in the government. Results from the Indian states for the period 1960-2002 provide support to these hypotheses.