The Political Economy of Indian Disaster Relief

Nakul Kumar

Advisor: John V.C. Nye, PhD, Department of Economics

Committee Members: Omar Al-Ubaydli, Virgil H. Storr

Mercatus Center, #456
September 14, 2012, 10:00 AM to 07:00 AM


Even though natural disasters are triggered off exogenously, often resulting from an extreme natural event interacting with a vulnerable social setting, they are seldom immune from politics. Natural disasters are not uncommon in the Indian sub continent. Among its 35 states and union territories, 25 are disaster prone.

This dissertation uses the Public Choice framework to examine the Indian Government’s disaster responsiveness.

First we investigate if self-interested politicians use intergovernmental grants to further their political agendas. Public choice theory suggests that discretionary transfers in multi party coalition governments like in India contribute to distributive politics. Using data on natural disasters and intergovernmental grants for disaster relief, we test for the existence of distributive politics. We instead find evidence in favor of tactical redistribution. Our results suggest that the coalition formateur in India is able to use disaster relief spending to further his/her own tactical interest by investing in creating patronage networks with floating political parties. Our results contribute to expanding basic predictions of public choice theory.

Next we use public choice theory to explain the failure of government efforts to carry out effective disaster relief in the state of Tamil Nadu following the Indian Ocean Tsunami of 2004. We attribute central government failure to a centralized system of disaster management, which precludes local actors thus making it impossible for government institutions to obtain the local knowledge of time and place. Further, we examine the reasons for the adoption of a ‘self-help’ strategy among the poor fishing villages of Tamil Nadu, which are otherwise dependent on state action for their survival. We argue that the government’s underperformance helped build people’s expectations about government efforts in a way that encouraged greater community involvement in orchestrating a successful recovery.