Paper short abstract:

This paper draws attention to the continuing relevance of local politics in influencing public policy, through a study of labour market reforms across Indian states and highlights the relevance of regional political economy in influencing reforms.

Paper long abstract:

Globalization, as commonly understood, limits policy choices of a nation by creating structural-institutional constraints. This leads to an important question: are political actors still relevant in shaping policy in the interest of domestic socio-economic concerns? This paper draws attention to the continuing relevance of local politics in influencing public policy, through a study of labour market reforms. It examines the sub-national variation in labour market reforms across Indian states after economic liberalisation and highlights the relevance of regional political economy in influencing reforms. Drawing on evidence from states of Gujarat, Maharashtra, Andhra Pradesh, and West Bengal, this paper shows that despite pressures of policy convergence, labour reforms vary across states, depending on partisan governments and dynamics of interest group negotiations. Specifically the nature of party competition and support base of governing parties act as important variable in determining pace and orientation of reform. Governments supported by relatively homogenous dominant support base with business presence tend to reform more than parties with heterogeneous support base. The party system operates as an endogenous variable influencing the formation of social bases of support and instrumental interests of political parties. Thus who governs and how is critical to understand policy reforms.