Decentralisation, Economic Inequality and Insurgency

This paper tries to understand the impact of a decentralisation initiative in primarily tribal districts on rising Maoist insurgency in India. Maoist insurgency is considered to be one of the major threats to the political structure of India as the insurgents purportedly aim to capture state power through protracted guerrilla war (Kennedy and Purushotham 2012). The objective of this study is to see if introduction of local government institution in areas with marginalised groups and rampant violence can reduce violence by giving marginalised groups the right to decide the allocation of local resources.

The local government institution that I focus on is the introduction of Panchayats Extension to the Scheduled Areas (PESA) act of 1996 in primarily tribal districts. The PESA institutionalised gram sabhas, local public meetings wherein provision of local public goods are discussed, and empowered them to take steps to safeguarde tribal's traditional customs and interests. The socio economic development of the tribal’s had long been neglected and it is believed that due to this reason tribal’s have participated in insurgent activities (Guha 2007; Hoelscher et al. 2012). By empowering tribals and giving them the right to control local plans, the PESA was designed to integrate them in the development process in the rest of the country.

However, using district level data on Maoist insurgency from 1983 to 2010, I find that introduction of PESA increased the likelihood of insurgency by about 9 percentage points. I investigate the reasons for this finding and provide evidence that this local government institution has been captured by special interest groups. The first indication of capture of PESA is the existence of evidence on its poor implementation (Choudhury, Dandekar(2010). I then study the impact of poor implementation of PESA on insurgency and show that states with better implementation of provisions of PESA have lower insurgency levels, indicating capture of PESA to be at least in part responsible for increase in insurgency. I further investigate the reasons for increase in insurgency and hypothesise that the advantage of PESA went to only a wealthy and powerful subsection of tribal people, an additional indicator of capture of PESA. I provide evidence on this by showing increase in within group inequality among STs after PESA. I then show that this increase in inequality has resulted in increase in insurgent activities. The evidence suggests that introduction of local government in areas with violence and marginalised groups can end up being captured, further marginalising the weak sections of the society.

The empirical methodology used in this paper is difference-in-difference methodology. The empirical analysis uses district level insurgency data from Global Terrorism Database, information on PESA comes from the Ministry of Tribal Affairs. For consumption expenditure inequality I construct Gini coefficient using data from 43rd, 51st, 55th, 61st, 64th and 66th National Sample Survey rounds. I also use an array of control variables, namely worker participation rate, literacy rate, urbanisation, population density, ST population, area covered by forests and net state domestic product.