ABSTRACT
This chapter examines the extent to which state–business relations (SBRs) in one state are influenced by changes in SBRs in other states in India. Promoting effective SBRs is key if the state intends to attract foreign and private investment. The chapter investigates whether there exists diffusion in policies to promote effective SBRs among states in India, focusing on major industrial states in India to examine this question. While Cali, Mitra and Purohit and Cali and Sen examine the impact of effective SBRs on economic growth among Indian states, they do not test for the existence of strategic interaction in SBRs, i.e. whether changes in policies to promote SBRs in one state depend on those elsewhere. Using panel data on the SBRs index constructed by Cali and Sen for 16 Indian states during the 1985–2008 period, the chapter finds that improved SBRs in one state are positively correlated with the improvement in SBRs in other states.
