FROM INVESTMENT TO INFLUENCE: How Multinational Corporations Shape Punjab's Politics Under Indian Federalism

Abstract

This paper looks at how multinational corporations (MNCs) working in Punjab, India, are able to turn their economic presence into something far more consequential — actual political influence. This is, frankly, an area that hasn't received nearly enough attention in the literature on Indian competitive federalism. The study draws on Stopford and Strange's (1991) triangular diplomacy framework, alongside the broader theoretical work on post-liberalisation federalism, to identify five channels through which corporate political activity operates in the state: electoral funding, policy capture in the legislature, the threat of capital flight, CSR as a form of soft power, and influence over media narratives.

What becomes clear through this analysis is that Punjab's severe fiscal stress — its debt-to-GSDP ratio sits at around 48%, the worst among major Indian states — isn't just an economic problem. It's a political one. It essentially forces whichever party happens to be in government, regardless of ideology, to keep chasing MNC investment as a way to stay afloat financially. In doing so, these governments end up giving away more regulatory space than they probably should. Add to this the structural features of Indian federalism — the chronic vertical fiscal imbalance, the Centre's ability to step into State List subjects when it wants — and the leverage that MNCs hold over a state like Punjab becomes even more pronounced.

The paper puts forward the idea of "compounded federal subordination" to make sense of Punjab's particular situation, where weakness at multiple levels reinforces itself. It closes with five concrete policy recommendations that, taken together, are aimed at giving Punjab back some genuine autonomy at the subnational level.