Political parties can be vehicles for economic and social development in poor countries. They can also serve as rent seeking instruments. Uncovering how parties function is therefore key to establishing the preconditions for good governance. The paper discusses when and why clientelism on the basis of party affiliation may arise. Operationally, party-based clientelism is defined as a bias of public policy in favour of members of the governing political party. In a sample of local governments in India, party-based clientelism is shown to exist in two out of four states and to be strongly affected by economic inequality.