Recently while speaking at a discussion on “The Economic Survey and the Union Budget: Legal and Policy Implications” organised by think tank Vidhi Centre for Legal Policy, Arvind Subramanian, Chief Economic Advisor, emphasized on the need for a mixture of competitive and cooperative federalism for India to move ahead. Same sentiments were echoed by our Prime Minister, Narendra Modi, while addressing our nation on India’s 71st Independence Day, as well on his maiden visit to Telangana. He said that the Centre will join hands with the states in working towards goal of development since it is possible only through cooperative federalism, and yet he asked the states to vie with each another and with the Centre in the matter of development as it was the only answer to meet the growing needs of the country. He called upon the CMs (Chief Ministers) to create an atmosphere of competition for development among villages and even streets, as it would ultimately result in country’s development. It is interesting to understand how the whole concept of Indian federalism has evolved over a period of time to suit, as Dr. Ambedkar had opined, India’s peculiar needs.
The term federation is derived from a Latin word ‘foedus’ meaning an agreement or a treaty, and a federation comes into being when a number of sovereign states unite to form a new State, in order to achieve their common political, economic, commercial, geographical or any common interest, and for that purpose surrender some part their sovereignty to the federal State so formed. However Indian federalism was formed through centrifugal forces where the whole union was divided into smaller constituent states as per the recommendations of State Reorganisation Commission. In fact the term federalism does not appear anywhere in the constitution of India, and the term used is Union of states. I would divide Indian federalism into four phases.
The first phase could be termed as dominant federalism. This was in the initial years after independence and during the time when the Congress Party was dominant in the country, both at the Centre as well as in states. The Centre’s approach towards the states was that of a ‘big brother’. Slowly discontentment began to sip in certain states and this gave rise to regional political parties which began to challenge the centre’s dictats to them. This was the second phase, confrontational federalism. Rise of Coalition Governments at the Centre gave a new leap to Indian Federalism, as now the states began to assert themselves and began demanding changes in the 7th schedule which distributes powers in Union list, State list and Concurrent list. They expressed their grievances against the performance of Interstate Council, on appointment of Governors etc. This was the third phase.
With the Bharatiya Janata Party (BJP) winning comfortable majority at the Centre, Government under Modi’s dynamic leadership, tried new experiments with Indian Federalism. Discontinuing the Planning Commission which was more centralised in nature, and formation of NITI (National Institution for Transforming India) Aayog is one such experiment. While the earlier blundered in believing that ‘one size fits all’, the latter focuses on bottom up approach with emphasis on involvement of the states highlighting less government and more governance. Another important experiment is the introduction of GST (Goods and Services Tax) where the Centre as well as the states has sacrificed their fiscal autonomy in favour of collective and single centralized taxation. This is integrated or cooperative federalism. But in the present context, with emphasis on ‘cooperative’ federalism there is also an element of ‘competitive’ federalism, and they don’t seem to be in contrast but are complementary to each other. That is the fourth phase, cooperative competitive federalism.
According to Narayan Murthy, Infosys co-founder, cooperative competitive federalism is a brilliant idea for the growth of the states as the competitive aspect would make states compete with each other to attract investors and thereby create more jobs. Thus there is focus on healthy competition. The states are now competing with each other as well as with the Centre, in three major areas. Firstly they are in race to attract funds and investments, from domestic as well as international investors, secondly they vie for good governance with transparency and efficiency and thirdly they aspire for various developmental activities. With new initiatives like Make in India or Team India, the states are also taking initiatives to build their own brands. We have states building brands like ‘Vibrant Gujarat’, ‘Resurgent Rajasthan’, ‘Invest Madhya Pradesh’, ‘Credible Chhattisgarh’, or ‘Happening Haryana’. The states are liberalising their investment policies and are also given autonomy to work for their own development. They are having a free hand in their inter-state policies relating commerce, investment and trade and the role of the Central Government is likely to be limited to that of a ‘facilitator’ to make enabling rules for this transactions. Even the funds devolved by the Centre to states are based on previously allocated funds and how judiciously they were utilised by the states. The 14th Finance Commission has emphasised on performance related grants thus making financial assistance more transparent and accountable. This will also reduce the conflicts between different states as well as between states and the Centre. Similarly less developed states will get more share in taxes earned under GST to provide them effective level playing field. Thus each state is expected to know what is best for it and has to work towards meeting its physical and socio-economic infrastructural needs.
(The author is Associate Professor of Political Science, Govt College of Arts, Science & Commerce, Khandola)
