Cooperation: A Federal Road to Development
An essay on "Cooperation: A Federal Road to Development" by Drishti Verma elucidates the significance, challenges, and reforms needed to promote cooperative federalism in India and how this will lead us to the path of progress and development.
An essay on "Cooperation: A Federal Road to Development" by Drishti Verma elucidates the significance, challenges, and reforms needed to promote cooperative federalism in India and how this will lead us to the path of progress and development. The goal of India is to become a developed nation in the coming years. To achieve this goal, ambitious measures are needed. In this essay, I provide a roadmap to development by way of cooperative federalism. The Indian model of federalism is unique in the sense that it gives the Union government more powers. This is to ensure unity. However, trends of over-centralization often curtail the autonomy of provincial governments, thereby putting a roadblock on diverse local and regional needs. Cooperation and collaboration among unions and States will ensure that our goals are aligned without compromising diversity.
Unity in Diversity
Mahatma Gandhi said,
"Our ability to reach unity in diversity will be the beauty and the test of our civilization."
India is a country where we can experience diversity every few kilometers - diversity in terms of culture, traditions, customs, language, food, dressing style, faith, and beliefs - yet we all see ourselves as one united set of people i.e., Indians. This is the philosophy of India- Unity in diversity.
Our Preamble begins with "We the people of India", yet our constitution recognizes and respects the diversity found here. Thanks to the way our constitution is framed, where we stay united without losing our distinctiveness. The idea of secularism, equality before the law, equal protection of the law, freedom of speech and expression, and rights of the minority to preserve their distinct culture are all reflections of this philosophy. Our constitution makers adopted a federal structure to ensure that the regional or local demands and aspirations are not neglected.
Taking cognizance of the nature of our country, we adopted the constitution that best suited our needs. It has been seven decades since we got our independence. The year 2022 marks the 75th year of our independence. A lot has improved over these years which we must appreciate but now what? What should we be looking forward to? Every Nation wants to progress and so do we. Our Prime Minister in the 75th Independence Day speech laid out five goals for the next 25 years called "Panch Pran". The very first goal is to make India a developed country before we celebrate our 100 Independence Day which is in 2047. But how do we define a country as developed?
There are no strict parameters/criteria for an economy to be considered developed or developing. In the language of many economists, it's the GDP (Gross Domestic Product) numbers and the per capita income numbers that determine how developed an economy is. But development in this sense would be a narrow approach. A broader approach must also consider social parameters like literacy, level of education, health, the standard of living, and equality level in Society.
MS Swaminathan in one of his articles mentioned Dr. APJ Abdul Kalam and how he "didn't like India to be referred to as a developing nation". Like Dr. Kalam, every other Indian wants to see India grow and prosper.
Now that we know our goal, how do we achieve it? The constitution has established a federal structure where government at the centre and government at the provincial level are tasked with the role of fulfilling our aspirations. We elect the government and pay taxes in return for security, law and order, and the overall progress of our society. The government at central and state levels thus acts as regulators and facilitators to ensure the smooth functioning of the economy. They are tasked to distribute the resources among the citizens in a fair manner. For this, the Constitution has given them powers to make laws and policies. Part V, VI, and XI deal with all such powers.
All these goals and roles of the centre and state government make sense only when we understand the 'why' of it. Many of us might think that the goal of the country is one i.e., development, so why are governments at two levels? To answer this, we need to go back from where we started- unity in diversity. Although the ultimate goal is development, the ways and means to achieve it can differ at different levels and in different regions. The geography, demography, and aspirations are different across our country-this raises the demand for a government at the regional level to cater to the local needs and aspirations. However, India is a "Union of states" unlike the USA's "Federation of states" and therefore, the states do not have the right to secede. To maintain the unity and integrity of our country, the constitution itself has given more powers to the centre vis-a-vis states.
Cooperation: The Nature of Indian Federalism
Though the Constitution makers gave the central government an upper edge in decision-making, that does not mean that centre can dictate the states in normal circumstances. The Indian model of federalism is collaborative and cooperative. Both are interdependent. For example, states are dependent on the centre for funds and the Centre is dependent on states for the execution of its policies and programs. This has been confirmed even by the supreme court in the 'State of Rajasthan v. Union of India 1977 AIR 1361' case. Part XI of our Constitution which mentions centre-state relations reflect the same. However, as Albert Einstein had once said -
"In theory, theory and practice are the same. In practice, they are not."
Showing that a lot of times the ground realities are different from the principles laid out in the text. This takes us to the challenges that come in the way of cooperative federalism.
Roadblocks to Cooperative Federalism
Cooperation, instead of conflict, is needed for the smooth functioning of government at both levels. It is through cooperation that we can realize our goals and aspirations. However, several challenges come their way. Since the central government has more powers, the roadblocks are generally seen through the lens of over-centralization. Broadly they can be divided into two categories- Economic/Fiscal and Legislative-Institutional.
Poor State of Fiscal Federalism
For any policy implementation, governments-central or state-need funds. The fiscal arrangements between the center and states are mentioned in part XII of the Constitution. The challenges in our fiscal arrangements are mainly four in number. The first one relates to the GST (Goods and Services Tax) which has reduced the autonomy of states to raise revenue through taxes. Many states have raised their issue over rates structure, and inclusion-exclusion of commodities. They are even demanding an extension of compensation granted by the central government beyond 2022. All decisions related to GST are taken by the GST Council (a body comprising of members from central and state governments) based on the majority voting. Recently Supreme Court has held that the decisions of the GST Council are not binding on states. However, the central government has taken the opposite view.
Over the years there has been a decline in fiscal capacities of the state - a decline in revenue while and an increase in expenditure. According to the 15th finance commission in the year, 2018-19, states had 37% of resources but were responsible for around 62% of expenditure.
The second issue pertains to the higher share of cess and surcharges. Even though the 14th and 15th finance commissions increased the fiscal devolution from 32% previously to 42% and 41% respectively, the majority of the total revenue share goes to the centre by way of charging cesses and surcharges - which are outside the divisible pool of revenue sharing between arrangement center and states. The share of cess and surcharge in the center's gross tax revenue has increased from 10.4% in 2011-12 to almost 20% in 2020-21.
The third issue is related to the centrally Sponsored Scheme (CSS) - where the center and state share the financing in defined proportion (70:30 or 60:40 or 50:50) but are implemented by state governments. The number of such CSSs has increased over the years and is mostly based on a one-size-fits-all approach. A lot of times states are not consulted before passing such schemes. Thus, the 15th Finance Commission suggested rationing as well as reforming the CSS to ensure that the localized interests of states are taken into consideration, which enables flexibility and scope for state innovation. It has also suggested the interpretation of Article 282 under which CSSs are implemented. The recent decision of the central government to cut down CSS from 130 to around 70 beginning in 2023 is a step in the right direction.
The fourth major zone of conflict is over the borrowing powers of the state. Article 293 requires the states to get prior consent to raise loans if they have any outstanding loans from the centre. Centre impose certain conditions and limitations on the amount of debt they can raise. All of these curb the autonomy of the states to raise revenue. On one hand, the states have been demanding more fiscal space for discretionary expenditure, while on the other hand, the centre has been pushing for more fiscal discipline by reducing the scope for discretionary spending. The recent Centre-state debates on freebies can be seen in this context. The concern of the centre is over the rising fiscal stress getting spilled over to the centre due to the high debt-to-GSDP ratio. The problem arises when states raise debt to fund populist policies such as loan waivers, subsidies, etc. However, the states argue that they must have autonomy over discretionary spending.
Many state governments have often raised the issue of interference by the central government over their area of jurisdiction. For example, the use of central agencies like the Enforcement Directorate, the Income Tax Department, and even the Narcotics Control Bureau to target opposition-ruled states. Sometimes, the appointment of the head of such central agencies is also put into question. The recent rule proposed by the Centre over non-requirements of states' approval for the transfer of All India Service officers for central deputation has also created a rift.
Another major cause of federal conflict lies in the office of the Governor - appointed by the president and often seen as an agent of the centre. Governor is supposed to be a bridge between the centre and state but since independence, central governments are seen misusing the governor's office for their advantage. The landmark Supreme Court judgment in the S. R. Bommai case has significantly reduced such misuse (President's rule). However, the issue persists. The three lists mentioned in Seventh Schedule divide the subjects between the union and states. Despite this, the centre has made laws that fall under state jurisdiction or made amendments affecting federal issues without state consultation, on many occasions. For example, the recent withdrawn-farm laws, decisions taken during the pandemic-induced lockdown, increased jurisdiction of BSF (Border Security Force) in border states up to 50 km, and the latest Electricity Amendment Bill 2022.
Cooperation: The Way to Eliminate the Roadblock
The best way to get rid of the challenges coming in the way of cooperative federalism is - more cooperative federalism. But before we look at the measures taken and Reforms needed, we need to first understand the significance of cooperative federalism.
Cooperative Federalism and its Significance
The word 'Federal' in Cooperative Federalism comes from the Latin word 'Foedus' meaning 'Contract' while 'Cooperative' comes from the Latin words 'Co' and 'Operari' meaning 'Together' and 'To work' respectively. Thus, cooperative federalism denotes - Governments by Contract that work by coming together. To ensure that the ideals of our constitution are carried out, central and state governments need to align themselves. Coercive federalism will only bring hurdles in achieving those ideals.
There have been so many instances when collaboration and cooperation between the two have yielded positive results. The land boundary agreement between India and Bangladesh signed in 2015 is a good example. The bilateral agreement involved the state governments of West Bengal, Meghalaya, Assam, and Tripura. Although there exist issues around it, the adoption of the GST is a landmark case of collaboration and negotiation between the centre and states. The joint efforts of the central and the state police forces have been significant in reducing the menace of Naxalism. Another good example is the state of Telangana getting support from the central government for its initiative in Drone delivery of medicines in remote districts. 'Health' is a state subject and 'Aviation' falls under central jurisdiction. Such cooperation is not always top-down but vice-versa as well. Many central government schemes have been inspired by state-level schemes. For example, the Midday Meal Scheme was first introduced in the state of Tamil Nadu. The MGNREGA scheme has its inspiration from the Maharashtra Employment Guarantee Scheme (MEGS).
Cooperative federalism can help us fight many regional and pan-India level issues. Collaboration of not just centre-state but also state-state(s) can resolve issues like pollution in the Delhi NCR region, natural disasters like flash floods, landslides, and even conservation of biodiversity, all of which are not restricted to one single state boundary. So, now that we know the 'why' part, let us also look at the 'how' part of promoting cooperative federalism.
Measures Taken and Reforms Needed
To achieve any goal and succeed, we need the contribution of all stakeholders involved in it, either directly or indirectly. The following are the main stakeholders, instrumental in promoting cooperation among the centre and state(s).
The most important body which is often considered the flagbearer of cooperative federalism is - the NITI Aayog. Its very agenda is to act as a bridge between the centre and States and promote cooperation along with healthy competition. The think tank has started several initiatives like the 'Team India' hub, Governing Council Meets, and the Aspirational District program. It also provides policy inputs to the center and states, e.g., model law for land leases.
The second important pillar in promoting cooperative federalism is bureaucracy. From policy formulation to policy implementation, it is the bureaucracy that works as a backbone. They have played the role in negotiating and convincing the state government to go together in adopting any policy or law. For instance, bureaucrats played a significant role in getting support for the implementation of the Sarva Shiksha Abhiyan scheme at the state level in the early 2000s. However, at times, bureaucrats play the role of forwarding the political objectives of the party in power, instead of being neutral and transparent. This should be avoided.
The third body is - the Interstate Council, formed under article 263 of the constitution. The Council is a recommendary body that work towards investigating and discussing subjects of common interest between Union and State(s) or among states. However, to ensure that the council functions efficiently, periodic meetings must be conducted. The Sarkaria Commission has recommended making it a permanent body called Intergovernmental Council.
Fourth, Supreme Court. The overlapping jurisdiction of the centre and states often leads to disputes between them. Thus, the power to resolve such disputes is given to the judiciary. Article 131 of the constitution provides original jurisdiction to the Supreme Court for deciding federal disputes. The Supreme Court often applies the doctrine of Pith and Substance to resolve the inconsistency between overlapping laws made by the centre and states. It also applies the doctrine of Colourable Legislation to check that the center and states do not exceed their jurisdiction in indirect ways.
The ultimate stakeholders in promoting/not promoting Cooperative federalism are the Political Parties in power. Looking at the trends in the evolution of Indian federalism, it is often said that the disputes in India are not center-state disputes but party-party disputes. Our federal model works frictionlessly when the same party rules at the center and states (including union territories having legislatures). However, once the combination differs, friction emergence and cooperative federalism become coercive/bargaining federalism, depending on the nature of government at the center - a strong majority/coalition party.
From Unity in Diversity to Development: The Way Forward
According to British Jurist A. V. Dicey,
"Federalism is a political contravene among those who desire unity without uniformity".
The one-size-fits-all approach might not work in every aspect of Indian polity, economy, and society. Consultation with states must be encouraged. Reforms are needed in areas of fiscal federalism. This must include the third tier i.e., fiscal autonomy to the local government as well.
The 15th Finance Commission chairman N.K. Singh has called for a thorough review of the Seventh Schedule. Many of the pending recommendations of the Sarkaria Commission and the Punchi Commission need to be implemented. Bodies like Inter-state Council, Zonal Council, and Inter-state River Water Dispute Tribunals must be revamped to make them effective instruments in resolving disputes and promoting cooperation.
To sum up, we can say that the aspiration of India, to become a developed nation, requires us to recognize diversity while we work unitedly towards our goal. It is only when the benefits reach the last mile then only we can say that we are succeeding. This requires the efforts of all - Centre, State, as well as local level governments. Cooperative (and Competitive) Federalism will not only strengthen our democracy but also bring efficiency and higher productivity in governance.
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