THE CONTEXT: The return of coalition politics in India will bring questions of federalism and Centre-state relations back to the fore. The BJP’s greater reliance on its regional allies, and its expanded stake in southern India, offers the potential for a federal reset. But whether this will happen is unclear.
THE ISSUES:
- Cooperative Federalism and GST: During Modi’s first term (Modi 1.0), the government abolished the Planning Commission and established Niti Aayog, aimed at strengthening cooperative federalism. The introduction of the Goods and Services Tax (GST) was a landmark reform in fiscal federalism, designed to unify the tax system across the country. However, the implementation of GST has been criticized for centralizing fiscal power, as the GST Council’s voting structure allows the central government to overrule state governments.
- Centralization and One-Nation Policies: In Modi’s second term (Modi 2.0), the government pursued a more centralizing agenda, exemplified by the abrogation of Article 370, which removed the special status of Jammu and Kashmir. This move highlighted a shift towards deeper centralization, leveraging the BJP’s parliamentary majority to push one-nation policies that often-disregarded state interests. The proposal for “One nation, one election” further underscores this centralizing trend.
- North-South Divide and Delimitation: A significant tension in federalism is the pending delimitation exercise, which could exacerbate the north-south divide. Southern states, which are less populous and often opposition-dominated, fear a redistribution of parliamentary representation favoring more populous northern states, predominantly controlled by the BJP. This threatens to destabilize the fiscal federal pact, as taxes collected in richer southern states are redistributed to poorer northern states.
- Coalition Politics and Federalism: The return to coalition government introduces multiple centers of power, potentially countering the centralization of decision-making in the Prime Minister’s Office. However, regional parties in the coalition may prioritize their own interests over a broader vision for federalism. This could lead to special-interest politics, undermining a wider federal bargain and perpetuating the “double engine” governance model from the BJP to the broader National Democratic Alliance (NDA) coalition.
- Strengthening the Inter-State Council: To address these challenges, empowering the Inter-State Council, established following the Sarkaria Commission’s recommendations, could be crucial. Currently under the Ministry of Home Affairs, the Council lacks independence and authority. Granting it greater independence and statutory responsibilities would enhance its legitimacy and effectiveness in facilitating Centre-state and inter-state dialogue, supporting dispute resolution, and enabling policy learning across states.
- Building Trust and Consensus: Building trust over the delimitation exercise and other contentious issues requires a process of genuine consensus-building among all states, rather than centrally imposed decisions. Drawing on precedents like the consensus-building process for GST, a similar approach could help find federal solutions that respect representation and redistribution principles without undermining state autonomy. This would benefit all parties and strengthen the federal structure as India looks to the future.
THE WAY FORWARD:
- Empowering the Inter-State Council: Empowering the Inter-State Council, established based on the Sarkaria Commission’s recommendations, to strengthen the institutional space for dialogue and decision-making between the Centre and states. Giving the Inter-State Council greater independence and statutory responsibilities, as recommended by the Punchhi Commission on Centre-State Relations (2010). Locating it outside the Ministry of Home Affairs to develop its own identity and authority, as suggested by the Sarkaria Commission (1988). Enabling it to convene discussions on matters of common interest and support dispute resolution, as envisioned in Article 263 of the Constitution.
- Consensus-building on delimitation: To build trust during the delimitation exercise, announcing a process for genuine consensus-building among all states, rather than a centrally imposed decision. Following the precedent of the long process of inter-state dialogue and consensus-building that led to the Goods and Services Tax (GST) implementation, as recommended by the Sarkaria Commission. Adhering to the principles laid down by the Supreme Court in its judgments on delimitation, such as the Delimitation Case (1976) and the Kihoto Hollohan Case (1992).
- Strengthening fiscal federalism: To address concerns over the redistribution of resources across states, find a federal solution that respects principles of representation and redistribution without reducing state autonomy. Implementing the recommendations of the Finance Commissions, which aim to address vertical and horizontal imbalances in resource distribution, as per Article 280 of the Constitution. Adhering to the principles laid down by the Supreme Court in its judgments on fiscal federalism, such as the Jindal Stainless Ltd. Case (2017) and the Gujarat Ambuja Cements Ltd. Case (2005).
- Promoting cooperative federalism: To foster a more cooperative and collaborative approach between the Centre and states, Reviving and strengthening the National Development Council, as recommended by the First Administrative Reforms Commission (1966), to serve as a platform for policy coordination and cooperation. Implementing the recommendations of the Punchhi Commission (2010) on promoting cooperative federalism, such as establishing an Inter-State Trade and Commerce Commission.
- Addressing regional aspirations: To address the concerns and aspirations of different regions, Considering the demands for special status or other specific requests from states, as per the provisions of Article 371 of the Constitution. Implementing the recommendations of the Sarkaria Commission (1988) on addressing regional aspirations and promoting regional development.
THE CONCLUSION:
Harnessing this moment to offer a new vision for federalism, in which the Centre and states can build trust and work together, would be to the benefit of all parties as India looks to the future. Strengthening the institutional space for dialogue and decision-making between the Centre and all states, not just NDA-governed states, should be a priority. Empowering the Inter-State Council would support dispute resolution, enable greater policy learning across states and provide a platform for inter-governmental cooperation.
UPSC PAST YEAR QUESTIONS:
Q.1 How far do you think cooperation, competition, and confrontation have shaped the nature of federation in India? Cite some recent examples to validate your answer. 2020
Q.2 The concept of cooperative federalism has been increasingly emphasized in recent years. Highlight the drawbacks in the existing structure and the extent to which cooperative federalism would answer the shortcomings. 2015
Q.3 Though the federal principle is dominant in our Constitution and that principle is one of its basic features, it is equally true that federalism under the Indian Constitution leans in favor of a strong Centre, a feature that militates against the concept of strong federalism. Discuss. 2014
MAINS PRACTICE QUESTION:
Q.1 The return of coalition politics in India offers an opportunity to reset Centre-state relations and strengthen cooperative federalism. Analyze the challenges and prospects for revitalizing the federal framework in this new political landscape.
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