From UPSC perspective, the following things are important :
Prelims level : 15th Finance Commission
Mains level : Paper 2- Federalism at the centre stage of politics
- Several issues such as vaccine wars, debates over the Goods and Services Tax (GST), the fracas over West Bengal’s Chief Secretary, and the pushback against controversial regulations in Lakshadweep have once again brought into focus the idea of federalism.
- The Dravida Munnetra Kazhagam, since taking office, has begun to craft an ideological narrative on State rights, by re-introducing the term Union into the public discourse and pushing back against increased fiscal centralisation
Lack of political consensus among States for genuine federalism
- Federalism in India has always had political relevance, but except for the States Reorganisation Act, federalism has rarely been an axis of political mobilisation.
- Fiscal and administrative centralisation persisted despite nearly two decades of coalition governments.
- Rather than deepen federalism, the contingencies of electoral politics have created significant impediments to creating a political consensus for genuine federalism.
Three challenges in deepening federalism among States
1) Tendency to equate federalism as against nationalism
- The grammar of development and nationalism, which has mass electoral appeal is used to undermine federalism.
- Slogans such as ‘one nation, one market’, ‘one nation, one ration card’, ‘one nation, one grid’ symbolise development and nationalism while leaving little space for federalism.
- In this context, federalism as a principle risks being equated with regionalism and a narrow parochialism that is anti-development and anti-national.
2) Lack of federal principles
- Pratap Bhanu Mehta has pointed out that over the decades, federal principles have been bent in all kinds of ways to co-produce a political culture of flexible federalism.
- Federalism in this rendition is reduced to a game of political upmanship and remains restricted to a partisan tussle.
- Claimants of greater federalism often maintain silence on unilateral decisions that affect other States.
- For instance, the downgrading of Jammu and Kashmir into a Union Territory, the notification of the NCT of Delhi (Amendment) Act, 2021 hardly witnessed protests by States that were not directly affected by these.
3) Economic and governance divergence among states
- Across all key indicators, southern (and western) States have outperformed much of northern and eastern India.
- This has resulted in a greater divergence rather than expected convergence with growth.
- This has created a context where collective action amongst States becomes difficult as poorer regions of India contribute far less to the economy but require greater fiscal resources to overcome their economic fragilities.
- These emerging tensions were visible when the 15th Finance Commission (FC) was mandated to use the 2011 Census rather than the established practice of using the 1971 Census.
- This, Southern states feared, risked penalising States that had successfully controlled population growth by reducing their share in the overall resource pool.
- With the impending delimitation exercise due in 2026, these tensions will only increase.
- A politics for deepening federalism will need to overcome a nationalist rhetoric that pits federalism against nationalism and development.
- Reclaim fiscal federalism: Weak fiscal management has brought the Union government on the brink of what economist Rathin Roy has called a silent fiscal crisis.
- The Union’s response has been to squeeze revenue from States by increasing cesses.
- Its insistence on giving GST compensation to States as loans (after long delays) and increasing State shares in central schemes.
- Against this backdrop, both sub-nationalist sentiments and the need to reclaim fiscal federalism create a political moment for a principled politics of federalism.
- Sharing burden with poorer States: On the fiscal side, richer States must find a way of sharing the burden with the poorer States.
- An inter-State platform that brings States together in a routine dialogue on matters of fiscal federalism could be the starting point for building trust and a common agenda.
- Overcome isolationist tendency: The politics of regional identity is isolationist by its very nature.
- An effort at collective political action for federalism based on identity concerns will have to overcome this risk.
- Finally, beyond principles, a renewed politics of federalism is also an electoral necessity.
Consider the question “Federalism in India has always had political relevance, but it has rarely been an axis of political mobilisation. What are the factors responsible for this? Suggest the way forward for the states to overcome these factors.”
A renewed politics of federalism would require immense patience and maturity from regional parties. It remains to be seen whether they up to the task.