[Yojana Archive] Strengthening Federalism


  • Cooperation and competition are the two sides of the same coin— ‘Federalism’. Both are essential to take the ‘New India’ march forward economically and socially.
  • While on the one hand the States need to be assisted with resources and sound policy advice, on the other they need to be encouraged to improve their performance.
  • The Budget 2022-23 is a continuation of a series of reforms, policies and measures that have strengthened India’s federal system.

Cooperative Federalism

  • Governing Council of NITI Aayoga – NITI’s Governing Council, chaired by the Prime Minister, comprises of all the Chief Ministers and LGs of UTs as equal members and a selected Government of India ministers. The Governing Councilmeets annually to evolve a shared vision of country’s economic development.
  • India @75 document – One of NITI Aayog’s major initiative since its inception has been formulating the Strategy document in 2017 (India@75), its preparation followed an extremely participative approach.
  • Other steps indicative of cooperative federalism – These steps are showcased in-
    1. Development blueprints prepared jointly with Governments of Uttar Pradesh, Tripura, and Madhya Pradesh.
    2. Regular sharing of best practices; policy support and capacity development of State/UT functionaries, etc., are other areas where NITI partners with State governments.
    3. The 17 goals and 169 targets under the SDGs are interdependent and inter-connected, and require concerted and coordinated action within the various departments.
    4. This inherent nature of the goals has forced States to dissolve silo-based functioning prevalent in government institutions.

Various moves for Competitive Federalism

(A) Indicators and transparent rankings

  • NITI Aayog stimulates healthy competition among States through developing indicator frameworks and transparent rankings in various sectors.
  • States are ranked through various indices measuring ease of doing business to Sustainable Development Goals.
  • Some of the indices launched by NITI Aayog are Composite Water Management Index, India Innovation Index, Export Competitiveness Index, School Education Quality Index, State Health Index and Sustainable Development Goals Index.

(B) Aspirational Districts Programme  

  • NITI Aayog also releases rankings in the monthly changes in the performance of Aspirational Districts.
  • The Aspirational Districts Programme (ADP) of NITI Aayog focuses on 112  of  India’s  most  developmentally  challenged  districts  across  sectors  such  as  health  and  nutrition; education; agriculture and water resources; basic infrastructure; and financial inclusion and skill development.
  • Districts are challenged and encouraged first to catch up with the best district in their State, and then aspire to become one of the best in the nation, by competing and learning from others in the competitive and cooperative spirit of federalism.
  • Top ranked aspirational district gets Rs 10 crore, second best receives Rs 5 crore and sector wise best gets Rs 3 crore each.

(C) Localization of SDGs

  • Starting in 2018, NITI defined the contours of the national progress monitoring on SDGs based on key national development Priorities in its first ever framework for monitoring the country’s progress on the SDGs – SDG India Index and Dashboard.
  • Now, it has been institutionalized and established as the country’s principal and official policy tool on benchmarking national and sub-national Progress.
  • Most recently, as a part of its localization efforts, NITI published the first regional index — The North-Eastern Region District SDG Index.
  • Taking the successful SDG localization model further to the level of urban areas, NITI Aayog developed and released the SDG Urban Index & Dashboard (2021-22).
  • This interactive tool is aimed at strengthening SDG localization at the city level.
  • NITI Aayog has created strong partnership with States to achieve SDG-oriented development agenda. This enables it to foster cooperative federalism.

Strengthening Fiscal Federalism

  • Devolution of finances: The successive Finance Commissions have raised the share of States in tax revenues from 29.5% between 2000 and 2005 to 42% currently.
  • Centrally Sponsored Schemes (CSCs): In line with Finance Commission recommendations, 130 Centrally Sponsored Schemes have been revamped and restructured into 65, enabling greater flexibility and impact.
  • Increased borrowing limits: Among the key fiscal support measures by Centre to States to fight Covid-19, the Centre increased the borrowing limits of States from 3.0% of GSDP to 5.0% for 2020-21.
  • GST Collection: GST has been a landmark reform of independent India showcasing the spirit of cooperative federalism. Despite the surge in Covid-19 cases, gross GST collections for the month of January 2022 were recorded at Rs 1,40,986 crore, which is the highest since the inception of GST.
  • Special assistance: In her Budget speech, the finance minister pointed out that the ‘Scheme for Financial Assistance to States for Capital Investment’ has been extremely well received by the States.
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