The red lines of federalism

The rise of regional leaders across the country has again brought the issue of federalism into the public space. Our pre-independence leadership rejected the 1946 Cabinet Mission plan for a loose federation because it feared that a weak Centre would not hold India together. This belief was reflected in the Indian constitution where India was envisaged as a Union of states and not a federation like the US. However, the Supreme Court ruling in the 1994 Bommai case established federalism as a basic structure of the constitution. This makes sense because fears over India’s political unity are no longer valid.

A system of bargained federalism — or what BR Ambedkar called flexible federalism — has taken root in India today. But even flexible or bargained federalism has to follow certain lines of division of responsibilities between the Centre and the states. National security, foreign policy and monetary policy ought to be the exclusive domains of the Centre while provision of public services to citizens is best handled by the state governments.

Overpowering: Mamata Banerjee not only forced the government to go back on a previously agreed deal with Bangladesh over sharing of Teesta waters, she now wants Delhi to go back on its agreement with Dhaka about the exchange of enclaves

In the recent debate over federalism, federalism has mostly been used as a bumper-sticker to beat the feckless UPA government with. The UPA government’s lack of political credibility and its attempts at constitutional overreach have contributed to its own misery but any discussion over federalism must capture the nuances. Devoid of nuances, it can have debilitating consequences for the future.

The threat of terrorism or insurgency is not merely a ‘law and order’ issue to be handled by the state government. They are attacks on the country needing a concerted response. The Maoists have particularly taken advantage of the current constitutional arrangement of state government’s control on police. Not only are they expanding into contiguous areas in adjacent states in central and eastern India, they have established relationships with militant groups in the Northeast to get weapons, ammunition and explosives. The current model of individual states dealing with the Maoists has proved to be a failure but the question of an united response under the Centre is never discussed lest someone is accused of encroaching upon India’s federal structure. The threat of jehadi terrorism, though abated since 2008, also has similar pan-India dimensions and is beyond any single state government’s capability to control.

Beyond internal security, the state governments in India have also influenced India’s foreign policy decisions. Mamata Banerjee not only forced the union government to go back on an previously agreed deal with Bangladesh over sharing of Teesta waters, she now wants Delhi to go back on its agreement with Dhaka about the exchange of enclaves. Similarly, Tamil parties have recently forced India’s hand on supporting the UNHCR resolution against Sri Lanka. When such vetoes on India’s foreign policy are accepted as legitimate expressions of federalism, we could be in for some interesting times ahead.

Goods and Services Tax, needed to create a single pan-Indian market, is hanging fire for many years as the constitutional amendment needs the support of state governments. The UPA government, which is unable to negotiate even the smallest of issues with the states, looks incapable of pushing this through in the current stint. But the state governments are using federalism to justify poor fiscal discipline. They haven’t handled their economies well and are asking for greater fiscal room. The highest own tax revenue to gross state domestic product ratio for any state is of Punjab at 8.3 per cent while states like West Bengal has liabilities amounting to 40 per cent of their GDP. In 2011-12, the states spent just 0.7 per cent of their GDP on medical, public health and family welfare, and 2.6 per cent of GDP on education.

More devastatingly, the competitive nature of Indian federalism has changed in the last few years. A decade ago, the states were competing to make themselves attractive to business and private investment but now they are competing for bigger bailout packages and handouts from the Centre. The examples of Chandrababu Naidu in the NDA government and Mamata Banerjee in the UPA-2 are instructive for noting this contrast.
It is nobody’s case that India doesn’t need stronger states. But these stronger states can’t be at the cost of a weak Centre. India must have a stable equilibrium between strong states and a strong Centre, each exercising its powers effectively in its own domain.

Sushant K Singh is Fellow for National Security at the Takshashila Institution and editor of Pragati-The Indian National Interest Review 

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