The Moment For A New Federal Compact

The return of coalition politics in India will bring questions of federalism and Centre-state relations back to the fore. 

Recent Actions taken by India

• In this last decade, India observed a number of changes in the domain of Centre-state relations such as the establishment of National Institution for Transforming India (NITI) Aayog and the Goods and Services Tax, abrogation of Article 370, etc. 
  • There is also a focus on “One Nation, One Election”.

Various Arising Challenges for the new Coalition Government of India

• Pending Delimitation Exercise: It was the focal point for a brewing north-south divide in which less populous, southern states are demanding for quick carrying of the delimitation exercise. 
  • Southern states effectively control their population and delaying the delimitation process is seeming against their efforts.
• Legitimacy of the Redistributive Model: This legitimacy through which taxes collected in richer southern and western states are redistributed to poorer northern states was at stake.
  • Southern states feel that the GST model disproportionately benefits less economically developed states and hence demand a more equitable and balanced approach.
• Multiple Power Centres: Governing in coalition will introduce multiple centres of power, pushing against the centralisation of decision-making in the Prime Minister’s Office.
• Various Regional Demands: Regional parties in the national coalition government seek to advance the interests of their parties and of their states such as the demands for special status being asserted on behalf of Andhra Pradesh and Bihar. 
  • Special-interest regional politics may threaten a wider federal bargain if it bolsters the impression that partisanship rather than principles determine the distribution of resources across regions within India. 

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About Federalism in India

• Refers: Federalism originates from the Latin term “foedus,” which means agreement.
• An Arrangement of Collaboration: Federalism divides power between the central/federal government and its member states. A federation is an arrangement where two types of governments share power and manage their respective areas. 
  • This system combines national and local governments under a common sovereignty, with both national and federating units having autonomous domains assigned by the constitution.
• Nature: The Indian Constitution establishes a federal system with a strong Union. Hence, is referred as follows:
  • Quasi-federal by KC Wheare
  • Cooperative Federalism by Granville Austin
  • Bargaining Federalism by Morris Jones
  • Federalism with Centralising tendency by Ivor Jenning
    • In S.R. Bommai Case, 1994, the Supreme Court laid down that the Indian Constitution is federal and characterised federalism as its ‘basic feature’.
• Need: The framers of the Indian Constitution recognised the need to uphold India’s ethos, i.e. unity in diversity. Consequently, the Indian Constitution established a federal system of governance.
• Purpose: A constitutional framework provides the institutional underpinning for federalism. It usually serves two purposes: 
  • To lessen the likelihood of a tyranny of the majority
  • To strengthen the union
• Constitutional Provisions:
  • Article 1: It defines India as a Union of States.
    • It suggests that no state has the power to secede from the federation and that the Indian Federation is not the result of an agreement reached by individual states.
    • The term “federation” is not explicitly used in the Indian Constitution.
  • Article 245: It grants Parliament and state legislatures the power to make laws within their respective jurisdictions.
  • Article 246: It enumerates the subject matters on which Parliament and state legislatures can legislate.
  • Article 263: It provides for the establishment of an Inter-State Council to promote cooperative federalism.
  • Article 279-A: It empowers the President to constitute a GST Council.
  • Seventh Schedule: It divides powers between the Union and states through three lists – Union List, State List, and Concurrent List.

Types of Federalism

• Holding Together Federation: Powers are shared between various constituent parts to accommodate the diversity in a country. In such cases, the central authority often holds the upper hand. 
  • Examples: India, Spain, and Belgium
• Coming Together Federation: In this system, separate states combine to create a more unified entity. In this case, states enjoy greater autonomy compared to a holding federation. 
  • Examples: The United States, Australia, and Switzerland
• Asymmetrical Federation: It refers to a form of federalism in which the components that make up a nation have uneven powers and relationships in the domains of politics, administration, and finance. 
  • Examples: Russia (Chechnya), Ethiopia (Tigray), Canada (Quebec), and India with the sole exception, of course, was the state of Jammu and Kashmir (till 2019). 
  • Also, there are various clauses in Article 371 which accord special powers to India’s north-eastern states.

Features of Federalism

• Division of Powers between the central government (Union) and state governments.
  • In India, it is mentioned in three lists in the Seventh Schedule.
• Written Constitution that delineates the powers of different levels of government.
• Supremacy of the Constitution and it governs the relationship between the Union and states.
  • Legislations of Centre and the States must conform to the Constitution otherwise, could be struck down by judicial review.
• Independent Judiciary that interprets and enforces the Constitution to resolve disputes between different levels of government.
  • Administrative expenses of the judiciary and salaries of judges are charged on the Consolidated fund of India.
• Dual Government, in which, both the Central and State governments have their own spheres of influence and authority.
• Rigid Constitution, it means the Constitution is not easy to amend and provides for clear procedures for changes.
  • Only Joint action of the Central and State governments with special majority could amend federal provisions.
• Bicameralism, the Rajya Sabha (Upper House) represents the states of the Indian Federation, while the Lok Sabha (Lower House) represents the people of India as a whole.

Evolution of Federalism in India

Since independence, the evolution of federalism in India has been dynamic and can be examined along various following phases:

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• Inner-party Federalism: During the first phase of federalism (1950-68), major disputes between the federal government and the states were resolved in Congress party forums, or what political scientist Rajni Kothari called the “Congress System”. 
  • This helped contain or prevent major federal conflicts and create a consensus-based form of “inner-party federalism”.
• Multi-Party Federalism: The 1990s saw the coalition period, also known as multi-party federalism. 
  • This period saw a decline in the intensity of Center-state confrontations as well as in the Center’s arbitrary use of Article 356 to topple state administrations. 
    • SR Bommai v. Union of India case verdict, 1994 that questioned the Center’s arbitrary use of the provision is partly responsible for this.
• Co-Operative Federalism: During this period, the Indian economy was also liberalised, giving chief ministers and state governments a considerable amount of autonomy to initiate businesses and attract foreign investment to their regions. 
  • Strengthening the foundation from the bottom up, the 73rd and 74th Constitutional Amendment Acts of 1992 further empowered local self-government. 
  • Thus, true federalism was made possible by the discussions and contests between the Union and states during this period.
• Competitive Federalism: In terms of governance, the federal government advocated co-operative federalism and agreed on various measures like enacting the GST law, establishing the GST Council and NITI Aayog, etc. However, some states and the Union continued to disagree on a number of policy matters, including the Citizenship Amendment Act, agriculture legislation, GST compensation, and support during the COVID-19 pandemic.
• Confrontational Federalism: Federalism under the “dominant party” reappeared with the single party majority in 2014 and concurrently solidified. 
  • However, it emerged during times of significant federal disputes between states led by the opposition and the centre. 
  • Examples: State programme blockages, governor abuse, state fiscal centralisation, state government instability, and subversion of state rights.
• Bargaining Federalism: Under bargaining federalism, the centre takes on the role of a patriarch or big brother. Due to the centre’s greater negotiating strength, bargaining federalism highlights states’ disadvantageous position. 
  • However, during the 1990s, state governments’ bargaining strength increased due to the regionalisation of the party system and open economy.

Need to Strengthen Federalism in India

• To Maintain India’s Diversity: Strengthened federalism is desirable to ensure that the linguistic and cultural identities of different regions are preserved and respected.
• To Avoid Centralisation: Strengthened federalism is needed to safeguard and enhance the autonomy and rights of the local units and accommodate their regional aspirations.
• Further Empowerment of Local Bodies: Strengthening federalism leads to empowering local self-governance through Panchayati Raj institutions that is essential for grassroots democracy and development.
• For More Justiciable Fiscal Federalism: Strengthening fiscal federalism ensures a more equitable distribution of financial resources among units of Federation.

Challenges to Federalism in India

• Regionalism: Managing the balance of power between the Centre and the states is a significant challenge to federalism in India. India’s pluralistic character leads to various issues, including regionalism.
  • Example: The demand for creating more states has become more prominent, particularly since the formation of Telangana in 2014. The Bodos, a major tribe in Assam, have a long-standing demand for a separate Bodoland state.
• Division of Powers: In India, the distribution of power is outlined in the Three Lists found in the Seventh Schedule of the Constitution. Some issues, such as criminal law, forests, and economic and social planning, require involvement from both the Centre and states and are therefore included in the Concurrent List, leading to conflicting situations.
  • Example: The three farm laws passed by the central government in 2020 were challenged by stateson the grounds that agriculture is a State List subject. 
• Fiscal Concerns: The Indian Constitution gives the Centre greater taxation powers but establishes the Finance Commission to correct this imbalance by determining states’ share in Central tax revenues.
  • Example: The 15th Finance Commission recommended a higher share of central taxes for states, increasing it from 32% to 41%. However, states complain that the funds are insufficient and not disbursed timely, leading to fiscal issues.
• Unequal Representation of Units: In Lok Sabha, representation is based on population, with larger states having more seats and leads to dilution of small states’ voice in national politics.
  • • Example: Uttar Pradesh has 80 Lok Sabha seats while Sikkim has only 1.
  • Also, there is no provision for equal representation of states in the Rajya Sabha, and states lack significant influence over constitutional amendments.
    • The Punchhi Commission recommended equal state representation in the Rajya Sabha.
• Economic Disparities and Fiscal Differences: Such differences among constituent states can jeopardise a federation.
  • Imbalances in economic standards lead to demands for economic planning, regional economic equality, and financial autonomy for states.
  • The quest for financial equality within a region can cause challenges in a federation.
• Other Concerning Challenges: Misuse of Governor’s Office, Misuse of Article 356 (President’s Rule), All India Services, Centralised Amendment Power in most of the cases, Various Inter-State Disputes, etc.

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Way Forward

• Empower the Inter-State Council: There is a need to provide greater independence and statutory responsibilities to this Council that would strengthen the space for both Centre-state, and inter-state, dialogue.
  • Empowering the Inter-State Council would support dispute resolution, enable greater policy learning across states and provide a platform for inter-governmental cooperation around policy areas.
• Smooth and Regular Conduct of Delimitation Process: To build trust over the delimitation exercise when it occurs, there could be an announcement over a process to be followed to enable genuine consensus building among all states rather than a centrally imposed decision. 
• Respect Principles of Representation and Redistribution: There is a need to find such federal solutions that should respect the principles of representation and redistribution, without reducing the voice and autonomy of states. 
  • There are precedents that might be followed such as the long process of inter-state dialogue and consensus building that led to indirect tax harmonisation, first via state-level VAT in the early 2000s and then the introduction of the GST.
• Enhancement of  Local Powers and Development:
  • Enhancing Devolution of Powers: Federalism can be strengthened by enhancing devolution of powers and resources to states and local bodies such as by revising the distribution of powers lists, giving more fiscal autonomy, etc.
  • Ensuring Equitable Development: There is a need to develop a transparent and objective formula for distributing central funds to states by considering major impacting factors such as population, poverty, infrastructure needs, etc.
    • In 2017, the Raghuram Rajan Committee suggested a formula-based devolution of central funds to states based on objective criteria.
  • Ensure Inclusiveness: Increased participation from states ensure their representation, values and spirit of federalism.
    • The appointment of Governor should be more transparent and consultative.
• Addressal to Regional Disparities: It is important to address regional disparities and inequalities  to maintain and strengthen the spirit of federalism.
  • It can be achieved by providing special assistance and support to backward and disadvantaged regions or groups.
• Foster Cooperative and Competitive Federalism: In cooperative federalism, the centre and states work together on issues of national importance such as national security, disaster management, etc and ensures a unified approach to achieving common goals.
  • In competitive federalism, states compete for investments and talent by improving infrastructure, public services, and regulatory frameworks. This fosters innovation and better governance practices across the country.
• Follow Federal Principles: The Centre should avoid excessive use of its powers under Articles 355 and 356 of the Constitution (imposition of President’s rule) that will ensure greater autonomy for states.

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