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Rethinking Cooperative Federalism in India
Context:
In discussions about the Indian Union, scholars often characterise it as an example of “cooperative federalism.”
More on News:
- Former Chief Justice of India D. Y. Chandrachud, in a lecture delivered in October 2023 shortly before his retirement, reaffirmed this view, highlighting the importance of cooperative federalism in democratic governance.
- However, he emphasised that cooperation doesn’t imply state conformity with Union policies.
- Rather, cooperative federalism in India should be built on discussions and dialogues that range from cooperation to contestation and even competition.
The Evolution of Cooperative Federalism in India:
- Ideal Approach: The term “cooperative federalism” is often discussed in Indian academic circles as an ideal approach for balancing power between the Union and state governments.
- Collaboration: This model implies that the Union and states work collaboratively, ironing out differences through dialogue to achieve shared developmental goals.
- Consensus: It suggests an approach where both levels of government work toward consensus for the collective benefit.
- Not in Sync with Reality: However, this idealised view has not always matched reality, as historically, central planning and one-party dominance often pressured states into conforming to Union mandates. This form of cooperation, in fact, often bordered on coercion.
GST and Challenges:
- GST: The introduction of the Goods and Services Tax (GST) aimed to simplify taxation by unifying multiple consumption taxes into a single national tax.
- This reform required states to sacrifice some fiscal autonomy for the potential economic gains of a unified market.
- To facilitate this cooperation, the GST Council was established as a joint body of the Union and states, serving as a platform for deliberation.
- To ensure state compliance, the Union promised compensation for any revenue loss due to GST implementation, guaranteeing a 14 percent growth from the base year of 2015-16.
- Pandemic: The pandemic disrupted this arrangement.
- The Union government’s decision to discontinue compensation, citing the pandemic as an “Act of God,” led to widespread dissatisfaction among states.
Competitive Federalism: A Reality in Indian Governance:
- While cooperative federalism is often promoted, what India frequently experiences is a model of competitive federalism.
- This competition exists both vertically, between the Union and states, and horizontally, among states themselves.
- Competition occurs in various forms—political parties vie for control, states compete for resources, and both Union and state governments seek to attract investments.
- This competitive dynamic can promote efficiency but requires certain conditions, such as “competitive equality” and fair distribution of costs and benefits.
- Unfortunately, the asymmetric power between the Union and states, along with the absence of institutions to regulate competition, complicates the realisation of fair competitive federalism.
Article 252 allows Parliament to legislate on state matters when two or more states consent to such legislation. This provision enables states to coordinate and empower the Union to legislate on subjects of mutual interest, promoting collective action. Meanwhile, Article 256 requires that executive power in every state be exercised in a manner that does not interfere with the Union’s executive power, ensuring alignment in policy implementation while respecting state autonomy.
The Need for Formal Intergovernmental Coordination:
- The Indian Union lacks formal mechanisms to coordinate, negotiate, and resolve conflicts between Union and state governments.
- The first Administrative Reforms Commission in 1966 suggested an inter-state council for coordination.
- This recommendation was reiterated by the Sarkaria Commission in 1983, which stressed the need for a neutral body to mediate Union-state issues.
- Although the National Development Council exists, it rarely convenes, and when it does, discussions often devolve into grievance airing rather than constructive dialogue.
- During the era of the Planning Commission, there were annual discussions that allowed states some voice in national planning, but after economic liberalisation in 1991, these became more about negotiating grant allocations than meaningful policy deliberations.
- While the 63rd Constitutional Amendment created the Inter-State Council, it was placed within the Union Home Ministry, limiting its independence and non-partisan role.
Towards an Inclusive and Balanced Federal Structure:
- Diverse Political Landscape: As India’s political landscape becomes more diverse, with regional parties gaining influence at the state level, the need for an institution dedicated to intergovernmental coordination has never been greater.
- Independent Body: Establishing an independent, efficient body to regulate competition, manage conflicts, and facilitate negotiation is critical to achieving the vision of a Viksit Bharat, a developed India.
