After a promising start and PM Modi’s call for a ‘competitive, cooperative federalism’, Centre-state relations are again on the brink
ONE OF THE DEFINING FEATURES of Prime Minister Narendra Modi’s discourse around governance reform has been the goal of building a more cooperative form of Centre-state relations. A former chief minister himself, Modi promised a new approach. Chief ministers would work together with the Centre as a ‘Team India’ to resolve differences and achieve a jointly defined national interest.
There have been real changes in the practice and institutional architecture of federalism in the last two years. The implementation of the Fourteenth Finance Commission recommendations increased the states’ share of central taxation from 32 per cent to 42 per cent. Along with the rationalisation of centrally sponsored schemes, this move recognised the demand of state governments to have more autonomy over their spending decisions. It constituted a substantial increase in the untied funds they received from New Delhi.
Even more significant was the passage of the Goods and Services Tax Act this year. The alignment of indirect taxation by Central and state governments and the removal of inter-state tariff barriers are major steps towards achieving a common market in India. The move has required the Centre and states to pool their sovereignty to pursue shared national economic goals. The states will not have veto rights on the GST Council that governs the operations of the new tax—they will have to form alliances with the Central government to get amendments passed.
The other major institutional innovation related to federalism was the abolition of the Planning Commission. The government argued that the Niti Aayog would oversee a transition from a top-down, Centre-to-state policy flow towards a genuinely cooperative partnership between the two. At the first meeting of the Niti Aayog in February 2015, Modi urged the states to embrace a spirit of ‘competitive, cooperative federalism’ in which they would compete with each other to improve governance, working in tandem for the goal of sabka saath, sabka vikaas.
However, there are signs that in a number of respects Centre-state relations are becoming increasingly politicised in ways that threaten to undermine the promised goal of a more cooperative form of federalism. This also raises questions about how far the Niti Aayog is able to function as a neutral platform for Centre-state dialogue and policy discussion. For instance, in its first meeting, the Niti Aayog governing council, which includes all CMs and state governors, established groups to explore and report on three priority areas for Centre-state cooperation: skills development, Swachh Bharat and the rationalisation of centrally sponsored schemes. Chief ministers of all 29 states, the NCT of Delhi plus the Union territories of Puducherry and the Andaman and Nicobar islands were represented on one of the three sub-groups.
Initially, two of the three sub-groups were due to be convened by CMs belonging to Opposition parties (the Congress’s Siddaramaiah from Karnataka and the CPI(M)’s Manik Sarkar from Tripura). Unceremoniously, two weeks after their formation, news came that these committees were instead to be convened by regional allies of the Central government (Punjab’s Parkash Singh Badal and Andhra Pradesh’s N. Chandrababu Naidu), along with the third committee chaired by the BJP’s own CM Shivraj Singh Chouhan from Madhya Pradesh.
Since the three groups reported in late 2015, there have been no other comprehensive consultative platforms. Those which have been established, such as the small committee on digital payments launched in the wake of demonetisation and convened by Naidu, look even more partisan. The CMs of Bihar and Tripura pulled out of the committee soon after it was established.
Naidu is the non-BJP chief minister most vigorously committed to the platform of cooperation with the Centre. This is a reprise of a role he played in the earlier NDA regime of 1999-2004. Andhra is fast becoming the poster-child of competitive federalism too. The state came first—with Telangana—in the government’s 2016 index of implementation of ‘business reforms action’ plans (the index mirrors the World Bank’s ‘ease of doing business’ index). Of the top 12 reforming states—the ‘leaders’—all