Millennium Post

Federalism’s real face

Federalism’s real face
With a comfortable majority in the lower house of Parliament and  being confident of improving the tally in the upper house before long, the Prime Minister Narendra Modi has embarked upon decentralisation of power from the centre to the states in a significant bid to promote true federalism.

Although several governments in the past had mouthed the need to devolve power from the centre to the states and from states to panchayati raj and urban local bodies, the reality was far different
 It was given to Modi to take the boldest step in fortifying federalism from the ramparts of the Red Fort in his maiden Independence Day address when he announced the intention of his government to do away with the Planning Commission.  That anachronistic symbol of centralised planning since 1950s continued for longer than necessary even after India chose to free itself from socialist bequest and usher in a market economy way back in the early 1990s, was quite inscrutable.

China outstripped India even as it had the first mover advantage in the reform phase by a few years ahead of India, thanks to its huge low-cost labour, high saving and investment rates, substantial market reforms, outward-oriented policies and prudent macro-economic management. But India wasted its golden opportunity afforded by reform of factor endowments of production, hobbled by coalition governance and a paternalistic attitude to molly-coddle even those sections which could be weaned away from subsidies. The Planning Commission too contributed to the overall policy inertia by not seriously focusing on growth-inducing measures .

Moreover, successive governments in the reform era used the highest policy-making forum to sideline politicians or the eminent supporters of the ruling dispensation to preside it over with paraphernalia of members to bolster the prime minister who was the chairman of the august body.

With the firm advent of the coalition era of governance, the state chief ministers who were not allies of the ruling dispensation at the centre came to resent the patronising attitude of the Plan panel and quite a few of them dispatched their finance ministers instead of coming in person for the annual parleys to resolve the State Plan outlays.

 Interestingly, the Plan panel saw its longest deputy chairman in Montek Singh Ahluwalia, the distinguished economist who also served the finance ministry as secretary earlier, besides being a member, Plan panel and the first director of the newly-formed Independent Evaluation Office (IEO) of the IMF in Washington. His tenure of close to a decade marked a lot of controversies including his aborted bid to engage foreign consultants in the Plan panel at the beginning to leveraging less than five billion dollars of the country’s foreign exchange reserves to finance infrastructure development projects which was not supported by the prime minister and his finance minister.

Even the Centrally-sponsored schemes (CSS’s), evolved by the Plan panel over the years, in the distribution of Central Plan assistance to socially desirable development programmes across the states through a mix of central and state funding emerged as a source of friction in the federal relations.

Most of the states found the CSS’s not suiting their developmental requirements and were reluctant to contribute their bit for the promotion of such schemes. After the CSS’s were reduced to 66 in numbers in 2013, states still not supported the move  as flexibility in the use of funds was not provided to them.

It is all right when the country soon after its independence saw the overwhelming need to prioritise programmes and plan development in a bid to iron out regional and state level inequalities and inequities. With the composition of political parties ruling at the centre and the states changing in recent years, the need for understanding the sensitivities of the states is more important now than ever.

 It is a welcome development that the BJP-led National Democratic Alliance (NDA) recognised this underlying philosophy so that the states would have the option to determine the path of progress, development and well-being in a responsible manner after 67 years of freedom from the colonial yoke!

Though critics and left-leaning political parties flayed the proposed move to disband Plan panel as a fallacious exercise fraught with undermining true federalism, the fact of the matter is that the paternalistic policy of the past is buried once for all and the states would not be treated as supplicants in the common cause of development.

Yet another signal sent by the prime minister for enriching federalism is the announcement to decentralise export promotion by setting up such commissions at the state level.

By consciously focusing his attention on state development leveraging its innate strengths in the competitive milieu, Modi has given a real beginning to the process of expanding states’ powers. This will be a welcome development for the Congress-led states also.  IPA
G Srinivasan

G Srinivasan

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