Editor’s Note: India’s federal experiment is facing an existential crisis

As general election approaches, Centre-State tussle over funds exposes cracks in fiscal federalism, imperiling the future of democratic bargaining.

Published : Feb 21, 2024 22:22 IST - 3 MINS READ

With the 18th Lok Sabha election just months away, the political atmosphere has become predictably replete with machinations. The government began the year with the much-hyped launch of the temple at Ayodhya, followed almost immediately by the worship at Gyanvapi, both of which were obvious electoral overtures. Meanwhile, the assault on freedoms and rights has continued, the latest being the disturbingly war-like response to the agitating farmers on the Delhi border.

The last decade has also seen a systematic undermining of the grand institutions that, despite many fractures, were still largely able to buttress the democracy. It is in this context that one must understand the euphoric response to the Supreme Court finally striking down electoral bonds as unconstitutional. It is a tiny point of light in a long series of inexplicably timorous judicial verdicts.

February saw another unprecedented sight: Chief Ministers and leaders of various opposition-ruled States descended on New Delhi’s streets to protest against the Centre’s alleged failure to disburse funds according to mandated norms.

The irony in much of this, of course, is that the Congress in its own salad days was the first to bend and twist the principles that upheld the idea of the “sovereign socialist secular democratic republic” imagined in the Constitution. It created the cracks that subsequent governments could slowly widen, allowing anti-federal, anti-secular, and anti-democratic ideas to creep in. Today, we are at a juncture when the very idea of the federation is being challenged.

But what exactly is this federation?

Tracing its etymology to the Latin word foedus, which means pact or contract, federalism can be loosely defined as government by contract. It is this “contract” that State governments are accusing the Centre of breaching.

Indian federalism is often described as cooperative federalism, built upon interdependencies, with Centre and States working together to fund and implement projects. Or, as W.H. Morris-Jones wrote, it functions as a “bargaining federalism” with give and take. A dominant Centre, however, has often resorted to bullying, with the Congress not averse to arm-twisting the States when it wished.

But we appear to have now entered a phase of active blandishments. Beguilingly terming itself a “double-engine sarkar”, the Centre links the release of funds to States voting saffron. Prime Minister Narendra Modi invoking competitive federalism, asking States to vie for development and economic indices, becomes a mockery when the Centre plays political favourites, even stooping to rank gubernatorial excess.

India’s States have developed along differing timelines, with some showing greater alacrity after Independence to set their houses in order. In the 1990s, when States were able to raise foreign investment directly, some again grabbed the chance to broaden education, expand industries and infrastructure, and quickly evolve into highly developed regions. They contributed more to the national kitty, and money was directed towards the laggard States. In true federal spirit, this was never resented.

The dismantling of the Planning Commission and the setting up of NITI Aayog, a ruling party cabal that loves acronyms and tech Band-Aids, began a series of centralised economic measures that have steadily undermined India’s ungainly but functional fiscal federalism. What spurred this centrist impulse further was the emergence of powerful regional parties, which are today the fiercest challengers to the ruling party. This irks the BJP, which seems to believe that a democracy needs no opposition at all, hence the ongoing efforts to strangle funding.

The States have begun to contest this in court, and the bugle has been blown. Ultimately, though, it’s that tiny point of light that must shine ever more fiercely if the idea of the federal republic is to survive.

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