This is the Moment for a New Federal Co... (2024)

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A New Federal Bargain: This is the Moment for a New Federal Compact

June 11, 2024

Context

• The resurgence of coalition politics in India is poised to bring issues of federalism and Centre-state relations back into sharp focus.
• The Bharatiya Janata Party (BJP)’s increasing dependence on regional allies and its expanded presence in southern India presents an opportunity for a federal reset.
• It is important to analyse BJP’s greater electoral stake in south India (and the Opposition’s in the north) and whether trust and balance could be restored in matters of federalism.

Centre-State Relations in the Past Decade

• Since the BJP’s ascendancy in 2014, significant changes have been introduced in Centre-state relations.
• During Modi’s first term (2014-2019), the government abolished the Planning Commission and replaced it with the Niti Aayog, aimed at enhancing cooperative federalism.
• The implementation of the Goods and Services Tax (GST) marked a pivotal reform in fiscal federalism since the Constitution's inception.
• In Modi’s second term (2019-present), the abrogation of Article 370 signalled a shift towards greater centralisation, as the government leveraged its parliamentary majority to push "one-nation" policies, often sidelining state interests.
• The proposal for One nation, one election was a continuation of this centralising agenda.

Areas of Concern for the New Coalition Government

• Delimitation and North-South Divide
  • One of the most contentious issues is the pending delimitation exercise, which aims to redraw the boundaries of parliamentary constituencies based on the latest population data.
  • This exercise has the potential to deepen the existing north-south divide.
  • Northern states, which have seen significant population growth, stand to gain more parliamentary seats, while southern states, which have implemented more effective population control measures, risk losing representation.
  • This redistribution could fundamentally alter the balance of power in the Lok Sabha, India's lower house of Parliament.
  • Southern states, which are generally more economically prosperous and opposition-dominated, fear a loss of influence and resources.
  • The resulting shift could exacerbate regional disparities and fuel resentment, destabilizing the federal equilibrium.
• Fiscal Federalism and Resource Allocation
  • The existing model involves the redistribution of taxes collected from wealthier states to poorer ones, primarily in the north.
  • This system, while aimed at achieving equitable development, has sparked discontent among southern and western states.
  • These states argue that their higher economic contributions are not adequately recognised and that the redistributive model undermines their fiscal autonomy.
  • The BJP-dominated central government’s policies are often perceived as favouring its strongholds in the north, leading to accusations of political bias in resource allocation.
• Centralisation vs. Regional Autonomy
  • Since 2014, the BJP's centralising policies have also been a source of contention.
  • The abrogation of Article 370, which granted special autonomy to Jammu and Kashmir, is a prime example.
  • This move was seen as an assertion of the Centre’s dominance over state autonomy.
  • Similarly, the push for "One nation, one election" seeks to synchronise state and national elections, potentially undermining the autonomy of states to govern according to their unique political timelines and priorities.
  • Such centralising tendencies raise concerns about the erosion of federal principles and the concentration of power in the Prime Minister's Office (PMO).
• Coalition Dynamics and Regional Party Interests
  • The dynamics of coalition politics further complicate the federal landscape.
  • Regional parties, crucial for forming national coalitions, prioritize their local interests and demands.
  • While this can lead to greater attention to regional issues, it often results in fragmented and inconsistent federal policies.
  • For instance, the demand for special status by Andhra Pradesh and Bihar reflects regional aspirations that may not align with national priorities.
• The Challenge of Building Consensus
  • Building consensus on federal matters in such a politically fragmented environment is inherently challenging.
  • The process of delimitation, fiscal redistribution, and policy formulation requires a delicate balance of competing interests and priorities.
  • The lack of a robust institutional framework for inter-governmental dialogue exacerbates this challenge.
  • Existing bodies like the Inter-State Council have not been effectively utilised to foster cooperation and resolve disputes.

The Role of Regional Parties in Coalition Government in Advancing Centre-State Relations

• Regional parties in a national coalition typically focus on advancing their interests and those of their states.
• Issues like special status for Andhra Pradesh and Bihar and calls for a caste census highlight their agenda.
• However, there is little indication of a comprehensive vision for Centre-state relations or federalism.
• If coalition politics simply translates into regional parties seeking resources for their states, it could undermine a broader federal consensus and perpetuate partisan resource distribution.
• The BJP's "one nation" vision has found some resonance among coalition partners.
• For example, the Telugu Desam Party (TDP) welcomed the abrogation of Article 370 as a move towards a unified nation, and the Janata Dal (United) [JD(U)] supported the one nation, one election concept.
• Thus, the presence of regional parties does not automatically guarantee a strengthened federalism.

Opportunities Before the Coalition Government Towards Renewed Federalism

• Institutional Reforms: Empowering the Inter-State Council
  • A critical step towards renewed federalism is the empowerment of the Inter-State Council (ISC).
  • Established based on the recommendations of the Sarkaria Commission in the late 1980s, the ISC was intended to be a forum for dialogue and cooperation between the Centre and the states.
  • However, its potential has largely remained untapped due to its placement within the Ministry of Home Affairs and the lack of independent authority.
  • To revitalise the ISC, it should be granted greater independence and statutory responsibilities.
  • This would involve repositioning the ISC as an autonomous body with its own secretariat, budget, and authority to convene regular meetings.
• Enhancing Dialogue and Consensus Building
  • A renewed federalism must prioritise dialogue and consensus-building processes.
  • The pending delimitation exercise, which has the potential to deepen regional divides, underscores the need for an inclusive approach to decision-making.
  • Instead of imposing decisions from the Centre, a process of genuine consensus-building involving all states is essential.
  • This process could draw inspiration from the consensus-building efforts that preceded the introduction of the GST.
• Fiscal Federalism: Fairness and Equity
  • Reforming the fiscal federal structure is another crucial aspect of renewed federalism.
  • The current model of fiscal redistribution, where taxes collected from wealthier states are allocated to poorer regions, has led to discontent among contributing states.
  • To address this, the redistributive model should be re-evaluated to ensure fairness and equity.
  • A more transparent and formula-based approach to resource allocation can help mitigate perceptions of bias and partisanship.

Conclusion

• Harnessing this political moment to offer a renewed vision for federalism, where the Centre and states collaborate and build trust, is in the long-term interest of all parties.
• A pan-India federal bargain would help stabilise Centre-state relations, ensuring a balanced distribution of power and resources.
• As India looks to the future, a strengthened federal framework could support its diverse and dynamic polity.