Editor's Note


Supporters of federalism will illustrate how the idea has come under threat as the heavy hand of the Centre has limited fiscal autonomy of states, curbing their ability to make a more meaningful contribution to our development

A few days back when Reed Hastings of Netflix aired his frustration about India’s viewing habits, it led to acres of web space being dedicated to analysing what Indians are binge watching. It is not an easy analysis, but chances are that most Indians missed the Amitabh Bachchan-starrer Gulabo Sitabo but watched Minnal Murali. And, it is not just about south Indian movies and shows. If you widen your horizon beyond current flavours of the season, such as Pushpa and Kurup, there is The Disciple, the Marathi films that streamed into watch lists across the country.

So, are the state boundaries drawn on linguistic and cultural considerations and administrative convenience blurring? Will trends like technological shifts, market integration, virtualisation of activities and innovations in the way we manufacture and work affect the political and economic philosophies on which India was created? These ideas may raise suspicions of attempts to do away with India’s federal structure at a time when the fear of rising Central authoritarianism to crush state autonomy is palpable. But, as with most philosophical ruminations, the basis of these ideas is dipped in the elixir of deep trust between the Centre and the states: a casualty in today’s India.

Supporters of federalism will illustrate how, over the years, the idea has come under threat time and again, as the heavy hand of the Centre has limited fiscal autonomy of states, curbing their ability to make a more meaningful contribution to our development. The same can be said about the diminishing economic role of urban bodies and panchayats. Many times, political expediency has won over constitutional misgivings when it comes to the delicate relationship between the states and the Centre.

The nature of the Indian society and economy is steeped in decentralisation, a promise that was made to states in 2016 when finance ministers huddled into the wee hours for three consecutive days before agreeing to enact the GST law a year later. Compensation for revenue loss was the most important factor then, as it is now, five years since the new tax regime kicked in. Even BJP-ruled states tell Outlook Business the dire need for an extension of GST compensation.

Political scientist Alfred Stepan described Indian federalism as “holding together”, but this definition has been put to a severe test as opposition-ruled states complain against the unfairness under the GST system or the design of Centrally sponsored schemes, which aims to take away more than it gives.

This is when we should rue the dismantling of institutions such as the Planning Commission or the absence of the National Development Corporation.

As economist M. Govinda Rao writes in this edition, there is a need to have an impartial and powerful “institution for intergovernmental transactions to better reap the gains from Indian fiscal federalism”.

The prime minister was also once a chief minister and, hopefully, remembers the plight of states when its interests are taken up by bodies that are “parrots”, “caged” by the Centre.