Dr. Pramod Kumar, Director, IDC and former Chairman, Governance Reforms Commission, Punjab while delivering keynote address in the Two-day Regional Consultation meeting on Centre-State and Inter-State relations organized by Inter-State Council Secretariat (ISCS), Ministry of Home Affairs in collaboration with Government of Punjab here on 27-12-2011 called for strengthening institutional framework for the cooperative federalism as provided in the Indian constitutions. He said that after the emergence of coalition government politics, some states were getting more than their due while others were suffering at their cost and resultantly states were getting lesser statutory grants. Describing this new trend as \'bargaining\' federalism, Dr. Kumar pointed out that preferential treatment and liberal funding to certain states was also a major impediment in smooth relations between Centre and states. He said that each central scheme couldn\'t be tailor made for all states as every state has its own ground realities e.g. NREGA though a very good scheme but not suitable to the needs of labour deficit states like Punjab. Underling the need for effective fiscal management, he said that each state should be given funds under different centrally sponsored schemes but the states should be given liberty to choose the schemes and alter them to needs of particular area or region. He also lamented that often the Centre passes the buck of failure of its schemes to the states and criticizes the state subsidies while the benefit of its own much touted Rs. 70,000 crore debt waiver scheme couldn\'t reach the targeted and suffering peasantry. He elaborated his view point on this vital subject in the Indian context as follows:
Not co-operative federalism but bargaining federalism
The architectural design of federalism is laid down in the Constitution. In that sense it is juristic and legalistic in nature. Whereas, centre-state relations are essential a political construct, and, therefore, not a static, but a changing notion. The Constitution has provided an institutional framework for the cooperative federalism. Whereas, contemporary nature of politics i.e. coalition politics and the trend of globalisation has provided basis to bargaining federalism. It is bargaining federalism which creates tensions between centre and state and amongst states.
Market-led reforms weakened federalism
The nation-state has surrendered to the market in the sphere of both the path and pace of development. The states are not taken into confidence for Central Governments keenness to fully integrate the Indian economy with the global market.
Over the years, the Central regime has made significant institutional change such that the states are to \'fend\' for themselves. This only means that the states will depend more and more on private debt to meet its expenditure responsibilities completing the full cycle for the global investors.
Federalism as practiced failed to reduce regional disparities
It was also assumed that economic reforms in the background of dynamics of market shall ultimately even out regional development across states and nurture unfed areas. However, the 10th plan and 11th plan appraisals have noted widening disparities between the states.
Not resources but autonomous resources
There is an inherent process of centralisation in place with increasing control of the Centre on allocation of resources. The problem is not resources, but devolution of autonomous resources. Resources under the rule-based devolution process of Gadgil-Mukherji formula have dwindled and has been overcome by tied assistance.
This implies that the statutory transfers were to some extent replaced by discretionary transfers.
The scope for discretion of the states to initiate state specific development strategy is being minimized and central government implicitly is suggesting that it knows what is best for the states and that \'one size fits all\'.
MNREGA in present form is an example particularly in the context of labour deficit states like Punjab. Another example is, the central government\'s district level, productivity enhancement programme. It is interesting to note that this programme was conceived keeping in view states other than Punjab and Haryana.
It is district based and not state based. For this, one has to have state level policies. How can one formulate policies for enhancement of wheat productivity without taking into consideration Punjab and Haryana. Further in the health sector, let us take example from Punjab.
The national health programs currently underway are in many ways oblivious of the reality at the ground level. There is hardly any recognition of the fact that the National programs to address specific morbidities might not be enough to meet the State-specific morbidity needs.
Fiscal deficit parameter and elimination of subsidies not social development friendly
Fiscal deficit is not a technical parameter at the provincial level in India. Given the context of centre-state fiscal relations in India, at the provincial level, it is a politically negotiated outcome.
Subsidies are considered as a negative performance indicator. For instance, agriculture dominant states provide power subsidy to agriculture. No doubt, there is need to rationalise these subsidies in the background of the environmental challenges from the rice wheat crop cycles, and the pressures from the global institutions for the agriculture sector. Agriculture sector needs support, but are power subsidies the best way to support it is a question that should be transparently answered? In this context, Centre also follow double standards, when they gave Rs. 70,000 crore debt waiver to farmers. It was termed as good economics enacted with political finesse. But, when states give even genuine subsidies, these are branded as bad fiscal management.
Need to shift to united grants
The need is to shift from tied grants to autonomous grants. It will be better if these resources were transferred to the states as an additional share in tax revenue or in the form of block grants. The state should then be let free to spend as much money on a particular scheme, according to their judgement, out of the total share allocated to them.
(Dr Promod Kumar is Director IDC Chandigarh and Former Chairman of Punjab Governance Commission)
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Keynote address delivered at Regional Consultation meeting on Centre-State and Inter-State relations on 27-12-2011 at Chandigarh,
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