BackThe start of federal fantasies, again
A coalition geared to garner more money from the Centre is bad news for India
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On Sunday, two old coalition partners—the Bharatiya Janata Party (BJP) and the Janata Dal (United)—called it quits. The divorce had been in the offing for a while. The break will be debated in the days and months ahead, raising the political temperature in the country. Much of the debate is likely to revolve around the idea and content of secularism. But beyond the sound and fury of that much abused expression, another—far more relevant—idea is likely to be debated as well, that of federalism and the rightful place of states in the Indian union.
Even before the formal split between the two parties, the idea of a federal front—a coalition of non-Congress, non-BJP parties—had been floated by West Bengal chief minister Mamata Banerjee and Orissa chief minister Naveen Patnaik. Bihar chief minister Nitish Kumar has, so far, made encouraging noises about it. The thread that binds these three leaders and their parties is their demand for more money and resources from the Union government. In Patnaik and Kumar’s case, this has taken the form of a demand for placing their states in a special category. Simply put, this means more devolution of central money from the country’s collective tax kitty and outright grants for development. When Banerjee became chief minister of West Bengal, she raised similar demands. These were later watered down—after the Union government refused to budge—to a moratorium on loan and interest repayments due to the Union government.
In this age, these three leaders have political heft: Together, their states account for 103 seats in the Lok Sabha. If like-minded “federalists" are added—for example, Mulayam Singh Yadav of Uttar Pradesh—this number swells to 183 seats, a remorseless figure in this age. While these leaders and their parties are unlikely to garner all these seats, even if they manage to swing half of this number, the nebulous federal front may turn into something more concrete. Even without such a front, there is pronounced pressure on any Union government to redistribute resources towards the states; with such a formation, this burden will become ruthlessly heavy. It will also dangerously widen the divergence between India’s politics and public finances.
At the moment, the fight for resources is between economically weak states and the Union government; rich states of the Union do not begrudge these transfers. For example, Bihar in recent years has been dependent greatly on central funds for meeting its government expenditures. But in the years ahead if weak states walk away with a bigger chunk of money—necessarily without contributing to the national cake—there is a good chance that richer states (for example, Maharashtra and Gujarat) will protest such profligacy. In any case, poor states seldom deploy these resources to productive ends; much of this money goes towards expenditures of the state government and direct subsidies for consumption. This kind of political bickering has not been seen so far, but with an explicit political formation whose raison d’être is cornering of resources, this is a very real possibility.
The other issue is lack of responsible behaviour on the part of state governments. One reason for such demands is that over time, in the absence of economic growth—which brings jobs and opportunities in its wake—political survival requires handing out ever larger amounts of dole. State politics then becomes nothing more than management of special interests and distributional lobbies. Over time, this situation has developed into a political moral hazard: chief ministers, out of the sheer number of members of Parliament their parties control, can indulge in unreasonable financial demands and pay little attention to governance. West Bengal is the exemplar of such politics. Chief minister Banerjee has a ready explanation for her woes: Blaming the previous Left Front government. This skirts the fact that once in power, a ruling party is responsible for administering a state, problems created by previous governments cannot be an excuse for maladministration. Even Kumar and Patnaik, sound administrators that they are, have blamed historical lapses such as the policy of freight equalization—that allowed industries to be set up anywhere in the country, even far removed from these mineral- and resource-rich states. They have done little to adopt new, industry-friendly policies.
Every decade or so, India is convulsed by such tendencies. The version being seen now has been incubated by the almost decade-long rule of the United Progressive Alliance. During this period, there has been a pronounced bias against industrialization in the name of protecting the environment and preventing the alienation of land from small holders and tribals. In Orissa, for example, the Posco steel plant—the single biggest piece of foreign industrial investment—was stalled in the name of protecting tribal rights. This resulted in justified suspicions on Orissa’s part against the Union government. Patnaik is now in his 14th year of governing Orissa. In the absence of industrial development, the pressure on him to indulge in populism is huge even if his response is not sound economically. This trend is being replicated—with different causes—across India. This lies at the root of the new and ruinous “federalism" in India.
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