The traumatic events surrounding the partition of India and fears of balkanization made our founding fathers opt for a highly centralized Union. States were given a well-defined legislative and executive jurisdiction in the Seventh Schedule of the Constitution. Institutions like the Finance Commission, Election Commission and Supreme Court were created to ensure some degree of fairness in dealing with the states. However, an appointed governor as head of state with discretionary powers, Article 356, the all-India services, Planning Commission, the introduction of licence-permit-quota-raj—all these eroded the states’ powers significantly. Habitual abuse of Union’s powers for partisan political gain, frequent dismissal of elected state governments, Union’s near complete control of public and private investments, excessive discretion of the Union in resource transfers, the internal emergency that made India a de facto unitary state, and mass dismissals of state governments in 1977 and 1980 led to serious friction.
In the second phase, powerful leaders like N.T. Rama Rao, Ramakrishna Hegde, Jyoti Basu, Biju Patnaik and M. Karunanidhi emerged to rally people around federalism and states’ rights. A series of developments—the S.R. Bommai case verdict (1994) making abuse of Article 356 largely a thing of the past, successive Finance Commission reports on resource transfer, end of licence raj, decline of discretionary public sector investments, rise of regional parties and abolition of Planning Commission—helped create a more balanced federal India. For example, according to revised estimates of 2017-18, half of the Union expenditure of around Rs22 trillion has been transferred to states. Of the total resource transfers, 69.4% is by Finance Commission devolution and grants, and the bulk of the rest is under centrally sponsored schemes. Indian federalism has matured quite a bit, and the states have far greater control of their economic and political management than in the earlier phase.
However, serious structural problems remain. States and local governments have responsibility for most of the things people need and expect from government on a daily basis—water supply, electricity, sanitation, drainage, police, courts, roads, traffic, schools, colleges, healthcare, and myriad public services. Our politics is centred around the states, and national verdicts are generally a mere aggregate of states’ verdicts. In all elections from panchayat to Parliament, people essentially vote for or against leaders and parties at state level, and punish them for failure to deliver. The national government is largely notional for most people most of the time. States exercise real power, and yet are severely constrained in delivering outcomes. In the first five decades after independence, federalism was eroded by the Union’s arbitrary and partisan exercise of power. Now, the Union government has much less discretion compared to the earlier period; and yet, states are severely constrained in fulfilling their obligations to people.
These fetters are no longer partisan political; they are structural and constitutional. A rigid, uniform political model imposed on all states and local governments disregarding local needs, a dysfunctional bureaucracy protected by Article 311, the generalist, all-purpose all-India services that do not bring specialized skills required to manage various services and enjoy a monopoly of all key public offices, the well-intentioned, but poorly drafted Part IX of the Constitution that created over-structured, under-powered local governments that failed to take root as the third tier of federalism, needless rigidity in Union legislation on subjects like education with resultant failure to improve outcomes despite vast expenditure, and the continuing archaic anachronistic role of nominated governors are making states and local governments dysfunctional.
The results of our governance failure are catastrophic. Despite our self-image, immense potential and many obvious strengths, our outcomes as a nation are far from satisfactory. Out of the 49 relatively large nations with gross domestic product (GDP) exceeding $200 billion, India ranks at near bottom on most indicators of basic amenities, infrastructure, education and healthcare, in the company of Pakistan, Bangladesh and Nigeria. Our people deserve more, and we as a nation have far greater potential unfulfilled. This calls for a more nuanced third phase of federalism while preserving and strengthening the nation’s unity and integrity, our constitutional freedoms, checks and balances and democratic accountability.
In no other democracy does the federal constitution impose a uniform structure, electoral system, and bureaucratic apparatus on states and local governments. Even in small unitary Britain, Scotland, Wales, Northern Ireland and London city have their own electoral systems different from the Westminster model. In the US, each of the 50 states have their own constitutions and structure of government. In Australia too, each of the six states and two self-governing territories have their own constitutions. In Germany, every Land (State) has its own constitution with the power and flexibility to design its own governance structure. In Canada, the 10 provinces have the right to decide on the electoral system, form of government and local governance structure.
The time has come for India to move to the third phase of federalism. Many of our states are larger than 90% of nations on earth. We need to allow each state to have its own model of governance, bureaucracy and local governments, but with firm safeguards to preserve national unity, separation of powers, fundamental rights and democratic accountability. The one-size-fits-all model cannot deliver the desired outcomes of prosperity, elimination of poverty and national greatness in a vast and diverse nation of 1.3 billion people. We need more flexible federalism, strengthening India’s unity and integrity, and allowing us to fulfil our potential.
Jayaprakash Narayan is the founder of the Lok Satta movement and, the Foundation for Democratic Reforms.