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Business News/ Opinion / Indian federalism needs the Inter-state Council

Indian federalism needs the Inter-state Council

It can be the core component of Modi's vision of cooperative federalism

Illustration: Jayachandran/MintPremium
Illustration: Jayachandran/Mint

B.R. Ambedkar once described India and its states as “one integral whole, its people a single people living under a single imperium derived from a single source". It was a necessary sentiment at a time when a newly independent and partitioned nation was trying to frame a coherent idea of itself. But the political and economic context has changed drastically since then. The relationship between the centre and the states has failed to keep pace with its evolution.

The Inter-state Council (ISC) meet convened last week after a decade’s gap is thus all the more significant. And the discontent there—chief ministers have voiced their concerns on issues ranging from adventurism by governors to shifting of subjects from the state list to the concurrent list—makes that gap particularly puzzling.

The council, after all, is a proven concept. Based on the Sarkaria Commission’s recommendations, it was constituted under Article 263 of the Constitution in 1990. It proved to be crucial in the implementation of many of the commission’s 247 other recommendations, such as altering the states’ share of central taxes. Just as importantly, the council helped bridge the trust deficit between the centre and the states. If not always a problem solver, it at least acted as a safety valve.

True, there are other bodies such as the NITI Aayog’s Governing Council—it has a similar composition, including the prime minister, chosen cabinet ministers and chief ministers—that could address centre-state issues. But the ISC has constitutional backing, as against the NITI Aayog which only has an executive mandate. This puts the states on more solid footing—an essential ingredient in building the atmosphere of cooperation needed for calibrating centre-state relations.

This latest meet has shown some positive signs. The centre was willing in principle to discuss and implement some of the Punchhi Commission’s recommendations on centre-state relations, broadly falling under legislative, administrative and financial heads. But if the ISC is to be more than a talk shop, it must show that it can follow up. For instance, with regard to legislating on education and forests—both subjects that have been transferred from the state list to the concurrent list—the centre would do well to consult states more extensively and offer them greater flexibility.

The core issues du jour, however, lie elsewhere. Over the decades, the role of governors and, by extension, the relationship between the centre and states headed by rival parties have both come into prominence on occasion. The recent crises in Uttarakhand and Arunachal Pradesh show that we are in the midst of one such phase again. Expectedly, a number of chief ministers had much to say about adventurism by governors at the ISC meeting. And the Punchhi Commission has recommendations here as well—from fixing governors’ tenures to mandatory consultation of chief ministers before the appointment of governors and choosing individuals who have been outside active politics for at least a couple of years.

The centre did not commit to anything, which was expected, given the delicate nature of the issue. But the ISC remains the best venue for addressing such concerns. The Supreme Court’s inconsistent rulings in both instances show that there is no certainty there. And the disruption created by such situations imposes heavy administrative and economic costs on the states affected.

Tax devolution is another crucial issue. The acceptance of the 14th Finance Commission’s recommendation to change the quantum of the funds allocated to the states from 32% to 42% of the tax pool was well received at the council meet, for the most part. This crucial shift in the funding pattern implemented by the Narendra Modi government—the goods and services tax, currently on the threshold of being passed, would change the landscape even more drastically—all but mandates periodic consultation and assessment of the kind the ISC can provide.

The challenges of maintaining a federation are many, but the solution is no mystery: healthy debate and discussion. This is easier said than done, of course. In past decades, the centralized nature of the Indian economy—even after liberalization—made papering over the cracks possible. But Modi, to his credit, has a very different federalist vision—one with an emphasis on decentralizing decision making and encouraging state competition. If that vision is to succeed, the ISC must be a core component of the new cooperative federalism.

Can the Inter-state Council improve centre-state relations? Tell us at

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Published: 19 Jul 2016, 12:16 AM IST
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