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New Delhi: There needs to be a mix of competitive and cooperative federalism for India to move ahead, chief economic advisor Arvind Subramanian said on Wednesday.

“I do believe that the future for India is cooperative and competitive federalism. Competitive federalism provides the dynamism that needs to be unleashed. We need cooperative federalism to balance competitive federalism. We are developing new institutions to enhance cooperative federalism—the Niti Aayog is one, the finance commission and now we have the GST," Subramanian said.

Subramanian added that the Constitution needed to catch up with economics to “favour integration over granting sovereignty" to promote Indian internal integration.

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The Parliament, in August last year, passed the Goods and Services Tax law (GST), which seeks to introduce the concept of one nation-one tax, in order to economically unify the country for the first time. Finance minister Arun Jaitley described this as “pooled sovereignty", which he said would bring a big change in the working of federalism in the country.

Subramanian was speaking at a discussion on “The Economic Survey and the Union Budget: Legal and Policy Implications" organized by think tank Vidhi Centre for Legal Policy. Lawyer and tax expert Arvind Datar, who was also on the panel, cautioned about the entry tax ruling passed by the Supreme Court in November with the GST.

The entry tax verdict declared states to be sovereign, which could allow states to decide their own tax rates, Datar said. “My great concern under GST is...there is nothing in the Constitution which prevents a state from completely pulling apart (away from the GST) and going on its own way," Datar said.

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