Considering that it is the Union that makes important contributions to the health sector, including framing of policy, why should health lie in the state list?  (Reuters)
Considering that it is the Union that makes important contributions to the health sector, including framing of policy, why should health lie in the state list? (Reuters)

India’s federal edifice needs a nudge

  • As greater decentralization is the need of the hour, the Union, concurrent and the  state lists should be re-examined
  • Most people will agree India’s administrative and governance template needs greater decentralization, and that’s in line with what the current Union govt also wants

Notwithstanding anything in the two next succeeding subsections, the Federal Legislature has, and a Provincial Legislature has not, power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule to this Act."

Barring those steeped in constitutional history, most may be unable to identify this quote. This is from the Government of India Act (GOIA), 1935. Union-state relations in the Constitution, including the Seventh Schedule, are essentially based on this legislation. The Seventh Schedule has three lists—Union, concurrent and state—and determines the level of government at which public intervention and public expenditure occur. The delivery of public goods is at stake here. Depending on the nature of the good, it will be optimally delivered at a certain level of government—Union or State, and after 1992, a local body. If one tries to deliver it at a higher or lower level, this will be suboptimal and lead to diseconomies.

Pre-independence governance was excessively centralized. This was reflected in the GOIA 1935 and in the Seventh Schedule. If one contrasts the Government of India Act, 1919 with that of 1935, one notices a creeping centralization in the Seventh Schedule between 1919 and 1935. (1919 didn’t use the expression Seventh Schedule, but it had “central and provincial subjects".)

Creeping centralization

Subsequently, the Seventh Schedule featured in Constituent Assembly debates in 1949. B. Das (former chief minister of Odisha) raised a valid point. “There are, Sir, 91 items in List I alone. There are of course some honourable members who have given notice of amendments in regard to particular items. But if there is a general discussion concerning the principles involved in the Union, concurrent and state lists, it will considerably clarify the position and will help us to understand the lists much better."

This was overruled by Rajendra Prasad, who chaired the debate. The debate was thus reduced to a discussion on individual items and language used for describing those items. Governance principles weren’t discussed and centralization that was in-built in the GOIA 1935 remained in the Seventh Schedule in 1950.

Why was there so much centralization? One can do no better than quote from the 2010 report of Punchhi Commission (Commission on Centre-State Relations). Indeed, the name for this commission is indicative of a centralized mindset, with a Centre in the middle and states along the periphery. After all, the Constitution doesn’t use the word “Centre". The relevant word and expression should have been “Union" and “Union-State Relations".

To quote from the Punchhi Commission’s excellent summary of historical evolution, “The Government of India Act, 1919, based on Montague-Chelmsford Report, provided for a considerable measure of devolution of authority to the provinces…The Government of India Act of 1935 provided for a powerful Centre….Although the Constituent Assembly did not completely lack in championing the cause of state autonomy, the overwhelming majority of its members stood for a powerful Centre…centralizing forces, which were the product of the British administration and the National Movement, largely influenced the nature of the Indian federalism."

The commission went on to make a wider point: “The idea of the welfare state, which found a significant place in the programme of the National Movement, largely contributed to the centralizing tendency in India…. As the welfare state ideal was incorporated in our Constitution, enshrined in the Preamble and the Directive Principles of State Policy, the Constitution makers had no choice but to make the Centre powerful." Those issues are less relevant today.

Over time, many constitutional amendments have led to changes in the Seventh Schedule. An item from the state list moving to the concurrent list, or an item from the concurrent list moving to the Union list, represents centralization. A movement in the opposite direction represents decentralization.

Some amendments to the Seventh Schedule have been neutral. They haven’t affected centralization. But not all—for instance, the 1976 amendment was a clear push towards centralization. Thus, amendments to the Seventh Schedule since 1950 have reinforced centralization, and not neutralized that trend.

The 1971 report of Rajamannar Committee, formally known as Centre-State Relations Inquiry Committee, put it thus: “The Committee is of the opinion that it is desirable to constitute a High Power Commission, consisting of eminent lawyers and jurists and elderly statesmen with administrative experience to examine the entries of Lists I and III in the Seventh Schedule to the Constitution and suggest redistribution of the entries."

Most people will agree India’s administrative and governance template needs greater decentralization, and that’s in line with what the present Union government also wants. The Rajamannar Committee was set up by a state government (Tamil Nadu). Nevertheless, that quote is unexceptionable. At best, in addition to lawyers, jurists, and elderly statesmen, one could suggest development and governance specialists. This isn’t primarily about the law. It is primarily about delivering public goods. Law is important, but secondary. The Rajamannar Committee also had some suggestions about which item should be in what list. One may, or may not, agree with those. The substantive point is about a re-look at the Seventh Schedule.

A matter of consultation

Union-state relationships straddle a wide canvas, and the Seventh Schedule is often a relatively minor item in that canvas. Hence, though Union government commissions have consistently spoken about decentralization/devolution, the Seventh Schedule has sometimes received no more than a passing mention. However, it has been mentioned.

The 1983 Sarkaria Commission essentially blessed the status quo: “After a careful analysis and examination of the entries in the concurrent list, we have come to the conclusion that a good enough case does not exist for amending the Constitution to transfer any entry in the concurrent list to the state list." But it did concede that before legislating on items in the concurrent list, the Union government should consult the states.

Roughly 20 years down the line from 1983, nothing changed. In 2002, the National Commission to Review the Working of the Constitution (Venkatachaliah Commission) submitted its report, and said: “There is, however, no formal institutional structure that requires mandatory consultation between the Union and the states in the area of legislation under the concurrent list."

This point, both in Sarkaria and Venkatachaliah, is about consulting the states before the Union government legislates on items in the concurrent list. After all, shouldn’t the states be consulted before an item is moved from the state list to the concurrent list? See what happened in 1976, when items like education and forests were moved.

The Punchhi Commission added another angle: “Article 368(2) empowers Parliament to amend any provision of the Constitution in accordance with the procedure laid down therein. Should Parliament deplete or limit the legislative powers of the states through this process unilaterally or otherwise? …Greater flexibility to states in relation to subjects in the state list and ‘transferred items’ in the concurrent list is the key for better Centre-State relations."

However, none of this addresses the core point about first principles. Most pending reforms pertain to factor markets—land, labour, natural resources. Should land conditions and land values, not merely history of land legislation, vary across the states? They should and do. Hence, land (and many aspects of agriculture) is in the state list. If that’s the case, why did Parliament legislate Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act in 2013 and force a template on the states?

In a heterogeneous country, can one expect labour conditions to be uniform across the states? In global negotiations, it is often argued that countries at different levels of development value labour, or the environment, differently. That logic should also apply to the states, which are at different levels of development. Hence, should labour be on the concurrent list, or should it be moved to the state list? The requirement of minimum standards, such as a result of global conventions (say International Labour Organization), or those evolved domestically, doesn’t conflict with labour being on the state list.

What is this artificial distinction created between major ports and minor ports? Does regulation and control over salt belong in the Union list? In personal income taxation, should there be a difference between agricultural income and non-agricultural income? Should police be in the state list? With Union government initiatives in health, should health be in the state list? Today, does something like “price control" deserve to be in the concurrent list? Should there be a concurrent list at all? Since most public goods are delivered at the local body level, should there be a local body list? These are rhetorical questions.

The bigger picture

The thrust of my argument is one should re-examine the Seventh Schedule.

First, there was a history, legacy, centralization mindset and shortage syndrome behind the Seventh Schedule. The times have changed.

Second, commissions that delved into Union-state relations have typically focused on other matters (such as Article 356), treating the Seventh Schedule in passing. The Seventh Schedule deserves independent scrutiny, asking questions on the basis of first principles.

Third, Union-state relations are now in the process of being transformed and new institutional arrangements have evolved and will evolve. There is no time like the present for the exercise.

As previous amendments illustrate, the Seventh Schedule isn’t cast in stone. In 1949 (Constituent Assembly debates), certain priorities were important for the country. As we contemplate 70 years after the Constitution, surely it is legitimate to ask whether those priorities (in so far as they relate to the Seventh Schedule) are still important. Or, from the perspective of efficient governance, should India become more decentralized?

On the Seventh Schedule, apportioning between a Union list, state list and a local body list (there need not necessarily be a concurrent list) is fundamentally a governance issue. Implicitly, just as there was in 1949-50, there has to be a value judgment about the role of the state (as in government) and the nature of state intervention.

In a liberalized environment, that ideological position can be different from that in 1949-50, which was that of a shortage economy. That’s the reason B.R. Ambedkar, participating in Constituent Assembly debates on 15 November 1948, opposed an amendment that sought to introduce the word socialist in the Preamble. “What should be the policy of the state, how the society should be organized in its social and economic side are matters which must be decided by the people themselves according to time and circumstances."

In conclusion

On the limited point about the Seventh Schedule, time and circumstances have changed. That apportioning between Union/state/local body is also a function of not just the role of the state in the sense of regulation, but also the role of the state in the sense of public expenditure, reflected partly in Central sectors and centrally sponsored schemes. As mentioned earlier, economies/diseconomies of scale/scope determine the level at which such public expenditure is best developed.

Hence, I think there should be support for taking a re-look at the Seventh Schedule by a group that has expertise in both law and governance.

Coming back to the point made by B. Das: Let there be “a general discussion concerning the principles involved in the Union, concurrent and state lists". It didn’t happen in 1949. Why should we not have it in 2019? As it stands, the Seventh Schedule isn’t quite seventh heaven.

Bibek Debroy is chairman, Economic Advisory Council to the Prime Minister.