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Business News/ Opinion / Columns/  Covid has exploited the comorbidities of our federalism
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Covid has exploited the comorbidities of our federalism

The pandemic has made it urgent to review how the Centre and states share responsibilities of governance

Photo: PTIPremium
Photo: PTI

Coronavirus is a true-blue change agent. Look at Russia, the bastion of Putin-style socialism, which is now opening its doors to vaccine tourism: Come to Moscow, get vaccinated and, as a bonus, enjoy the sights. Even as an agent provocateur, the Sars-CoV-2 virus has upset the fragile economic balance of the past 40 years or so, disturbed the tenuous political order, and injected chaos into social networks and kinships. General Disequilibrium, anybody?

Among other disruptions, the second wave has exposed gaping crevices in governance capacity and public health infrastructure, apart from exposing the questionable practices of some constitutional authorities. As the Centre has floundered in managing rising infections and deaths, a new breach has emerged in the country’s federal framework. The signals are clear: There’s an urgent need to upgrade state finances and discuss whether the Constitution’s Seventh Schedule—which delineates the Centre’s and states’ responsibilities—needs a hard relook. Will the Centre oblige?

While the new gaps in the federalism framework are a direct consequence of governance lapses, they have also surfaced from the government’s pursuit of political goals by leveraging the pandemic and lockdowns. This is not to say that the federal structure was infallible earlier (see: and; the covid virus has only manipulated existing gaps in the structure, much like it exploits comorbidities, and exposed the hollowness of the slogan “cooperative federalism".

This is true for all forms of federalist structures. The Goods and Services Tax (GST) Council has not met for seven months despite rules mandating quarterly meetings, thereby depriving states of resources for combating covid. This is important because the Centre’s absence from the frontlines in tackling the second wave has shifted the burden of healthcare expenditure to states. In politics, the West Bengal governor saw it fit to bypass a popularly elected chief minister and approve the Centre’s vilification of recently-elected Trinamool Congress state legislators, though their earlier partners in the same alleged violations have been spared because they shifted allegiance. Here is another example of a federal imbalance: The Election Commission’s insistence on 8-phase elections for West Bengal, in the midst of a raging pandemic, could be viewed as a constitutional body’s not-so-subtle partisan signals to voters.

The federalism question reared its head once the Centre’s mismanagement of the vaccination programme forced states to float global tenders for buying vaccines. A flurry of articles appeared thereafter, debating the state of India’s federalism. States are also, for good measure, not looking up to the Centre for guidance and have instead implemented their individual lockdown protocols, all distinct from each other’s. These individual state responses have collided with the unstable and unequal form of Indian federalism and, consequently, something has to give. It is this column’s hope that a framework currently biased towards a stronger Centre will yield to a kinder, gentler and more even-handed federal structure, one that does not perpetuate or worsen the patron-client relationship between the Centre and states. The starting point for that should be state finances.

As stated above, the second wave has squeezed state finances and, in the absence of additional central funds, this has constrained states’ pandemic efforts. After much prodding, the GST Council is finally meeting and is expected to discuss the GST revenue shortfall during the current financial year and how to compensate states. When GST was introduced in 2017, states were assured a 14% increase in their annual revenues till 2022, with the proviso that revenue shortfalls would be compensated through a cess levied on luxury goods (such as alcohol, cigarettes or automobiles, among other things).

The Centre’s earlier estimate that states would need 156,164 crore compensation during 2021-22 now needs revision because the second wave has impacted economic activity. There was a similar shortfall in 2020-21, and the Centre had agreed, after much coercion, to borrow and pass on a portion of that outstanding to states, repayable from future compensation cess accruals. In the absence of economic activity and commensurate tax revenue inflows, the Centre will now have to find new ways of transferring additional revenue to states, even if that means expanding debt.

The fraying federalist structure also mandates a relook at the Seventh Schedule; this has become especially pressing with the Centre increasingly encroaching upon state territory. And now states are competing with each other in the global market for securing vaccines, something that should have been centralized at the Centre.

What next? Can states draw up their own foreign policies? For example, West Bengal—which shares borders with Nepal, Bhutan and Bangladesh—is currently hostage to the Centre’s shifting foreign-policy quirks, lacking agency and unable to intervene for its own benefits. Perhaps foreign policy may be too extreme a step, but that shouldn’t stop a reassessment of the Seventh Schedule, especially the misaligned balance of powers in healthcare, education agriculture or labour issues.

The pandemic’s lessons are loud and clear, but it is moot whether this government’s overt centralist tendencies will continue to drown them out.

Rajrishi Singhal is a policy consultant, journalist and author. His Twitter handle is @rajrishisinghal.

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Updated: 24 May 2021, 05:56 AM IST
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