| PYQ Relevance: Mains: Q) From the resolution of contentious issues regarding the distribution of legislative powers by the courts, the ‘Principle of Federal Supremacy’ and ‘Harmonious Construction’ have emerged. Explain. (UPSC CSE 2019) Q) Explain the rationale behind the Goods and Services Tax (Compensation to States) Act of 2017. How has COVID-19 impacted the GST compensation fund and created new federal tensions? (UPSC CSE 2020) Prelims: Q) Which one of the following in Indian polity is an essential feature that indicates that it is federal in character? (UPSC CSE 2021) (a) The independence of the judiciary is safeguarded. (b) The Union Legislature has elected representatives from constituent units. (c) The Union Cabinet can have elected representatives from regional parties. (d) The Fundamental Rights are enforceable by Courts of Law. |
Note4Students:
Prelims: Co-perative federalism; NITI Aayog; GST System;
Mains: Federal Issues; Governance Issues; Regional Disparities;
Mentor comment: India is a vast and diverse country with different regions, cultures, and languages. To govern such a complex society, the Indian Constitution established a federal system of governance, dividing power between the central government and the states. This system is known as a quasi-federal system because it contains elements of both a federation and a union. Despite its importance, Indian federalism faces several challenges regional differences, centralized power, Economic insecurities for states, and communication barriers. These challenges can lead to issues like conflicts over resource allocation and decision-making.
There is a need for the even-handed treatment of all the States by the Centre and also less friction among the rich and poor States when proportionately more resources are transferred to poor States to keep rising inequality in check. The issue of governance, both at the Centre and in the States, needs to be flagged. It determines investment productivity and the pace of development. Corruption and cronyism lead to resources being wasted and a loss of social welfare.
Let’s learn.
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Why in the News?
The results of the 2024 general election in India have led to a surprise, with regional parties performing well and set to share space in both the ruling and opposition benches in Parliament.
- This development is expected to strengthen federalism, which has been fraying due to contentious Centre-State relations and the dominant Centre’s attempts to impose its will on the states.
The recent challenges faced by regional states:
- Democratic Issues: The Opposition-ruled States have been complaining about stepmotherly treatment by the Centre. Protests have been held in Delhi and the State capitals.
- There is a huge diversity among the States. For example, Assam is unlike Gujarat and Himachal Pradesh is very different from Tamil Nadu. A common approach is not conducive to the progress of such diverse States.
- They need greater autonomy to address their issues in their unique ways.
- Fiscal-Federal Issues:Kerala has complained about the inadequate transfer of resources, Karnataka about drought relief, and West Bengal about funds for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).
- The Supreme Court, expressing its helplessness, recently said that Centre-State issues need to be sorted out immediately.
| About Co-operative Federalism: The Constitution of India does not explicitly contain the phrase ‘cooperative federalism,’ but the functioning of the governance and evolution of our Constitution implicitly resulted in building ‘cooperative federalism.’ |
Significance of Cooperative Federalism:
- Need for Robust Institutions and Mechanisms:
- Revenue has to be raised through taxes, non-tax sources, and borrowings. The Centre has been given a predominant role in raising resources due to its efficiency in collecting taxes centrally.
- Among the major taxes, personal income tax (PIT), corporation tax, customs duty, and excise duty are collected by the Centre. So, the Centre controls most of the resources, and they have to be devolved to the States to enable them to fulfill their responsibilities.
- Need for Promoting Intergovernmental Relations:
- The Centre-State relations in India are plagued by inter-state tussles and resource disparities. The Finance Commission’s efforts to devolve funds proportionally to poorer States have been unsuccessful, leading to resentment from richer States.
- The Centre’s allocation of resources, including expenditures and schemes, can be used to play politics and favor certain States, undermining Federalism and Autonomy.
Initiatives taken by the Government:
- NITI Aayog:
- NITI Aayog acts as the quintessential platform for the Government of India by bringing States together as ‘Team India’ to work towards the national development agenda.
- NITI has also established models and programs for the development of infrastructure and to reignite and establish private-public partnerships, such as the Centre-state partnership model Development Support Services to States and Union Territories (DSSS) and the Sustainable Action for Transforming Human Capital (SATH) program.
- Goods and Service Tax (GST) System:
- The 101st Amendment to the Constitution, which introduced the GST regime, is a watershed moment in the evolution of cooperative Federalism as enshrined in the Constitution of India.
- Before the implementation of GST, the Indian taxation system was a medley of Central, State, and Local area levies.
Judicial Contribution for Co-operative Federalism:
- In the case of State of Rajasthan v Union of India (1977) which some state governments brought against the Janata government’s dissolution of state legislatures, the Supreme Court upheld its right to strike down a proclamation imposing the President’s rule if the action was mala fide or irrelevant considerations.
- It was held that the ‘maintenance of democratic norms’ could not be regarded as an irrelevant ground for the exercise of the power of proclamation. Since then, the Indian model of federalism has been predominantly ‘cooperative’ as laid down by the Supreme Court in 1977.
| Recommendations by Sarkaria Commission on Federalism (1988): * The Indian government constituted the Sarkaria Commission in 1983 mainly created to explore the relationship between the states and the central government. * The Sarkaria Commission did not favor structural changes and regarded the existing constitutional principles and arrangements relating to the instructions as sound. However, it emphasized the need for changes in the functional or operational aspects. * It discusses the relations between the states and the center by the 8th to 12th Finance Commissions to maintain the dependence on several funds from the center. |
Way Forward:
- The Sixteenth Finance Commission has begun work, aiming to strengthen federalism and address the fraying of Centre-State relations.
- It should ensure even-handed treatment of all states, proportionate resource transfers to poorer states, and reduce Centre domination over states.
- To reduce the domination of the Centre over the States, the devolution of resources from the Centre to the States could be raised substantially from its current level of 41%.
- For example, the Public Distribution System or MGNREGS are joint scheme, but the Centre asserts that it be given credit. It has penalized States that have not done so.
