“Though the Constitution provides adequate powers to the Centre to fulfil its role, yet in actual practice, the Centre can maintain its dynamism and initiative not through a show of its powers—which should be exercised only as a last resort in a demonstrable necessity—but on the cooperation of the States secured through the process of discussion, persuasion and compromises. All governments have to appreciate the essential point that they are not independent but interdependent, that they should act not at cross-purposes but in union for the maximisation of the common good.” These words by jurist M.P. Jain in 1968 give us a slight idea of what Cooperative Federalism is and what it is meant to be.
Cooperative Federalism envisages that the National and State agencies undertake government functions jointly rather than exclusively. The Centre and the States would share power without power being concentrated at any government level or in any agency.
The term “Cooperative Federalism” entered into the lexicon of comparative federal theory and practice when classical federations—the USA, Canada and Australia, especially the latter two—departed from the spirit of dual sovereignty within their constitutions to deal with the economic dislocations and devastations of the Great Economic Depression of 1929-30s and the Second World War (1939-1945) and to institute policies and comprehensive welfare states.
The renewed emphasis on it in India is in three contexts:
1. Adverse economic and social consequences of neo-liberal economic reforms.
2. Extreme regionalisation of the highly fragmented party system since the 1989 general election.
3. The Modi-led NDA Government being the first one-party majority-cum-coalition dispensation in three decades since the majority secured by the Rajiv Gandhi-led Congress in 1984.
The advantage of this system is that distribution of responsibilities gives people and groups access to many avenues of influence which may otherwise be inaccessible. Even in a truly Federal State, there may be several objectives to be achieved that may have political importance or ramifications throughout the country. It would be practically impossible for the Federal government to achieve the national objectives without active cooperation from the State governments. It is thus crucial that the Federal and State governments are on the same page and the same wavelength.
In recent times, after the NDA Government led by Mr. Narendra Modi came into power, the Centre-State relationship was strengthened by the government’s decision to abolish the Planning Commission and create a new federal balance of power. The sixty-five-year-old Planning Commission of India has been replaced by a ‘think tank’ called the National Institution for Transforming India, popularly described as the NITI Aayog. The major aim of NITI Aayog is to achieve Sustainable Development Goals and to enhance Cooperative Federalism by fostering the involvement of State Governments in the economic policy-making process using a bottom-up approach.
The Fourteenth Finance Commission of India recommended a 10% increase in the share of States in the Centre’s tax revenue from the earlier 32% to 42%. This move was to ensure that the States do not depend too much on Central assistance to plan their respective development needs. It was hailed as a strong move towards Cooperative Federalism—where the States and Centre cooperate with each other in the developmental process with more autonomy devolving to the States in the process of planning their developmental projects.
The introduction of Goods and Services Tax (GST) from July 1, 2017 is a major step towards making India a “One Nation One Market” tax regime. The GST is one indirect tax for the whole nation, which will make India a unified market. It has amalgamated several Central and State taxes into a single tax, eradicating the double taxation system. It is the perfect model of cooperative federalism.
Of all these successful Center-State collaborations there are some contemporary issues which compel us to think ‘Is Cooperative Federalism a reality? Or is it a myth?’
The first point I would like to enunciate is the independence of the States from the Centre. According to the new ‘fiscal federalism’ and ‘cooperative federation’, the State Governments are freed from the excessive controls of the Central Government. Allowing State Governments to chart their own paths is both fair and likely to result in more efficient outcomes. However, many States are at various stages of development: a reduction in Central development spending could arguably lead to widening gaps in the standards of living across the States. Ensuring horizontal equity across States is a critical aspect of Cooperative Federalism, as well as perhaps the best argument for persisting with Central Government programmes relating to core aspects of social welfare. State finances also vary considerably and some of the weaker States had protested that the Union Budget 2015-16 diluted the proposals of the Fourteenth Finance Commission to their detriment. Even as States received a more significant share of tax revenues, the taxes themselves were reduced, sometimes replaced by surcharges and cesses to be collected by the Central Government.
The next issue, violating the principles of federalism, which I want to mention, is the decentralisation of power while dealing with the issue of terrorism. The establishment of National Investigation Agency (NIA) in 2008 as an immediate response to the terror attacks in Mumbai is one such example. It does not require a State’s consent to initiate an investigation into crimes listed in the Schedule of the NIA Act. The functioning of the NIA has been subject to an extensive debate about the violation of a State’s autonomy. In addition, issues of coordination and intelligence sharing have also been raised concerning the functioning of the NIA vis-à-vis the State Police. Thus, even though the Bombay High Court had upheld the constitutional validity of the NIA in 2014, federal tensions continue to exist.
India is the second largest populated country in the world with a population of over 1.2 billion. Securing employment for its citizens is one of the most important issues that the government faces. Touted as the largest employment generation programme in human history, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) was launched in 2006 in 200 districts of the country. It is a centrally sponsored scheme which is ultimately implemented by State Governments. In theory, the implementation of the MGNREGS serves as a compelling example of how cooperative federalism can take shape in practice as it involves institutions at the Central, State as well as local government levels.
However, like other schemes financed by the Centre but implemented by the States, the performance of the MGNREGS is characterised by sub-national variations. Many of these problems arise from the fact that the implementation of the Act was not accompanied by simultaneous recruitment of trained personnel at the local level. The paucity of workforce has led to two major issues—underutilisation of labour budgets and lack of uniformity in the conduct of social audits. The performance of Gram Panchayats across States has also varied. While Kerala and Madhya Pradesh have had active involvement of the Panchayats, in Jharkhand, for a few years, decisions on allocation of work were being made by the Governor.
From the above arguments, it is clear that on the one hand the Centre and States are working smoothly with each other with a minimal dispute at all making an initiative like GST a success, while on the other, there are disputes at different levels on issues like inequality among States, tackling issues of terrorism, employment generation schemes, etc.
Communications, inter-state commerce, e-commerce, taxation, security and a host of such national objectives get derailed when a State’s interest predominates. For a federation where the units are incentivised to cooperate with each other, individualised solutions must be put forward in situations of conflict, keeping the broad normative framework of cooperative federalism in mind. In chaotic conditions, the Centre and the States must devise a delivery system for implementation of federal programmes by motivating compliance from those concerned in the States. It is no time for the Titans to clash, but to cooperate in the national interest.