The issue of federal structure

Ongoing discords b/w Centre and states on various issues has again brought the issue of federal structure, resolution of which is essential for the country’s growth.

Approach to Federalism

• Traditional approach that sees competition and cooperation at loggerheads is no longer relevant in the post-1990s scenario.
• Indian federalism today enables Centre and states to function with both exclusivity and mutualism.
• New approach has shown that combination of cooperative and competitive spirit ensures economic prosperity and welfare of the nation in an equal and equitable manner.

Cooperating federalism

• Cooperation is required at both vertical (between Centre and states) and horizontal (among states) levels and on various fronts.
• This includes fine-tuning of developmental measures, development-related policy decisions, welfare measures, administrative reforms, strategic decisions, etc.
• Recent efforts : according greater leeway to states in functioning of NITI Aayog, frequent meetings of PM with CMs, periodic meetings of President with governors, and functioning of “PRAGATI” to review progress of developmental efforts have generated the requisite synergy between the Centre and states.

Competitive aspect

• It can positively harnessed by encouraging states to adopt each other’s best practices.
• Positive efforts of states to attract investment can create a conducive environment for economic activities in urban and backward regions alike.
• Healthy competition and transparent ranking system would ensure full materialisation of the federal framework.
• Govt. initiatives: NITI Aayog’s initiatives such as launching sector-specific indices like
  • School Education Quality Index
  • Sustainable Development Goals Index
  • State Health Index
  • India Innovation Index
  • Composite Water Management Index
  • Export Competitiveness Index, etc. could prove to be a great contribution.

Benefits of Competitive federalism

• Healthy competition: It will help in innovating and generating synergies for local businesses.
• Improved rankings: Adoption of best practices and implementation of reforms would positively impact ease of doing business for MSMEs.
• Raise India’s manufacturing capacity and transform India’s growth story.
• Higher GST collection which will boost government’s welfare measures.
• Competition among states along with hand-holding by Centre has potential to enable realisation of the goal of a five-trillion economy by 2024.

Govt. efforts

• Central efforts can be observed in implementation of the 14th and 15th Finance Commission reports
• It has greatly contributed to resource devolution.
• Recent reform measures: New Labour Code and other amendments/enactments by the legislature

Conclusion

• Rising stature of Indian economy globally can be strengthened by a tailored approach to cooperation and competition.
• Any ideological differences needs to be resolved for great Indian federal structure to succeed and prosper.

Exam track

Prelims take away

• Federalism