Competitive v/s Co-operative Federalism
“Give all the power to the many; they will oppress the few. Give all the power to the few; they will oppress the many.” This is a famous quote by Alexander Hamilton, one of the founding fathers of the United States of America. In the context of the federal structure, Hamilton throws light on the balance of power. The Federalism, traditionally, meant the independence of the state and the union governments. But Federalism has evolved over the years and taken up many forms.
In India, we follow a form of Federalism where both the state and the union work in tandem for the progress of the Republic, also known as “Co-operative Federalism”. There are two critical aspects to it, Political Federalism and Fiscal Federalism. Political Federalism relates to the ability of both the state governments and the union government to make laws on their respective subjects. The distribution of tax revenues among states and between state and the center is decided by the Finance Commission (an independent body). That’s where Fiscal Federalism enters the picture. The states in India are falling into a debt trap. As per reports, the debt to GDP ratio has risen from 24% in 2017–18 to 24.3% in 2018–19. Under this context; the states find themselves in a not so fortunate position. Recently one of the ministers from Delhi Government claimed that the Center wasn’t treating the states right by asking them to borrow money from RBI to pay 2.35 lakh crore shortfall. The state revenues haven’t been high enough, one of the states had missed their revenue target by 57%.
The whole motive is to promote co-operation and participative policymaking. But this is an idealistic scenario. It is not uncommon to find instances when the state governments have alleged that the Union tried to undermine the federal fabric. And we don’t have to dig deeper into the archives to come up with such examples (Ref: Political tension between New Delhi and Centre).In the sphere of competitive Federalism, the fight is no longer contained between the state and the Union, instead, it moves to state v/s state. The states are now competing against each other, riding on their comparative advantages. The divisional success now matters more than the firm’s success.
Some of the most prominent political scientists in 1947 predicted that India would get balkanized in 10–20 years. Yet, India survived and the federal co-operative structure is still intact.
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This article has been written by Siddharth Matta, a PGP (2020–22) Student at IIM Ahmedabad . All the views expressed are his own.
