Media Coverage

Pulled to the Centre-A blow against federalism


  • 22nd January 2016

The Narendra Modi government's decision to abolish the National Development Council is a further blow against the federal structure of our republic. True, the NDC did not have a constitutional status, and differed in this respect from the Inter-State Council, whose activation was often demanded by the Left, precisely because it was a constitutional body, for deciding inter alia on the composition and terms of reference of finance commissions. But in practice the NDC had come to acquire the position of the supreme body on issues of planning and development in the country, a body where both the Centre and the states were represented.

Even though there was no voting at NDC meetings, and decisions were supposedly arrived at through "consensus", these meetings were by no means a rubber stamp for the Centre. On the contrary, in the early 1980s, when Centre-state relations were at the core of a nationwide debate, there were quite a few stormy meetings of the NDC, with Jyoti Basu and Ashok Mitra mobilizing the chief ministers of Opposition-ruled states against the Centre's encroachment on states' resources and powers. And even though much of this fire had got extinguished by the time I got a chance to attend NDC meetings as part of the Kerala delegation under the chief minister V.S. Achuthanandan, I still found many forthright statements being made at these meetings by chief ministers, some of whom also belonged to the ruling party at the Centre.

Of course, the habit of rejecting even concerted demands of states had already surfaced under the Manmohan Singh government, which, for instance, had unilaterally raised the share of states in funding the Sarva Shiksha Abhiyan in spite of the unanimous plea against it at an NDC meeting by state governments, including Congress-led ones. But, the Modi government has now carried this process of centralization miles further: it has simply done away with the NDC altogether, which means that the state governments henceforth will have no say in development policymaking in the country, as no other body comparable to the NDC either exists or is being contemplated. Indeed, the very fact that the Central government decided unilaterally to scrap the NDC without so much as a "by your leave" to the state governments indicates the utterly subordinate status that states have come to occupy under the present dispensation.

It may be thought that the governing council of the Niti Aayog, which includes chief ministers, would emerge as a replacement for the NDC; but the two councils are altogether different for at least two reasons. First, the Niti Aayog itself is of little relevance, because, unlike its predecessor, the Planning Commission, it has no funds being channelled through it. And second, the NDC was never the "governing council" of the Planning Commission. It was a body on its own to which the Planning Commission presented its plans, and specific programmes like the Rashtriya Krishi Vikas Yojana, for final approval; but it was never concerned with the "governing" of the Planning Commission.

Discussions on the general strategies of development of the country can hardly figure with any degree of meaningfulness at a meeting of the "governing council" of a largely irrelevant body like the Niti Aayog. And if perchance some chief minister does happen to raise such issues, then his or her attempt would be promptly ruled out of court for not being part of the meeting's agenda. Thus no matter how the abolition of the NDC is "sold" to the country, it constitutes indubitably a negation of the role of the states in development policy-making.

This fact becomes particularly ominous in the context of several other developments that are taking place, which also restrict the rights of states. The first of these is the doing away of the Planning Commission, of which the abolition of the NDC is a sequel. The Planning Commission itself was a departmental body of the Central government, and the fact that funds to states were routed through it at all, rather than exclusively through the Finance Commission which was a constitutional body, had been a source of controversy. But even as a departmental body of the Central government, it had at least enjoyed a degree of autonomy. With its demise, the role of Central ministries which are completely devoid of any such autonomy will increase greatly in the devolution of funds from the Centre to the states, which means a further compulsion on state governments to don the role of mendicants.

The second development is a reduction in the relative magnitude of the total transfers from the Centre to the states that has been occurring lately. This assertion may appear odd at first sight in view of the 14th Finance Commission's raising the share of the states in the divisible pool, and the Central government's coy acceptance of this recommendation. But while doing so, the Centre has so reduced the transfers through other channels that total transfers as a proportion to the gross domestic product are headed for a fall. They have, of course, been falling for some time, but this trend is being carried forward.

According to calculations made by Sona Mitra of the Centre for Budget and Governance Accountability, New Delhi, the total transfers from the Centre to the states as a proportion of GDP, which was 6.4 per cent in 2010-11, 6.1 per cent in 2011-12, 5.8 per cent in 2012-13, and 5.6 per cent in 2013-14, fell to 5.4 percent in 2014-15 (revised estimate) against a budget estimate of 6.1 percent for that year. In 2015-16, the budget estimate itself was scaled down to 5.8 percent. The actuals clearly are likely to be even lower than in any previous year.

The third development is the Centre's frenetic attempts to introduce a goods and services tax. All sorts of absurd claims are being made about the rise in GDP growth rate that would ensue if a GST is introduced; and it is a symptom of the intellectual regression in our national life that such claims are not meeting with the derision they deserve. The GST would completely do away with the freedom of the states to fix rates for the taxes that are constitutionally under their jurisdiction. To an extent this has already happened with the introduction of the value added tax, but with GST even the multiplicity of tax rates that VAT allows will not be there. There is much talk of a "revenue-neutral" GST rate (which is supposed to leave total tax revenues unchanged compared to what would have accrued otherwise), but nobody knows what this rate is, and how the total revenue will be distributed among states to ensure "revenue-neutrality" for individual states.

But even assuming that there is no revenue loss at present, and that all present state governments agree to a GST, it still entails a violation of the spirit of the Constitution, because it takes away the right of any future government at the state level (or at the Central level for that matter) to impose tax rates of its choice. The essence of a federal polity is that different parties and political formations should be able to come to power at different times in the different states and should be free to pursue policies, including tax policies, of their choice. (Indeed, the same holds for the Centre.) And the essence of democracy is that the people should have such a multiplicity of alternatives before them and be free to choose between them. Fixing a uniform tax rate violates this requirement. It is possible to argue that it violates the "basic structure" of the Constitution and hence should not be accepted, even if a constitutional amendment is enacted for introducing a GST by meticulously following all the appropriate procedures.

At any rate, since states are the resource-deprived constituents of our federal polity, a uniform GST entails an unfair encroachment on their powers. And the Central government's obsession with the GST betrays only its eagerness to make life easier for corporate capital through an attenuation of the constitutional rights of the states.

An abridgement of the federal structure of our polity is in conformity with the perception of the Hindutva forces, who are oblivious of the diversity of this country and whose vision of a Hindu rashtra is that of a unitary State. It is also in conformity with the neo-liberal ideal where states and even lower-tier entities like panchayats are denied the resources to experiment with alternative development strategies, but enjoy unrestrained freedom to entice domestic corporate capital and multinational corporations for the pursuit of "development". A unitary State, in short, appeals to both, and the moves towards such a State merely express the common predilections of the corporate-communal alliance that currently rules at the Centre.

The author is Professor Emeritus, Centre for Economic Studies, Jawaharlal Nehru University, New Delhi