Cosmetic federalism will not do

Dr Bharat Jhunjhunwala
The Central Government has disbanded the Planning Commission and replaced it with Niti Ayog. Two major changes have been made. All members of the Planning Commission were appointed by the Prime Minister. The Niti Ayog will have all the Chief Ministers as members in addition to the expert members appointed by the Prime Minister. This is a welcome step. Alas! this is rendered irrelevant by the second change. The Planning Commission had powers to determine the size and direction of plan expenditures made by the states. These powers have now been taken away. The Ayog will only act as an advisory body to the Prime Minister. In the result, the distribution of plan monies to the states will become even more centralized in the hands of the Prime Minister. Previously, the Planning Commission was responsible for this task even though there was indirect interference from the Prime Minister. Now the façade of independence has been removed. All powers are clearly vested in the Prime Minister. That is a retrograde step. The Chief Ministers have only been given cosmetic authority to make recommendations. The correct way forward was to retain powers of distribution with the Niti Ayog but make it more inclusive. Or to transfer the powers of distribution to the Finance Commission.
The underlying question is whether federalism is better or centralization? The argument in favour of federalism is that every people must have the freedom to govern themselves even if they make mistakes along the way. After giving the discourse on the Gita to Arjuna, Krishna told him to take a decision on waging the war himself. Krishna could just as well have told Arjuna to wage war; and he would have dutifully followed. But Krishna wanted Arjuna to take the decision since that would empower him and help raise his consciousness. The pleasure derived from eating a banana of one’s own decision is much more than eating the same banana on the mother’s instructions. The ultimate purpose of this world is happiness of the people. This comes from empowering people to take decisions. The same approach has to be applied at the level of the State. People of a State have to have the pleasure of charting their own destiny free of diktats of the Central Government.
We have many instances of success of federalism. The prime example is that of the United States. Absence of a centralized government has not held that country back. Switzerland is another example. Here every major law has to be approved by the 26-odd Cantons. On the other hand we have many examples of centralization leading to collapse. Soviet Russia got fragmented because the regions felt suffocated under the iron hand of Moscow. The recent disintegration of Iraq is mostly blamed on the attempts of Prime Minister Maliki to centralize all powers in his own hands. The Kurds had made good use of their autonomy and developed a prosperous economy. They were not happy with the domineering control of Maliki’s Government. They wanted to break off. Earlier disintegration of Iraq under Saddam Hussein is also blamed on the similar centralization. There was seething dissent in many regions contributed to the entire country becoming weak. It matters not that the immediate collapse took place due to the American invasion. It also matters not that Iraq had made strides in improving the living standard of its people under Saddam Hussein. The “development” brought by the centralized system was overpowered by the dissatisfaction arising out of the “control” of the same Central Government. Indonesia under Sukarno and Uganda under Idi Amin are other notable examples of failures of centralization. The secession of Bangladesh from Pakistan too was due to centralization of powers in Rawalpindi. Bangladesh wanted its say in the governance of Pakistan that was denied.
China is the obvious example where centralization appears to be delivering. But severe problems are being noted. People are restive. The gap between rich and poor is increasing rapidly. The environment is degrading. Rivers are dying and air is not breathable. Separatist movement are gaining ground in Inner Mongolia, Tibet and Xinjiang. It is too early for the sustainability of the Chinese model to be known. Let us not forget that the centralized government of Soviet Union ruled for nearly 80 years and attained many a gloried feats like putting the first man in space before the system collapsed and Russia was left behind in the polity of nations.
Our own experience also points to the benefits of federalism. Our Federal structure enabled Maharashtra to evolve the employment guarantee program that has since been applied nationwide. The Tamil Nadu experiment of mid-day meals has likewise been applied nationally. We have emerged largely unscathed from the troubles of separatism. A route to the fulfillment of regional aspirations is made available by providing autonomy to the States. In comparison, Sri Lanka and Pakistan have been devastated. The National Highways could be built only because of intervention of the Central Government. But let us not forget that Haryana had made as good roads two decades ago. We have also seen negative fallout of centralization. The disaffection among the people of Tamil Nadu arose mainly because of the attempt by the Central Government to impose Hindi by force. The Khalistan movement had its origins in the imposition of an unpopular Chief Minister by Delhi on the people of Punjab.
Some negative experiences of Federalism are also available. Federalism allowed Laloo to put back Bihar by 15 years. But then, as Krishna said to Arjuna, every State has to learn by its own doings. The dangers of centralization are much more acute as shown by the examples of Tamil Nadu, Punjab, Russia, Iraq, Pakistan, Bangladesh and Uganda.
We have to take a call on the desired level of centralization. Subjects such as defense, currency and external affairs will necessarily have to be dealt with by the Centre. Subjects such as education, health and water shall continue to be in the State List. The Central Government has been encroaching on this State List by enacting the Right to Education Act, for example. These must stop notwithstanding the fact that that some of these intrusive actions may have had beneficial results. These benefits of centralization pale into insignificance when seen in the light of the much bigger danger of disintegration of the country.
The biggest danger before us is not the allegedly “slow” rate of growth. The biggest danger is the potential disaffection of the people with the policies of the Central Government leading to disintegration of the country. Stripping of financial powers from the Niti Ayog takes the governance one step away from Federalism and one step towards disaffection.
(The Author was formerly Professor of Economics at IIM Bengaluru)


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