In 2014, the term ‘cooperative federalism’ was in vogue. Twelve years on, it rings hollow. A fiscally weak central government has steadily increased cesses, not taxes; because cesses, unlike taxes, are not shareable with the states. The Niti Aayog, which replaced the Planning Commission, is both ineffective and a mouthpiece of the Centre. When it refers to the states at all, it does so like a classroom monitor, obsessed with regulation and comparative evaluation. Its ludicrous ‘aspirational districts’ programme, the Prime Minister’s direct annual meetings with police and district chiefs, reductions in contribution to centrally sponsored schemes, the disgraceful behaviour of some of the governors in opposition-ruled states, and the withholding of resources from states that do not agree with central policies (like language policies), all point to a centralising Union government scrambling to deny the states resources and extracting maximum credit for joint ventures.
In such a situation, it is important for states to reclaim agency. This is particularly true of the five peninsular states, which are at the cutting edge of economic growth and human development. They are especially hobbled by the removal of their legitimate resources in the form of cesses and by borrowing limits. Also, these states currently do not belong to the National Democratic Alliance, with one recent exception. But I see no kinder treatment for Andhra Pradesh, as a consequence of the shrimp tariffs imposed by US President Donald Trump, for instance.
For now, the peninsular states are on their own when it comes to furthering their development transformation. They must court foreign investment, build their global capability centres and infrastructure, and support their manufacturing base with little help from the Centre. They are also under pressure to provide better social services than the Indian average—no one in Tamil Nadu is going to accept the pitiful carb-heavy, protein-free mid-day meal scheme in states like Madhya Pradesh.
If the Centre acts as a hegemon, the peninsular states must begin fostering cooperation among themselves. This is both feasible and desirable because the peninsula is relatively economically and socially advanced, has stronger social and economic governance systems, and is better equipped and resourced to deliver complex infrastructure and social development initiatives compared to the rest of India.
Law and order is an immediate area where cooperation can be enhanced. Creating joint police databases, using State forces and specialised agencies to address economic crime across the peninsula, working jointly to promote women’s safety in conjunction with the many progressive schemes being implemented across the peninsula, are areas where cooperation would both save costs and increase effectiveness.
In the area of social policy, too, there is considerable scope for cost-effective cooperation. It would benefit all southern states if education standards were harmonised across the peninsula. In my view, the peninsular governments need a larger pool of well-educated (not just trained and skilled) human resources over the next 30 years if they are going to rise up the productivity ladder—an essential prerequisite for future prosperity. Jointly planning and thinking through how to do this, from the primary level through to higher education and vocational training, would be an important catalyst for quality.
This is especially so because national institutions are failing us. Peninsular educators privately complain about the antiquarian and corrupt practices of national-level education regulators, from the University Grants Commission to the Medical Council of India. A joint body with better standards would be a great initiative. A similar initiative is possible in healthcare here; each state enjoys specific comparative advantages. Interoperability of social welfare schemes, labour standards, and minimum wage policy would go a long way toward creating an integrated single market that is indispensable for the next phase of high productivity and high skill, transforming double peninsular per capita incomes in 10 years.
The most important area of collaboration is fiscal policy. A joint-peninsular fiscal strategy is essential to implement the reforms needed for effective future fiscal operations. Peninsular states are revenue-constrained. There is not much they can do about this with respect to taxes in the divisible pool, but they all punch well below their weight when it comes to their own tax revenue, especially property tax and real estate taxes—these are essentially giveaways to rent-seekers. There is a resultant over-reliance on sin taxes.
Equally, harmonising procurement and tendering by creating a peninsular professional body would reduce corruption and improve the standards and quality of public goods and infrastructure services. The peninsula is rapidly urbanising. So, coordinated action plans for financing urban infrastructure through the creation of an aggregator financing entity that leverages the considerable economic and fiscal weight of the five states would enable access to finance capital on more favourable terms. Joint debt management and pooling of domestic debt ceilings would also increase fiscal prudence and improve debt sustainability metrics.
Peninsular states are economically and socially more advanced than the rest of India. They are dealing at this time with a churlish and uncooperative central government that seems only interested in extracting resources to subsidise geographies where it is politically dominant and favouring its own crony capitalists—look at what happened to India’s airports in just five years. Peninsular cooperation is, therefore, an imperative, not a luxury. The socio-economic conditions are already in place but shaping such cooperation will require individual states to put aside their parochial concerns, stop taking potshots at neighbours, and invest political capital in muting petty ground-level rivalries. This will also help the peninsula present a united front against religious bigotry.
Peninsular cooperative federalism is a grand idea whose time, I believe, has come. Just as in years past, a spluttering, ineffective and parochial Union government in Delhi is now an unwitting catalyst for co-operative change. It is now for the peninsula’s political leadership to seize the moment.
Rathin Roy| PENINSULA | Distinguished professor at Kautilya School of Public Policy, Hyderabad; visiting senior fellow, Overseas Development Institute, London
(Views are personal)
(rathin100@gmail.com)
