Context: In a unique departure from the past, the government has stressed on the need to leverage co-operative & competitive federalism to achieve all round growth.
What is Competitive Federalism?
It is the concept where Centre competes with the states and vice versa, and states compete with each other with the ultimate aim to develop India.
For a long time, a ‘one size fits all’approach had been used, not taking into account the heterogeneity of different states and their local requirements. This approach has been replaced with different policies of various states based on their own priorities within the states.
Steps towards Competitive Federalism:
- Government abolished Planning Commission and replaced it with NITI Aayog. One of the mandates of the NITI Aayogis to develop competitive federalism. Under it;
- State governments would not look towards centre for policy guidelines and fiscal resources.
- Share of states in central tax revenue has been increased from 32% to 42% after the recommendation of finance commission. Greater financial strength and autonomy as well as prudence and discipline in the management of the same.
- States have freedom to plan their expenditure based on their own priorities.
- States would work with centre on a shared vision of national objectives.
- It (NITI) will develop mechanisms to formulate credible plans at the village level and aggregate these progressively at higher levels.
- State governments would not look towards centre for policy guidelines and fiscal resources.
- Restructuring of centrally sponsored schemes.
- Financial sector bailout programme under UDAY scheme.
- Swachch Bharat Ranking system.
In a novel initiative PM Modi was accompanied by two Chief Ministers on his visit to China. They participated in a landmark initiative: The Provincial Leaders Forum. This will usher in a new era of state to state co-operation. And in a major boost to the states, particularly the coal rich states of east India, a major portion of the proceeds from the successful coal auctions would go to the states helping them immensely.
Some examples of States moving towards competitive federalism:
- Gujarat has amended its land acquisition act to attract more investment.
- Maharashtra has amended the Maharashtra Land Revenue Code, allowing the sale of certain publicly-owned lands that were previously slated only for leasing.
- The Andhra Pradesh legislature has passed a bill extending land leases from the government to private entities from 33 years to 99 years.
- Gujarat and Karnataka have passed various reforms in labour laws.
- Uttar Pradesh has approved the Uttar Pradesh Information Technology & Start-Up Policy 2016. To encourage start-up growth, the policy waives taxes on land purchased for office use, as well as electricity dues for five years.
The growing competition has led to reforms in the ease of doing business, expediting the pending project clearances, and to bring in investment in general.
Conclusion:
Competitive federalism is not yet embraced by every state. But a handful of states are clearly taking steps to strengthen their business environments, including initiating difficult reforms on land acquisition and labour flexibility. Centre’s support would be required by some states (Bihar, Odisa, Jharkhand, NE states etc) to participate in competitive federalism. Strong states make strong nation and to realise this vision, it requires a “Team India” approach to work for India’s development.
References:
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- Press Information Bureau
- NITI Aayog official website.
- Competitive federalism is working, Richard M. Rossow, Livemint
- Empowering different states equally with boost to federalism, PMIndia website.
- An unfinished agenda of federalism, N. K. Singh, Indian Express
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