How Modi is skewing Centre-State ties

Ignore the obligatory noises on cooperative federalism. Modi is steadily strengthening the Centre at the cost of the states

Is Indian federalism, or the delicate consensus between India’s states and the Union, crumbling? All signs seem to point in that direction. The Bharatiya Janata Party (BJP), under its mascot Narendra Modi, has established an almost unchallenged dominance in national politics. But it finds itself struggling to imprint its supremacy in the states. India’s federal arrangements are now emerging as an important site of contestation for the BJP in its quest for absolute political hegemony.

Through a mix of fiscal, administrative and institutional measures, the current regime is attempting to reshape the nature and form of India’s federal bargain. The project is a work in progress. Just hours from now, state finance ministers will lock horns, for the third time in as many months, with the Central government at a specially convened GST council meeting to resolve the vexed issue of who should borrow (Centre or states) to meet the GST compensation deficit. Thus far, the Centre has stubbornly refused, despite sound economic logic, to take on the burden of borrowing to meet its commitment to the states under the GST law.

Last month, the Centre bulldozed agricultural market reforms, an area that falls firmly within the Constitutional domain of state governments, with no regard for consensus building or Parliamentary process. The political significance of the BJP’s centralising project is articulated through the slogan of ‘One Nation’ that it is now linked with all its development schemes. Implicit in this is a clear political message: This government has little patience for its own stated goal of “cooperative federalism”.

The irony is inescapable. As chief minister, Narendra Modi was amongst the most vocal advocates for state rights. He pushed hard for greater fiscal autonomy for the states, rallied against the Government of India’s central schemes and argued to the Planning Commission that they locked states into rigid, one-size-fits-all, centrally-driven agendas that went against the grain of India’s federal structure.

On taking office as prime minister in 2014, Modi committed himself to replace the centralising Planning Commission with the NITI Aayog because the “States of the Union…do not want to be mere appendages of the Centre.” Yet, through its policy actions, rather than promote cooperative federalism, this government has carefully renegotiated Centre-state relations to tilt the balance of power firmly toward the Centre.

Consider the following: First, the 14th Finance Commission increased states’ share in the divisible pool of taxes from 32% to 42%. Having accepted, indeed welcomed, this recommendation, the Centre carefully avoided fulfilling it. Actual transfers to states as a share of gross tax revenue have been in the range of 30% to 35%.

Second, the terms of reference (TOR) provided to the 15th Finance Commission. These have been devised to nudge the commission firmly in the direction reducing state share in the divisible pool. While we will have to wait for the final report to ascertain the fate of state finances, the political demand for centralisation, including the suggestion to consider a non-lapsable defence fund, expressed through the TOR, is loud and clear.

Third, rather than dismantling the practice of one-size-fits-all central schemes, this government actually created more – Ujjwala, PM Kisan, Swachh Bharat, Ayushman Bharat. To be fair, all governments (irrespective of party) have misused their fiscal powers and encroached on states’ autonomy through central schemes.

The 14th finance commission calculated the ratio of Central spending on state subjects increased from 14% in 2005 to 20% in 2012. But what distinguishes this government from its predecessors, who were stymied by the constraints of coalition politics, is its ability to successfully deploy schemes for its political pursuits.

In its first term, central schemes became an inextricable tool for building moral legitimacy and voter trust in Modi.

An entire gamut of administrative resources, including direct monitoring of schemes by Central government bureaucrats and technology tools, combined with the BJPs army of grassroots workers to directly popularise ‘Modi’s’ schemes. The attempt was to create a direct link between Modi and the voter. The gamble paid off.

Political logic of centralisation

In its second term, the BJP has been far more aggressive in its pursuit of centralisation. The grammar of cooperative federalism has been eschewed in favour of ‘One Nation’.

Ideologically, the BJP has had relatively little patience for the Constitutional compromise of using federalism as a device to accommodate India’s multiple linguistic, religious and ethnic identities, best illustrated in its historical objection to Article 370.

In pursuit of its hegemony and emboldened by its electoral mandate, substantive federalism is now being positioned as an impediment to development.

To accelerate progress, India must become, ‘one nation, one market’, ‘one nation, one ration card’, ‘one nation, one grid’. While there is a strong economic rationale for pursuing ‘national’ goals’, their articulation within the political project of ‘One Nation’ places them in direct tension with India’s federal aspiration.

In this framing, federalism as a principle necessary for negotiating diverse political contexts and identity claims must play second fiddle to India’s developmental aspirations.

Challenge from regional parties

But the BJP’s centralising agenda also poses a political dilemma for its own expansion.

Despite its dominance, India’s multiple regional, ethnic and religious identities will continue to seek political representation outside the BJP. This is, as I have argued in a research paper with the political scientist, Neelajan Sircar, one reason why regional parties remain key players in state politics.

For the moment the primary political strategy for the BJP to reclaim states is to destabilise regional parties by deploying its institutional powers – we witnessed this in its ugliest form in the controversy over Sushant Singh Rajput. But the gains of this intimidation strategy were visible even in August 2019, when regional parties failed to fight for their federal rights, even as the Centre took the unprecedented step of downgrading a state into a union territory.

However, as it entrenches its political and cultural project of centralisation, the BJP will find it difficult to credibly mediate regional aspirations.

We already saw glimpses of this in the North East, where the passage of the Citizenship Amendment Act witnessed a resurgence of protest linked to very specific historic anxieties over ethnic and regional identity that the BJP was unable to negotiate.

The real test to our federalism will lie in the ability of our regional parties to credibly navigate these new regional assertions and reopen the fight for a renewed, deeper federal compact for India.

(Yamini Aiyar is President and Chief Executive, Centre for Policy Research)