Sambhav-2025

Approach In introduction define cooperative federalism and competitive federalism. Discuss the concept of cooperative federalism and concept of competitive federalism and their impact on Centre-State Relations: In conclusion, highlight the need for a balanced approach.

Introduction

The Indian Constitution establishes a quasi-federal structure, balancing the powers between the Centre and States. Cooperative federalism, implied in Articles 245-263, promotes collaboration between the Centre and States for unified policy implementation. Competitive federalism, encouraged post 1991 economic liberalization, fosters inter-state competition for economic growth and governance efficiency. The interaction between these principles significantly impacts Centre-State relations, shaping governance and policy outcomes in India.

Body

Concept of Cooperative Federalism:

• Cooperative federalism is a system where the Centre and States work together to achieve common governance objectives.
• Constitutional Basis:
  • Article 263 empowers the President to establish the Inter-State Council for resolving Centre-State disputes.
  • Article 280 provides for the Finance Commission, ensuring equitable financial distribution between the Centre and States.
  • Schedule VII delineates the Union, State, and Concurrent Lists, requiring Centre-State collaboration on subjects like education and environment.
• Examples of Cooperative Federalism in India:
  • The Goods and Services Tax (GST) Council (Article 279A) ensures revenue-sharing and uniform taxation across States.
  • The Aspirational Districts Programme by NITI Aayog encourages coordinated efforts for socio-economic development in backward regions.
  • COVID-19 management saw Centre-State coordination in vaccine distribution, lockdown measures, and healthcare resource allocation.

Concept of Competitive Federalism:

• Competitive federalism promotes competition among States to attract investment, improve governance, and foster economic growth.
• Key Features of Competitive Federalism:
  • No explicit mention in the Constitution, but implied in economic policies and financial devolution mechanisms.
  • States act as autonomous economic entities, competing for resources, businesses, and governance benchmarks.
  • Encouraged by liberalization reforms (1991), NITI Aayog rankings, and State Start-up Indexes.
• Examples of Competitive Federalism in India:
  • Ease of Doing Business (EoDB) Rankings encourage States to create business-friendly regulatory frameworks.
  • NITI Aayog’s Fiscal Health Index (FHI) 2025 provides a comprehensive evaluation of the fiscal health of 18 major Indian states.
  • Inter-State competition for FDI sees States like Tamil Nadu, Maharashtra, and Gujarat competing in the automobile sector.

Impact on Centre-State Relations:

• Positive Impacts:
  • Improved Governance Efficiency: Competitive federalism encourages States to introduce innovative policies (e.g., Digital India, Smart Cities), while cooperative federalism ensures coordinated policy execution (e.g., Jal Jeevan Mission).
  • Strengthened Fiscal Decentralization: The 15^th Finance Commission recommended 42% tax devolution to States, empowering them financially. The GST Council's revenue-sharing mechanism strengthens cooperative financial governance.
  • Encourages Policy Experimentation: Policies like Karnataka’s startup ecosystem and Rajasthan’s labor law reforms have set models for other States to follow.
• Challenges and Conflicts:
  • Power Imbalance between Centre and States:
    • Article 356 (President’s Rule) has often been misused to dismiss elected State governments, undermining federal principles.
    • Governor’s Role (Article 155 & 156) has led to conflicts, as seen in Maharashtra, West Bengal, and Tamil Nadu, where opposition-led governments have faced alleged political interference.
  • Fiscal Dependency of States on the Centre:
    • Some States, particularly Bihar, Odisha, and Uttar Pradesh, rely heavily on Central grants, leading to economic disparities.
    • GST compensation disputes (e.g., Kerala and Tamil Nadu seeking higher compensation) highlight the tension between Centre and States.
  • Political Conflicts Hindering Cooperation:
    • Some States oppose centrally sponsored schemes like PMAY and MGNREGA, alleging biased fund allocation by the Centre.
    • Water-sharing disputes (e.g., Cauvery River dispute between Karnataka and Tamil Nadu) create inter-state tensions.
• Recent Trends and Case Studies:
  • GST Council as a Model of Cooperative Federalism:
    • It enables consensus-driven taxation policy. However, recent disagreements over GST compensation and taxation rates highlight challenges in fiscal federalism.
  • NITI Aayog’s Role in Promoting Competition and Cooperation:
    • Replaced the centralized Planning Commission, allowing State-specific policy-making while ensuring national development goals align with regional priorities.
  • Centre-State Conflicts Over Investigative Agencies:
    • States like West Bengal and Chhattisgarh have withdrawn general consent to the CBI, alleging misuse of central agencies to target opposition-led State governments.

Conclusion

India needs a balance between cooperative and competitive federalism. While cooperation fosters unity, competition enhances efficiency. Strengthening the Inter-State Council, ensuring fair fiscal devolution, and transparent Centre-State coordination can reinforce federal principles without compromising governance efficiency. Excessive centralization weakens federalism.