It was the noted expert on constitutionalism K.C. Wheare who once described India’s federal structure as “quasi federalism”. India was not a pure federalism but federalism with strong unitary features. Ever since the adoption of the constitution in 1950, the problem of centre-state relations has continued to bedevil the Indian polity. Nowhere has this tension been more evident than in fiscal federalism or in the Centre-states fiscal relations. Till 1967, when the Congress part was in power in the centre and in a majority of the states, this tension was “managed” though periodically it surfaced whenever strong regional leaders emerged. The post 1967 political scenario saw a new polity in India with many regional parties in power in various states. Political differences led to increasing demands on the Centre by states. But the tension had other dimensions as well. State governors who were political appointees abjured their constitutional roles and in some cases, acted in a decidedly partisan manner.
Various commissions were appointed to make recommendations on Centre-state relations, of which the most notable was the Sarkaria Commission whose recommendations were never fully implemented. The current major change in the political dispensation at the Centre has led to the replacement of the Planning Commission with the Niti Aayog.
Possibly because the present ruling party was in the Opposition for most of its political life, it viewed the erstwhile Planning Commission as the agency of the Centre in the allocation of resources and felt that politics intruded in resource disbursement. In replacing the Commission with the Niti Aayog, it took away its powers to allocate funds and resources and made this the job of the finance ministry. In an interaction with an official of the Niti Aayog recently, I found how happy he was to say that the Aayog no longer allocated resources. But the politics inherent in funds disbursal has not abated; only the venue has shifted from Yojana Bhavan to the North Block.
A number of these issues have been highlighted in Y.V. Reddy’s recent book, Indian Fiscal Federalism. Reddy has been one of our perceptive economists and a former governor of the Reserve Bank of India (RBI). He also headed the 14th Finance Commission of India. In surveying the history of Centre-state fiscal relations, Reddy does acknowledge that there has been an effort to devolve more and more functions to the states and accord them greater autonomy. But the Centre continues to usurp too many resources and schemes and plans are devised and sometimes implemented without any inputs from the states. Most projects begin with the preface Pradhan Mantri Yojana leaving the states with virtually no discretion or even any of the credit.
Reddy also points to a growing and disturbing tendency for performance-based incentives and to reward those states which exercise adequate control over “populist” measures. What constitutes “populist” is debatable and can be politically-coloured. Many states initiate a slew of measures to woo voters before elections. For example, in Tamil Nadu, both the “Amma Canteen” providing food to the urban poor at subsidised rates and the mid-day meal scheme for schoolchildren could be termed populist and were described as such. But the Amma canteens became a source of food for the poor in the city who also reasoned that it was not a handout and they were paying something for it. Similarly, the mid-day meal, since implemented in other states as well, became a source of nutrition for children and a powerful incentive for keeping them in schools.
Political differences can lead to piquant situations. We have the recent example of the effects of the cyclone in Odisha and West Bengal. Strained relations led to the Prime Minister cancelling his visit to Bengal and visiting only Odisha.
I had occasion to meet Y.V. Reddy twice. The first was during the launch of his book, Lectures on Economic and Financial Sector Reforms in India, in Chennai. Reddy was then one of the deputy governors of the RBI and the launch was to take place at the RBI staff training college. We were assured of a “full house” as the RBI board meeting was taking place in the city and the then governor of the RBI, Bimal Jalan himself, had agreed to release the book. I had known Bimal through another senior colleague of mine at the office and we had launched his book, India’s Economic Crisis: the Way Forward some years ago at the Delhi Gymkhana Club.
I landed in Delhi to find my colleague in our Chennai office asking me if I had brought a tie to wear that evening. I confessed I had not, given Chennai’s weather. He said all the chairmen and managing directors of the major nationalised banks would be there and they would all be “suited and booted”. He brought me a spare tie and I was happier for it. Bimal was pleasantly surprised to see me and in my opening remarks, I thanked him for sparing the time and spoke of our association as his publisher.
Bimal had, a month or so earlier, released another book by the OUP, that of his distinguished predecessor in the RBI, I.G. Patel. At that time he had remarked on the great production qualities of the book and said it was far more handsome than his own. I said I anticipated much the same remarks from him when he unveiled Reddy’s book and said that the only way this matter could rest was for “Dr Jalan to give us his next books and we would make it the best of the lot”. This caused much amusement among the audience. Reddy whose Tamil was as fluent as his Telugu was equally pleased and even consented to an interview over Sun TV.
The second time I met Dr Reddy was in Delhi at the launch of Macroeconomics and Monetary Policy Issues for a Reforming Economy —Essays in Honour of C. Rangarajan. The book was edited by Reddy, Montek Ahluwalia and S.S. Tarapore. The NDA government was in power and Reddy as the RBI governor had managed to get then finance minister Jaswant Singh to do the honours. His only request was that I should be able to get Dr Manmohan Singh to come. Dr Singh was then leader of the Opposition in the Rajya Sabha and I had met him some time earlier to give him a copy of the Lionel Robbins Lectures at LSE. I had been assured by his secretary that he would attend. But I had bigger problems. The function at the India Habitat Centre was being held one day before the festival of Diwali and I was finding it hard to muster up an audience. Dr Rangarajan had just demitted office as governor of Andhra Pradesh and appointed chairman of the 12th Finance Commission.
Dr Rangarajan, along with his wife and the other members of the panel, all arrived before time and I still did not have the chairs in the hall filled. However, I got another room opened for the distinguished panel, organised some tea/coffee and assured Dr Reddy of Dr Manmohan Singh’s presence. Meanwhile, I got a call from the finance minister’s secretary that the FM was about to leave for the venue. I asked the secretary if he could hold up the FM for some time. He was clearly shocked. But the Delhi traffic did the needful and by the time the FM arrived, the hall was reasonably full.
At the launch, Jaswant Singh greeted the panel and acknowledging the presence of Dr Singh in the audience remarked that in the galaxy of economists present in the hall, it was not for him to release the book. He requested Dr Singh instead to do so. Dr Singh, graciously acknowledging his request, politely declined, saying that Jaswant Singh was the finance minister and, in that capacity, the right person to release the book. There is an interesting sequel to the story.
At the reception that followed, Dr Rangarajan had remarked to me that he and his wife had been staying at the governor’s suite in A.P. Bhavan as he was still in the queue to get a house allotted. In a lighter moment I mentioned this to the FM. He gave immediate instructions to his secretary to get the needful done on priority. The Rangarajans did thank me profusely!
The writer is a senior publishing industry professional who has worked with OUP and is now a senior consultant with Ratna Sagar Books
