Why the Centre is a drag on states; time to devolve power

A subtle theme that emerged during the recent World Economic Forum (WEF) meeting in Mumbai is the need for greater devolution of power to the states. But the point was made very differently by different people. Mukesh Ambani called on the Centre and states to “align and move a lot faster” to prevent policy paralysis. Since it is the Centre that is seen as “paralysed” in the wake of several scams, the underlying message is to the Centre to get its act together. There is no policy paralysis in states. Ajit Gulabchand, whose Lavasa project is under fire, said if the Land Acquisition Bill proposed by the Centre went through, “You can forget about development and growth for the next 100 years.” The hidden message: his Lavasa project would never have materialised if the Land Bill had been law.[caption id=“attachment_131498” align=“alignleft” width=“380” caption=“An aerial view of Lavasa Hills. “]  [/caption] Maharashtra’s Chief Secretary Ratnakar Gaikwad said the 1894 Act on land acquisition was good enough. The new bill would stymie the state’s plans to acquire 60,000 hectares for industrial development. His message: the state can manage without the Centre poking its nose in. Kerala Chief Minister Oommen Chandy cribbed about how the Centre was sitting on the Athirapally hydro-electric project. He said: “The project is quite crucial for the state, but despite repeated attempts by the Left Democratic Front and United Democratic Front, the Central government has not yet granted clearance.” He couldn’t be plainer: Athirapally is a non-partisan issue in Kerala – and is still stuck with the Centre. Madhya Pradesh Chief Minister Shivraj Singh Chouhan said his power projects were in limbo for want of clearance to coal projects from the ministry of environment and forests (MoEF). “States really have to work hard to get environment clearance. Many irrigation projects don’t get cleared. You need to give (more) rights to the states.” His grouse: even though the state has 30 percent forest cover, MoEF does not give environmental clearance easily. Chouhan also had issues with centrally-sponsored schemes like the Mahatma Gandhi National Rural Employment Guarantee Scheme (NREGA). He said it would be better to let states do their own thing with the money instead of imposing uniformity. “Why impose the same scheme in all the states?” Put all these themes together, and what you get is this: India’s states now feel that the Centre is holding them back. Here’s why. Political power in the era of coalitions has shifted to the states, with state-level politicians wielding enormous clout. Whether it is a Narendra Modi in Gujarat or a Jayalalithaa in Tamil Nadu or a Mamata Banerjee in West Bengal or a Mayawati in Uttar Pradesh or a Nitish Kumar in Bihar, no one can take them lightly. Economically, the states are driving the India story forward, with Bihar and Gujarat topping the growth league. But they are hampered by the fact that the Centre controls all the economic levers. Another reality is that coalition partners impose regional agendas on the Centre in the current power arrangement. It was the DMK’s control of the crucial communications ministry that made it politically difficult to rein in Dayanidhi Maran and Andimuthu Raja. Given this background, when the future is sure to create more central coalitions and stronger states, the prevention of policy paralysis at the Centre means giving states more economic powers. There are several reasons why India must become more federal. One, most Indian states are viable in terms of size, with populations that exceed most other countries’. Uttar Pradesh’s population would make it the world’s sixth largest country. The European Union’s biggest country, Germany, with a population of 82 million, would rank sixth among Indian states – if it were a part of India. Barring six or seven countries, every European nation is smaller than metropolitan Delhi in terms of citizens. Two, there is a mismatch between the political power enjoyed by states compared to their economic power. If we accept that most Indian states are viable economies, clearly we need to devolve more power to the states. In fact, there is a good case for states to decide all economic issues barring monetary policy and currency. Given the dynamism of most states, India would grow even faster. Three, lack of adequate economic levers at the state level makes state-level politicians want to play a role at the Centre – which vitiates both central and state politics. If the Centre were only to look at foreign policy, defence, communications, commerce, and things that affect all states, the states would be free to set their own norms on industrial policy, environment, social security, et al. Of course, we would still need to coordinate environment policies, but this can be less contentious than having a Rahul Gandhi deciding what the Land Bill should be or how tribals should be protected through a Mining Bill. As the World Economic Forum, in the session on “The new role of states: Catalysts of growth”, Canada’s Prime Minister Christy Clark said the federal structure there allowed “states to control some of the economic levers”. Environment is one of them. It’s a model we should adopt. Four, India is about diversity. We don’t need uniform policies on everything in every state. If NREGA can be implemented differently in different states, in a couple of years we would know which one works better. Currently, states have to like it or lump it. Uniformity means we can never know if the policies we implement are good or bad. We have no benchmark on best practices. The key to success as a country is to let a thousand experiments bloom, and adopt the ones that fare best. Five, the best way to keep India together – from Kashmir to Nagaland to Manipur – is to make our chief ministers prime ministers in their own states. If we are thinking of greater autonomy for Kashmir in order to deal with the alienation and militancy there, why not offer the same deal to the other states? Why is economic azaadi important for Kashmir and not Bengal or Punjab or Gujarat? Six, devolving power will make more sense for central coalitions, too. State leaders sharing power at the Centre have made nonsense of the concept of collective responsibility of the cabinet, as regional parties run their ministries independently. No one can ask a Sharad Pawar what to do with agriculture, for that’s his baby. Even the PM has a limited ability to intervene. The best cure for India’s current policy paralysis is to shift the onus for good economic decisions to the states. When states compete over good policies with one another, India will benefit. India needs to become a true federation.