Perspectives from ISB

A brief primer on the current state of affairs

Article 1 of our Constitution defines India as a Union of States. This relationship between the Union and the State governments, is not only a constitutional necessity but also a prime contributor in the development of our nation and its states.  The Constitution has laid out the framework for this relationship in Part XI, “RELATIONS BETWEEN THE UNION AND THE STATES” and is divided into two parts – Legislative Relations and Administrative Relations. In addition, Schedule VII contains the all-important division of policy areas under the Union List (List I), the State List (List II) and the Concurrent List (List III). This crucial relationship has been emerging as an area of concern because of the reversal of important government decisions and the lack of reform implementation across vital areas.

Elections are the cornerstone of any democracy – and it’s no different in ours. However, these routine electoral processes are increasingly becoming the key reason affecting the continuity of government work. One may argue that each elected government has its prerogatives and promises to fulfil and should be allowed a free hand during its tenure. Apart from the usual modifications in existing schemes and rolling out newer ones, recent government reversals have led to stalling of projects, some of which are of national importance. Take the case of Amravati – a new city to be designed as the capital of Andhra Pradesh (AP), after the bifurcation of the state. This project was being developed with active cooperation of the Government of Singapore, that was also financially invested in it. The AP Government had sought loans from the World Bank and the Asian Development Bank for various projects in the upcoming city. These investments could be attributed to the fact that investor sentiment would have been high given that our Prime Minister had inaugurated the project. The sudden reversal of the project, though after a detailed review, would have come as a shock to the Singapore Government and an episode that it will surely remember before investing again in a similar project.  Similar is the case of the refinery project in Ratnagiri that was being built with help from Saudi Arabia & UAE, and the Bullet Train project being developed in close coordination with the Government of Japan. The sad picture that emerges out of these situations is that either the Union Government did not do due diligence or that there are no costs attached to reversals like these. Such decisions not only affect the national prestige but also diminish the investment appeal of the nation. It would be worthwhile to recollect that though India has climbed up in the Ease of Doing Business Rankings, the biggest hindrance around Contract Compliance is still pulling us down. We were ranked 63rd in the overall ranking in the 2020 edition published by the World Bank, but the corresponding ranking for the contract enforcement indicator was 163, which is amongst the lowest worldwide. The palpable tension in this relationship is becoming evident at another critical level. On 8th November, the Government of Punjab revoked the general consent given to the CBI from investigating cases in their jurisdiction. Going forward, the investigation agency would have to seek explicit permission from the state government before taking up cases in the state. Over the past few months, few other state governments have taken similar decisions effectively barring the entry of the central agency to their respective states. Such decisions are to indirectly oppose the Union Government and its policies, but in the longer run they’ll not only take a toll on the institution and state of investigating crimes but would erode away the union structure of the country.

Another area that merits concern is performance and key reforms related to various sectors, especially in those that are mentioned in the State List or the Concurrent List. For instance, Health is a matter listed in the State List, but most good public hospitals (if I may use that term) are run mostly through the Centre’s financial support. Thus, the promise of an AIIMS in every state still finds a place in political manifestos every election season. Education is in the concurrent list, but again the vast majority of institutes of higher education are those that have either been declared as institutes of national importance or have been built or heavily financed by the Union Government, even though land mostly comes from the State Government, which usually is the deciding factor in the inter-state competition. Another disturbing scenario emerges from the Power Sector which too falls under the concurrent list. It is widely known that almost all of our distribution companies (or discoms) operate within the State Government apparatus or under its rigid control and are heavily in debt. Successive Union Governments have tried various reforms measures, including a few in the recent past, but in vain. The outcomes have not been encouraging and the Union Government has ended up either refinancing them or writing off their debts. This happens as State Governments do not play their part judiciously. In such cases, what is the alternative with the Centre – except the judicial way – which is again a political death trap. Another puzzle that seems to be impossible to solve is the Right of Way (RoW) issue in the Telecom Sector. Everyone realises that the country needs a lot more telecom infrastructure, to connect the unconnected areas as well as to improve the quality and experience. Logically, then it should be easy to get requisite permissions for laying infrastructure. However, the reality is to the contrary. Even though the Union Government gazette notified the RoW rules way back in November 2016, only 16 states have adopted them till date.

On the other hand, the country is – witnessing the developments around Goods & Services Tax, which is a very interesting case study – not just for its implementation but more so for its governance mechanism. The decisions made by the GST Council have mostly been unanimous which signal towards an effective collaboration between the States & the Centre. Though the latest development around GST dues of the states, is a bit worrisome but is also a classic case to test the relationship. Yet after this ’federal’ experiment, it is either lack of trust in state-based reforms or the slow speed of implementation, that has prompted the Central Government (albeit an absolute majority one) to move in new legislations such as the New Electricity Bill and the Farm Bills. These developments have raised the political temperature in the country and have further strained the Centre-State relations. Another instance of  a ‘different’ kind of announcement was one made under the Atma Nirbhar Bharat package, wherein the Union Government linked the increase in borrowing capacity of the states to certain metrics and reforms undertaken by them. For a change, it seemed that the Centre was looking more at an outcome and a performance-based mechanism rather than a simple project implementation.

Over time, the Centre-State relationship has become equivalent to that of a financier and an executioner with dwindling accountabilities. In hindsight, one of the objectives of formation of NITI Aayog was to soothe the palpable tension in this relationship and provide strategic support under a National Framework. The cabinet resolution that gave birth to NITI prominently mentions that, “An important evolutionary change from the past will be replacing a centre-to-state one-way flow of policy by a genuine and continuing partnership with the states.” In fact, the composition of NITI speaks volumes about its original idea wherein every Chief Minister is a member of the Governing Council that is presided by the Prime Minister. But after the initial proceedings and except a few marquee programmes, the resolve does not seem to transpire into practice – at least for this stated objective.

One of the most important outcomes that the pandemic has pertinently brought fore is that cooperation, collaboration and dialogue – is the only way forward.  Thus, there is a need to further institutionalise these values so that this crucial relationship could become much deeper, more comprehensive and one that has something for all stakeholders, even though elections may come and go.

Ankit Anand is Deputy General Manager – Strategic Initiatives & Regulatory Policy at Reliance Jio Infocomm Ltd. With more than nine years of experience in various roles in the Telecom Ecosystem, he is presently working at an intersection of technology and policy. He has a keen interest in politics and policy, domestically and globally. Ankit is presently a student of the AMPPP Co’21.

Picture: Sansad Bhavan, New Delhi,

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“The views expressed in this article are personal. Ankit Anand is a student of the Advance Management Programme in Public Policy at the Indian School of Business.”