Modi’s secession?

[Flintlock]

Modi’s secession?

Pratap Bhanu Mehta

Posted online: Tuesday, June 17, 2008 at 2018 hrs IST

Depending on your point of view, Narendra Modi’s challenge, on Gujarat’s financial relationship with the Central government, is either the first step in the making of a secessionist argument, or a policy stance that was long overdue. In Modi’s case it was probably a bit of both: a legitimate point articulated in openly insurrectionary terms. There is a serious question about the Centre’s financial relationship with the states, and all states need to get together to work out these issues. But his challenge that the Centre let Gujarat keep all the revenue it generates and simply leave it alone, should be a warning about what is now within the horizons of possibility.

The well-to-do states are beginning to feel that the less-well-off states and the Centre are a drag on their prospects and they are quite ready to demonstrate that they can do without them. The poor states feel cheated anyway, and the Centre has done precious little to demonstrate that its transfers to the states are not politicised. Chief ministers have also connived in this charade, triumphantly parading their ability to wrest discretionary favours from the Centre. Overlay on this the gnawing pull of identity questions, and Indian federalism can come under serious stress.

There are four broad senses in which Modi has a point. The share of the Centre’s allocation to the states in general has varied over time. But given the responsibilities the states have been charged with, this level is not as high as should be and has been falling. Second, the proportion of Central grants now coming through channels like Centrally sponsored schemes and outlays of ministries has been growing. Occasional technical criticisms apart, Finance Commission allocations had, for the most part, depoliticised major issues in Central-state transfers. But the increasing trend of discretionary allocations is politicising the Centre-state relations.

Third, there is some evidence that the Centre uses this discretion politically. A recent paper by Bhaskar Dutta and his colleagues, for instance, suggests that states that are aligned with the party at the Centre, or are swing states in its electoral prospects, get, on average, sixteen per cent more discretionary grants than other states. Fourth and finally, Centrally sponsored schemes are increasingly coming with conditionalities that make IMF conditionalities more rational and dignified by comparison. Despite the presence of various mechanisms, the states have little say in the design of Centrally sponsored schemes which they are supposed to implement. In short, all states, not just Gujarat, are still being infantilised by the Centre.

All the arguments used to buttress greater discretionary power to the Centre are specious. The first argument was regional equality. The blunt truth is that the patterns of Central allocation have exacerbated, not produced, regional equality. In the past, patently absurd schemes undertaken in the name of regional equality, like freight equalisation, left poor states irrevocably more impoverished. And before India’s richer states get too self-assured that their prosperity rests on self-sufficient foundations, it is worth reminding them how it was based on all kinds of impoverishments inflicted on poor states.

The second argument for greater Central role is the capacity of the states. There is a standard image: the states are inefficient, corrupt, unimaginative and lack the technical expertise of the Centre. Some states indeed have had periods of breakdown. But we should bear this in mind. First, in any case, states have to do most of the implementation, so their alleged lack of capacity cannot be an argument for more Central discretion. Second, it is always amazing how the same IAS officers who are allegedly bereft of capacity when they serve in states, become exemplars of technical expertise when they come to the Centre. It is something of a myth perpetuated by Delhi’s elites that the states have no capacity; in many areas crucial to the states, like education and urbanisation, the Centre’s capacity is being overestimated. States will develop the capacity if they have the incentive to do so.

The third argument is greater accountability. The Centre will hold the states accountable. But under present circumstances, we have the worst of both worlds. On the one hand, the Centre consistently overestimates its power to hold the states accountable. On the other hand, greater centralisation impedes the creation of horizontal accountability within states. In the final analysis, state governments can be held accountable only by their electorates, not by some vertical oversight imposed from the top.

It is time allocations to states were made more in the form of block grants than Centrally sponsored schemes. This will allow greater experimentation, and states will be held more responsible for their own conditions. But the temptation to centralise is great. The Planning Commission has long overstepped its constitutional mandate by being the channel through which development funds are funnelled to the states. Leaders at the Centre feel that Centrally sponsored schemes are the best way of engaging in the politics of noblesse oblige, to project themselves as the knights in shining armour, rolling scheme after scheme, to help the aam admi. But the track record of Centrally sponsored schemes is poor enough to warrant more confidence being reposed in the states. And finally, coalition politics has had a paradoxical effect. While it has empowered states in some respects, it has not led to mechanisms for strengthening the collective dialogue amongst states.

What applies to the Centre applies to the states as well. There is a larger conversation to be had about the appropriate level at which different taxation and financing functions should be carried out. Various state governments and local bodies have not been able to use the legislative powers that allow them to raise revenue. The states, for their part, have been very reluctant to empower local government, the point at which all implementation takes place. Each level of government is a centraliser in its own way, projecting the levels below as incapable and corrupt. The states feel threatened that the Centre will now directly allocate funds to the third tier of government, while they themselves have, with a few exceptions, done precious little to empower local government.

Modi has raised a serious issue. But he has also let loose the argument that Gujarat’s economic prosperity and its increasing revenue collection are entirely its own doing: Gujarat does not now need the Centre or other states. In doing so, he has become a harbinger of the shape of conflicts that will haunt the Indian Republic in the years to come.

The writer is president, Centre for Policy Research, Delhi pratapbmehta@gmail.com

 

[Flintlock]

A very well thought out article from the Centre for Policy Research.

 

[vish]

Dude, Modi barked because Congress is in the Lok Sabha. Would he say the same thing if the BJP was in the Lok Sabha?

The article was trash, and I did read it.

 

[Flintlock]

Dude, Modi barked because Congress is in the Lok Sabha. Would he say the same thing if the BJP was in the Lok Sabha?

The article was trash, and I did read it.

Please, its an excellent article. I examines why the relationship between the centre and the state should be tweaked.

The centre does overstep its bounds by taking all the responsibility away from the states, and yet never holding them accountable for heir own failures. There should be greater discretion given to the states to manage their own projects.

Lastly, I completely agree that there should be more local empowerment. Local self governance is the first step towards an educated and self-reliant society.

The idea is to redefine the way power is shared between the centre and the state, so that the country can be run more efficiently.

 

[vish]

Please, its an excellent article. I examines why the relationship between the centre and the state should be tweaked.

The centre does overstep its bounds by taking all the responsibility away from the states, and yet never holding them accountable for heir own failures. There should be greater discretion given to the states to manage their own projects.

Lastly, I completely agree that there should be more local empowerment. Local self governance is the first step towards an educated and self-reliant society.

I genuinely do not see anything wrong in the Centre-State relations.

We all know how good our State Governments are. Most of their money goes in feeding their own employees. While I support more local self-empowerment, the current set-up is rather okay, especially in matters related to financing, which I do agree are politically motivated but not to the extent that the author is implying.

The States have enough say in matters related to development and policy. It is the local administration that is being left out.

Gujrat's development has a lot to do with Gujratis and very little to do with Modi. Gujrat still lags Maharashtra in investment even though our state is currently in a very bad shape. Most of Gujrat's investment is very top-heavy.

The author is painting a successionist scenario ignoring the fact that it is Brand India that counts and not Brand Gujrat or Brand Maharashtra.

 

[Flintlock]

^^^Vish, did you even read the article? The author is not painting a secession scenario, but is arguing why it is NOT a secession scenario.

its the Congress government which has overreacted to Modi's suggestions by painting them as secessionist because they don't want to lose control over the money.

Modi has everything to do with Gujarat's development. He has done far more for his state than any other Chief Minister in the last 60 years.

As far as Maharashtra is concerned, it is ahead only because of Mumbai, which is running inspite of, and not because of the state government. The rest of Maharashtra is in dire straits and is probably surviving only because of Mumbai.

Gujarat on the other hand has seen all round development in every field - agriculture, healthcare, industry, transparency, etc.

 

[vish]

Vish, did you even read the article? The author is not painting a secession scenario, but is arguing why it is NOT a secession scenario.

its the Congress government which has overreacted to Modi's suggestions by painting them as secessionist because they don't want to lose control over the money.

Modi has everything to do with Gujarat's development. He has done far more for his state than any other Chief Minister in the last 60 years.

What is the Congress expected to say? Modi started the pin-poking; either shut him up with a sledge hammer or the others start blabering as well. We all know what happens then.

This is from the paragraph:

"Modi has raised a serious issue. But he has also let loose the argument that Gujarat’s economic prosperity and its increasing revenue collection are entirely its own doing: Gujarat does not now need the Centre or other states. In doing so, he has become a harbinger of the shape of conflicts that will haunt the Indian Republic in the years to come."

"But his challenge that the Centre let Gujarat keep all the revenue it generates and simply leave it alone, should be a warning about what is now within the horizons of possibility."

What do the above statements imply? Sensationalism of political barking.

Modi has done nothing great; anybody else in his place would have managed the same thing.

 

[Flintlock]

^^^Christ you're touchy today, aren't you?

Fine whatever, you want to put on your blinkers and refuse to see what is a real problem, then too bad.

As far as Modi is concerned, the facts and figures are all out there. Feel free to check them out.

 

[vish]

^^^Christ you're touchy today, aren't you?

Fine whatever, you want to put on your blinkers and refuse to see what is a real problem, then too bad.

As far as Modi is concerned, the facts and figures are all out there. Feel free to check them out.

Common dude, don't give me that.

I would love to see the real problem and would be interested in your argument.

But as far as Modi is concerned, let us just agree to disagree.

 

[Flintlock]

Common dude, don't give me that.

I would love to see the real problem and would be interested in your argument.

But as far as Modi is concerned, let us just agree to disagree.

The arguments are all in the article, unless you want me to copy and paste para-by-para.

Fine by me..here's the first one:

All the arguments used to buttress greater discretionary power to the Centre are specious. The first argument was regional equality. The blunt truth is that the patterns of Central allocation have exacerbated, not produced, regional equality. In the past, patently absurd schemes undertaken in the name of regional equality, like freight equalisation, left poor states irrevocably more impoverished. And before India’s richer states get too self-assured that their prosperity rests on self-sufficient foundations, it is worth reminding them how it was based on all kinds of impoverishments inflicted on poor states.

 

[vish]

^In that case I thought I'll counter the argument itself.

The well-to-do states are beginning to feel that the less-well-off states and the Centre are a drag on their prospects and they are quite ready to demonstrate that they can do without them. The poor states feel cheated anyway, and the Centre has done precious little to demonstrate that its transfers to the states are not politicised. Chief ministers have also connived in this charade, triumphantly parading their ability to wrest discretionary favours from the Centre. Overlay on this the gnawing pull of identity questions, and Indian federalism can come under serious stress.

Most of today's progressive states had some rather good investment-friendly state governments in place, and hence have managed to prosper. Just because a state is well to do today does not guarantee that it will remain so in the future. case in point: Bihar. Post-independence it was one of the top states in the country, look where it is today. Another example would be Mahrashtra: our budget deficit is worrisome but we are still a prosperous state. Can we let go off central help? The centre too needs the money for a whole lot of very important things.

There are four broad senses in which Modi has a point[/B]. The share of the Centre’s allocation to the states in general has varied over time. But given the responsibilities the states have been charged with, this level is not as high as should be and has been falling. Second, the proportion of Central grants now coming through channels like Centrally sponsored schemes and outlays of ministries has been growing. Occasional technical criticisms apart, Finance Commission allocations had, for the most part, depoliticised major issues in Central-state transfers. But the increasing trend of discretionary allocations is politicising the Centre-state relations.

So earlier there was no politics in Centre-State relations? It was always there and it will be there.

Third, there is some evidence that the Centre uses this discretion politically. A recent paper by Bhaskar Dutta and his colleagues, for instance, suggests that states that are aligned with the party at the Centre, or are swing states in its electoral prospects, get, on average, sixteen per cent more discretionary grants than other states. Fourth and finally, Centrally sponsored schemes are increasingly coming with conditionalities that make IMF conditionalities more rational and dignified by comparison. Despite the presence of various mechanisms, the states have little say in the design of Centrally sponsored schemes which they are supposed to implement. In short, all states, not just Gujarat, are still being infantilised by the Centre.

Well, this implies that the process needs to be further streamlined. Increasing States' say is more important; I do agree to that.

All the arguments used to buttress greater discretionary power to the Centre are specious. The first argument was regional equality. The blunt truth is that the patterns of Central allocation have exacerbated, not produced, regional equality. In the past, patently absurd schemes undertaken in the name of regional equality, like freight equalisation, left poor states irrevocably more impoverished. And before India’s richer states get too self-assured that their prosperity rests on self-sufficient foundations, it is worth reminding them how it was based on all kinds of impoverishments inflicted on poor states.

If you have Central help and a bad State government, you'll not achieve much. Most poor states have had interesting histories. I'm not saying the Centre is God, but to blame it entirely is not correct. Many States that have recieved Central help have goofed up as well. Once good governance reaches a state, it is then that the Central help assumes workability.

The second argument for greater Central role is the capacity of the states. There is a standard image: the states are inefficient, corrupt, unimaginative and lack the technical expertise of the Centre. Some states indeed have had periods of breakdown. But we should bear this in mind. First, in any case, states have to do most of the implementation, so their alleged lack of capacity cannot be an argument for more Central discretion. Second, it is always amazing how the same IAS officers who are allegedly bereft of capacity when they serve in states, become exemplars of technical expertise when they come to the Centre. It is something of a myth perpetuated by Delhi’s elites that the states have no capacity; in many areas crucial to the states, like education and urbanisation, the Centre’s capacity is being overestimated. States will develop the capacity if they have the incentive to do so.

Very true indeed; this implies that States need to be given more leverage and both parties need to reach a consensus. Again, in this regard, the Centre's position of strength needs to be maintained.

The third argument is greater accountability. The Centre will hold the states accountable. But under present circumstances, we have the worst of both worlds. On the one hand, the Centre consistently overestimates its power to hold the states accountable. On the other hand, greater centralisation impedes the creation of horizontal accountability within states. In the final analysis, state governments can be held accountable only by their electorates, not by some vertical oversight imposed from the top.

Couldn't agree more; so how would reducing the Centre's hold help? Rather a merit-based system needs to be set-up where the financial leverage would be provided on the basis of governance record.

It is time allocations to states were made more in the form of block grants than Centrally sponsored schemes.

This should be implemented, and my I'll suggest leverage be slowly increased on the basis of governance.

This will allow greater experimentation, and states will be held more responsible for their own conditions. But the temptation to centralise is great. The Planning Commission has long overstepped its constitutional mandate by being the channel through which development funds are funnelled to the states. Leaders at the Centre feel that Centrally sponsored schemes are the best way of engaging in the politics of noblesse oblige, to project themselves as the knights in shining armour, rolling scheme after scheme, to help the aam admi. But the track record of Centrally sponsored schemes is poor enough to warrant more confidence being reposed in the states. And finally, coalition politics has had a paradoxical effect. While it has empowered states in some respects, it has not led to mechanisms for strengthening the collective dialogue amongst states.

The point I'm making is the States' have not had a stellar record either. Hoinestly, in my opinion, the Centre has doine far better than the State. Plus, as I have mentioned before, Central help and control and State governance need to go hand in hand, because the States have not shown great promise. I do agree the present control level is very high and this needs to be reduced a bit.

What applies to the Centre applies to the states as well. There is a larger conversation to be had about the appropriate level at which different taxation and financing functions should be carried out. Various state governments and local bodies have not been able to use the legislative powers that allow them to raise revenue. The states, for their part, have been very reluctant to empower local government, the point at which all implementation takes place. Each level of government is a centraliser in its own way, projecting the levels below as incapable and corrupt. The states feel threatened that the Centre will now directly allocate funds to the third tier of government, while they themselves have, with a few exceptions, done precious little to empower local government.

Very true; the best way possible is greater consensus between the Centre and the State.

I do eat my words; my initial assessment of this article being "trash" is incorrect.

But I'll say that Centre's control is very much a necessary evil which does need some moderation.

 

[Marshal]

well I think you guys are missing something, in his speech he was complaining that the center is giving only 2% from total IT collected in gujarat as he was accused by center for not doing enough on various skims started by him were stuked, and further he also challanged the center if it could give the autonomy to gujarat only for one year (he clearly stated that but our media misinterpreted him and made him anti national) then observe the growth rate of gujarat, he told. which is still the best of all state in India at 11.5%. and as far as the investment is concerned Gujarat is no where near to maharastra in terms of FDI, but it is right now leading in terms of domestic investment.

I also belive that the state government should be given more responsibilities so that they can not accuse the center and vice versa... for not doing anything at the time of election.