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Assignment - Centre State

Assignment - Centre State

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Published by Sangram Dey

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Published by: Sangram Dey on Aug 22, 2010
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‘Centre State Relation’
 
Cdr Sangram Dey 
National Institute of Financial Management
 
1
INTRODUCTION
Background
1.1
The foundation of centre staterelationship is the Federal systems, which bothin pure form and in some impure variety are the dominantadministrative arrangements of government. Of course, the world hasexperienced other types of government structures, from the Greek city-states to the British Empire, but today federalism appears to be thesystem most compatible with democracy.
1.2
The Constitution of India is federal in form but is more unitary incharacter. Strengthening the federal system is necessary for meetingthe aspirations of the people who are governed through StateGovernments and for preserving the unity of India. Therefore, Centre-State relations, i.e. the arrangements between the Union Governmentand the States in regard to their powers, functions and responsibilities,have always been a crucial issue.
1.3
Federalism has come to be understood as a dynamic process ofcooperation and shared action between two or more levels ofgovernment, with increasing interdependence. The framers of theIndian Constitution took due note of these changing concepts andfunctional realities. Avoiding a dogmatic approach, they fashioned asynergised system of two-tier polity in which the predominant strengthof the Union is blended with the essence of cooperative federalism.Several features and provisions of the Constitution appear to havebeen deliberately designed to institutionalise the concept ofcooperation.
1.4
Nonetheless, federalism is a very broad concept, whichencompasses a variety of political, administrative and economic
 
‘Centre State Relation’
 
Cdr Sangram Dey 
National Institute of Financial Management
 
2
features. This paper is primarily concerned with the economic aspectsof a federal system or the economic relationship between states withthe centre in Indian context.
Fiscal Federalism
1.5
Fiscal federalism requires that there be at least two levels ofgovernment: a higher level, in general called federal government whichmust have some economic decision power over all jurisdictions, and aset of lower level governments, each of them exerting economicdecision power only over a restricted part of the national territory.Thus, the main focus of the economic approach to federalism is on whodecides about the economic aspects of the federation rather than whohas the legal right of deciding. For example, if a dictatorial regimedelegates some economic decision power to its appointed provincialofficials, it will be considered an economic federation (e.g. present dayChina) but not a legal federation. At the other extreme, if in ademocratic country the population delegates to the central governmentall economic decision power (e.g. New Zealand) this country will not beconsidered a federation in the economic sense.
 
‘Centre State Relation’
 
Cdr Sangram Dey 
National Institute of Financial Management
 
3
FEATURES OF FEDERALISM
2.1
Conventional definitions of a federationusually lay emphasis on the fact that between thetwo levels of government, there is a division ofpowers such that the central government is givenspecified functions and the states enjoy the residual (non-specified)powers.
2.2
 
Independence and Coordination.
The fundamental processof the formation of a federation is guided by the dual consideration ofself-interests of the units as also mutuality and commonality of largerobjectives, which bind the federating units together. Thus the two wayprocess by guarding self-interest and yet reaching out beyond it for therealisation of common aspiration. This makes for cooperation, mutualaccommodation and compromise. This is the essence of a functioningfederation, which is characterised not so much by independence as bycoordination. A federal state should combine genuine independence ofaction with genuine interdependence. A federal Constitution shouldguarantee to
each of the two levels of government an independence ofeach other sufficient to enable them to engage the continuing supportof significant elements of the political system
.
2.3 Rationale for Coming Together.
There is an inherent urgeamong the federating units to come together in a federation so that thepolitical and material interests of the units can be better safeguardedthrough the nation that is brought into existence. This process usuallytakes place through two opposite processes.(a)
Federation by disaggregation 
, that is, by a process ofdecentralisation, a previously existing state of a unitary characterbreaks up to form a federal state.

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