CENTER STATE RELATIONS LLM 2016-17 UNIT 1 FEDERALISM UNIT 2 LEGISLATIVE RELATIONSTHE STAGES OF FEDERALISM DERALIS Federalism is a political system in which power is divided and shared between the national/central government and the states. This arrangement limits the power of government, Over the years, the powers of the national government have increased tremendously atthe expense of the states, The Supreme Court has played a key role in defining the relationship and powers of ‘the national government through its broad interpretation of the supremacy and commerce clauses, ual Federalism (1789 ~ 1937 Stage is called “dual federaliswn” because the functions of the state and national government remained largely separate. + Marshall Court © Cases upheld expansive federal powers. They had a major impact on the balance of power between the national and state governments. © McCulloch v, Marytand (1819) © Gibbons v. Ogden (1824) + Taney Court © Different notion of federalism © Belief that separate and equally powerful levels of government work best © National government should not exceed its constitutionally enumerated powers © Court tended to limit the national government’s authority in areas such as slavery and eivil rights Dred Scott v. Sandford (1857) Post Civil War Amendments © Plessy ». Ferguson (1896) oo Stage 2: Cooperative Federalism (193 963) Stage is called “cooperative federalism” because the new programs of the “New Deal” require cooperation across all levels of government. © Franklin Roosevelt's “New Deal” sparks a revolution in national policy making and an Increased role for the national government altering the balance of power. © Initially, the Supreme Court struck down New Deal programs, but in 1937 Supreme Court ‘changes course (court-packing plan). | | | |Stage 3 lated Federalism (1963 — 1981 Stage is called “reguiated federalism” because the national governmeat further intervened in state ‘government decision-making by threatening to withhold federal grants for specific purposes. - © Categorical Granis were given to the states for specific purposes. Discretion largely a remains in the hands of federal and officeholders. © Example: War on Poverty ~ in an effort to alleviate social ills that the states had been e unable or unwilling to remedy, Johnson Administration bypzsses conservative legislatures ‘and administrators and gives money to constituencies that will spend it on urban renewal, : ‘education, poverty programs, and job training. © Example: to regulate speed within states, the national government threatens to 7 withhold federal transportation dollars thus forcing the states to comply with federal mandates. © Unfunded mandates © From the New Deal to the 1980's, the Supreme Court exwanded national powers and - restricted state power in their rulings. Stage 4: New Federalism (1981 Stage is called “new federalism” because it reflects the return of administrative powers to the state governments. The federal-state relationship was proposed by Ronald Reagan during the 1980's, © Block Grants are given to states for general purposes and allow state officials greater discretion over how funds will be spent, eg. education, welfare. Reduced the size and power of the federal government. President Reagan used states rights as a litmus test for appoin’ments. Bush Administration: federal government expands post 9/11 Most Supreme Court decisions since 1989 have been 5-4 majorities in favor of states rights. Bush Administration: federal government expands post 9/11. oocoe Regulated Federalism ow Fodoraten gC ETE TINE ~ Jeet, BPRS tent 7 ational goverment State governments have1 Introduction Much of the literature on federalism and democracy claims it as an empirical fact that Se ofthe literature on fede (| development, especially in large and diverse societies,’ federalism is beneficial for democratic ‘As Stepan has observed,“ .. In fact, every single longstanding democracy in a territorally based multilingual and multinational polity isa federal state. Although there are many multinational polities in the world, few of them are democracies. Those multinational democracies that do exist, however (Switzerland, Canada, Belglum, Spain, and India), are all federal” (Stepan 1999; 19-20}. Where theoretical literature does make the connection between federalism and democracy, the reasoning derives from the consensus that suc sssful federalism requires well functioning democratic institutions, judicial system, integr 1ed national political parties and appropriate electoral incentives created by d 1ocratic political competition. The basic finding of the literature is that only in well func democracies can federalism be a stable and effective for of government. And conversely, outside of the democratic context, federalism is ultimately an unstable form, which logically progresses either to territorial disintegration or to becoming a ie theories show is that in the long run, in equilibrium, ddms cy must be present in order for BR ee eee eee eae federalism to be successful, This has no bearing on what adding federalism to a political regime acy and ft ble federalism isto be | 7 aie considered @ desirable democratic equilbrium, the theory is sient on how to get to thet \equilibrium. It is possible, we argue, that federalism as a constitutional form may be well compatible with successful longstanding democracy, and yet it could undermine partial democratic success in fledging regimes. This is because in the short “un the federal form with its additional cl leaders to interfere with the der process. For this reason, hypothetically speaking, it would be easier to quickly improve the quality of democracy in a unitary state than in a federal one, other taings equal. We build our argument by taking as the point of departure Kiiker’s (1964) theory of federalism, considered by many to be the best political theory of federalism avaitable, and add to it the consideration of the logic of the multi-level democratic process (Stepan 1999, Mckay 2004). In this theoretical framework, we then address the nature of the interaction between J cy and federalism as institutions for societal aggregation of preferences and corresponding political mobilization. What results is @ theoretical prediction of insttutionafot modality where, in order to pr erve territorial integrity, the quality of democracy in a federation in terms of the restrictions placed on democratic politica! competition must be either very high, or low. The reason for this bi-modality is that a low-functioning or a newly established democracy cannot generate from its midst the thing thet is needed in order to contain disruptive distributive bargaining inherent to the constituticnal federal form ~ the federally integrated party system. And since high quality of democracy in a federation requires that the party system is organized consistently with federal needs, the relationship also holds in reverse — new federations will undergo a period of inadequacy of their democratic process, and during that time will, as a strategic adjustment to the threat to their survival, lower the procedural quality of their democracy.2 Riker’s federal theory: federalism (without democracy) is not an equilibrium outcome in federal studies, there was a long tradition of viewing federalism as a balance, and in ‘hat meaning ofthe word, as an equilibrium between the opposing social forces and aspirations ~ ©, unification versus autonomy, centralization versus decentralization, and et cetera. Riker, ‘who hac! just completed at the time his analysis of coalition formation and bargaining (Riker 1962), pointed out that any federal institutional balance must depend on coalitions which were formed to support it, and that coalitions have a propensity to shift. Federal balance would change with the changes in the coalition structure, and as long as coalitions were unstable, federal institutional balance was bound to be unstable as well (Riker 1964). Furthermore, because federal bargain Is generally unstable, formal federal constitutional provisions were not a8 important as their actual implementation and “operation” (Riker 1969). After a federal Constitution is put in place, its real operation and thus the terms that are actually enforced become endogenous to the political process, more precisely, to the interaction between various government incumbents at all levels. Thus, argued Riker, federalism is a non-equilibrium political process and federal ‘agreements are bound to be unstable and will change over time to the advantage of some and the detriment of others, Since the sides to the bargain, as Riker and the prior literature saw it, ‘were states versus the center, then either the sub-national governments were to become stronger than the federal government (which Riker cal wl “peripheralized federalism) oF the federal government was gain the upper hand fntate federalism"). Neither of those were plausible candidates for Elone-sorm inetutonalequlbrum ps “peripheratized federalism” ‘would eventually so weaken the federal “center” as to become but a transitional stage on thepath toward eventual federal dissolution, while the overly strong “center” in the “centralized federalism” version would maintain territorial integrity but the union would lose its federat nature —due to “the tendency, as time passes, for the rulers of the ‘ederation to overawe the rulers of the constituent governments” (Riker 1964). Asi ilar informal argument is known in political science as Eiryce’s Law. According to 1 Edward MeWhinney (1962: 105), Bryce's Law states that *...federclism is simply a transitory step on the way to governmental unity.” An economic version of the Bryce Law was re- —————————e— discovered in the 1930s by a German economist Johannes Popitz, who argued that, though starting from rather decentralized tax systems, both unitary and feceral countries alike end up concentrating fiscal authority in the hands of national governments." Accordingly, Popitz called the federal form of government a fiction. “Popitx’s Law” asserts tha: over time there must be a centralizing trend of revenue collection, which was indeed found in a cross section of countries (see, eg, Diaz-Cayeros 2004; Blankart 1999; 2001; Vaubel 1994), Consistently with Riker’s prediction, Lake and Rothchild (2005) find that: “territorial decentralization is an extremely fragile political institution that majority groups and regions in favor of centralization and by minority groups and regions in favor of full political autonomy or secession, Most commonly, central governments quickly increase their power at the expense of regions and groups within the state. Less frequently, central governments unravel, ultimately leading to the disintegration of the state and the fracturing of the national territory into several sovereign pieces . ..” In Riker’s logic the three post-communist federations (USSR, Czechoslovakia and Yugoslavia) were all cases of rapid transitions from highly centralized to peripheralized federala models, producing federal governments so weak that they were unable to prevent those countries’ territorial disintegration (Bunce 1999). Meanwhile, illustrating the other theoretical Possibility a fragment of the former Soviet Union, Russia, itself a federation, has converged to a Highly centialized federal model and thus escoped territorial collapse, though federalism there 's on its way to becoming mostly @ formality (Ross and Campbell 2009) 3. Where there is no equilibrium, contract is required ‘The instability and absence of a “natural” equilibrium — an equilibrium which would be i directly setf-enforceable because it coordinates the participants to a mutually beneficial outcome — means that federal balancing via bargaining is essentially a contract, The initial ‘outcome of bargaining over the fundamental federal arrangements (constitution) is 2 contract. Ang all interim compromises in continuous federal bargaining as per Riker's conceptualization are also a string of contracts. Meanwhile, all these contracts are between and among the a Bovernments. Sovereign unit governments negotiate over alternative federal principles for the - Constitution. Sovereign federal and sub-national governments hammer out subsequent Bargains on ways of implementing federal principles and amending them. This fact makes the question of enforcement central: when dealing with governments, it is usually difficult to enforce the outcome of bargeining. Hence what we summarily label the federal form of government is a contract without a built-in mechanism for its enforcement, 7 The Incomplete contract literature extensively deals with the so called “hold-up problem,” which arises when ex ante decisions change ex post bargaining power of economic agents. A classical example is of a firm making an irreversible (sunk), “elation-specific”investment into products demanded by another firm (Klein, Cravford and Alchian 1978). A growing number of studies apply the principles of industrial organization to the design of federal constitutions {especially to their fiscal design) as incomplete contracts (Aghion and Bolton 2003; Bednar 2008; Lulfesmann 2002; Rodden 2005; Tommasi and Saiegh 2000; Seabright 1996). laryczower, Saiegh, and Tommasi (2007) argue that many welfare-Improving inter-governmental institutional arrangements have characteristics similar to investments in specific assets: they require undertaking costly and hard to revers2 actions with limited to no value in alternative uses, and they produce benefits only in the future. As long as future benefits might be threatened by the opportunistic actions of some players, this extra uncertainty will deter institutional investments, or will lead them to take less efficient forms. 4, How democracy stands in the way of credible commitment to the federal contract As distinctive from decentralization of government functions, federalism preserves the political autonomy of constituent governments. Thus, it institutionally empowers regional politicians to bargain with the federal government and challenge no: only federal policies at the stage of their implementation, but even the federal institutions thernselves that gave rise to such federal policies. Re-distributive institutional coalitions emerge from the conflict in constituent preferences when it overlaps with the federative lines of representational division. Riker thought of federal bargaining as politicians bargaining over distribution of prerogatives between the states and the center."" We put emphasis on distributive bargaining among groups such as the constituencies in federal units. Distributive bargaining gives rise to the derivative bargaining over federal institutions, as institutions for decision-making have long-termdistributive implications. indeed, crass-nationally, there is a pattern of coalitions of units clashing over the degree of centralization and prerogatives of the federal center (Bednar 2008, Cameron and Falleti 2005, Filippov, Orteshook, and Shvetsova 2004). Coalitions more likely to Control the center or to receive greater benefits from its more obvious functions support the center's institutional empowerment. tn this way, the precariousness of the center-state federal balance felt by the politicians is substantively rooted in the institutional preferences of the underlying popular coalitions that can be mobilized on each side and in support of shifting that ‘balance in either direction. Motivated by the logic of unit-level political competition, sub-national incumbents are pressured to offer their constituents the redistributive agenda for the dialogue with the federal center, Those regional politicians who are more willing to commit to hard bargaining and pose increasing demands to the center will, other things equal, be more attra for focal electorates than those who say that their unit has no claim on additional resources in the federation. This implies that electorates at least in some units will be mobilized on the issue of federal reform — federal institutional change aimed at gaining advantage (or redressing “current disadvantages”) vis-d-vis the rest of the union. Resulting territorial political polarization threatens the country's institutional and political stability, and ultimately its territorial integrity. tn the extreme, issues of federalism and federal renegotiation can become the explicit Focus in campaigns nationally as well as in the units. There Is abundant evidence that, when confronted with institutional choices of re-distributive nature, politicians are limited in their ability to support compromise and cooperation by the need to anticipate popular pressure and, most importantly, the entry of political challengers seeking to capitalize on such popular pressure ormobilize it (Horowitz 1985, Lustick 1979)" if the constituency expects distributive gains from the institutional reform, incumbents supporting stability find themselves in a vulnerable position. Therefore, federal success is impossible without the sufficiently strong central government capable to overcome resistance of any feasible coalition of constituent units. Center that strong removes any expectation of benefit from polarizing unit mobilization by making successful renegotiation of the federal terms implausible. inates at the at-large federal level in federal ‘The opposite competitive dynamics elections, where, lke in all democracies, the majority makes redistridutive decisions, generally, in its own Favor. But the majority coalition that wins federal ineumbency is limited in its poticy- making prerogative (and thus its ability to redistribute) by the constraints that the federal arrangements impose on the federal center. it therefore becomes electorally advantageous at the federal level to advocate the expansion of the powers of the center and shrink federalism. ‘The stronger the center is to begin with, the more decisive the majeritarian takeover. Thus, ‘contracts regarding institutions of federalism are routinely breached! in practice, Among the more recent examples are South Africa and Russia. In South Africa, curing the transition to majority rule, the African National Congress used the promise of decentralization as an incentive to gain cooperation from the government, Inkatha Freedom Party, and Afrikaner \Volksfront. it made concessions on the powers of the provincial authorities in order to secure ‘the minorities’ support for the 1993 draft constitution. Then, having obtained that goal, reversed the course a few years later (Lake and Rothchild 2005). In itussla, federal politicians discarded power sharing treaties with regions (and perhaps federalism altogether] as soon as a popular president came to power in 2000 (McFaul and Stoner-Weiss 2008).FROM PLANNING TO NII TRANSFORMING INDIA’S DEVELOPMENT AGENDA FEBRUARY 8, 2918 BEES Ey ey ee) Ce) EEE ee) eee eee tecINTRODUCTION: TRANSFORMING INDIA .. CONTEXT: INDIA HAS CHANGED... RATIONALE: INSTITUTIONS MUST CHANGE .. NEW ROLE: FUNCTIONS OF NITI.. Demography Economy Private enterprise Globalisation States Technology Cooperative and Competitive Federalisin Shared National Agenda State's Best Friend at the Centre Decentralized Planning Vision & Scenario Planning Domain Strategies Sounding Board Network of Expertise Knowledge and innovation hub Harmonization Conflict Resolution Coordinating interface with World Internal Consultancy Capacity building Monitoring and EvaluationPURPOSE: GUIDING PRINCIPLES MECHANISM: STRUCTURE OF NITI .. eevee CONCLUSION: VEHICLE OF GOOD GOVERNANCE .. Antyodaya Inclusion village Demographic dividend People's Participation Governance Sustainability v7 7 Chairperson Governing Council Regional Councils, Special invitees Full-time Organisational Framework 2 Research Wing 2 Consultancy Wing 2 a ‘Team India Wing« Che cr tee re. Oo Gee Cog COPE EVO OE CHKintroduction: TRANSFORMING INDIA india has undergone a paradigm shift aver the past six decades - politically, economically, socially, technologically as well as demographically. The role of Government in national development has seen 2 parallel evolution. Keeping with these changing times, the Government of India has decided to set up NITI Aayog {Nationai Institution for Transforming india), in place of the erstwhile Planning Commission, as a means to better serve the needs and aspirations of the people of India, “The new institution will hea catalyst to the developmental process; nurturing an overall enabling environment, through a holistic approach to development going beyond the limited sphere of the Public Sector and Government of India. This will be buiit an the foundations of: < Anempowered role of States as equal partners in national development; operationalizing the principte of Cooperative Federalism. © Aknowledge hub of internal as well as external resources; serving as a repository of good governance best practices, and a Think Tank offering domain knowledge as well as strategic expertise to all levels of government. « Acollaborative platform facilitating Implementation; by monitoring progress, plugging gaps and bringing together the various Ministries at the Centre and in States, in the joint pursuit of developmental goals.INC. HAS CH. GEDContext: INDIA HAS CHANGED “The Planning Commission was constituted on 15.3.1950 through a Government of India Resolution, and has served India well, india, however, has changed dramatically over the past 65 years, While this has been at multiple levels and across varied scales, the biggest transformatory forces have been the following: 4_-Bemography: Our population has increased over three-fold to reach 121 crores. This includes an addition of aver 30 crore people to Urban India. As well as an increase of 55 crore youth {beiow the age of 35), which is mare than one anc a half times the total population of the country then, Furthermore, with increasing levels of development, literacy and communication, the aspirations of our people have soared, moving from scarcity and survival fp Gafoty and surplus We-aré therefore looking at a completely different India taday, and our ‘governance Systeme need to be transformed to keep up with the same. Economy: Our econamy has undergone a pasadigm shift. tt has expanded by over a hundred times, going from a GDP of Rs 10,000 crord’to)Rs 100 lakh crore at current prices, fo emerge fas one of the world’s largest. Agriculture's share in this has seen a dramatic drop, from more g than 50% to less than 15% of GDP. And our central government's Twelfth Five Year Plan size ? of Ré,G3 lakh crore, dwarfs the First Five Year Plan size of Rs 2,400 crore. Priorities, strategies: ‘and structures dating back to the time of the birth of the Planning Commission, must thus be revisited. The very nature of our planning processes needs to be overhauled to align with this shift in sheer scale.~~ : The nature of our economy, and the role of the Gavernment init, has Private enterpris undergone a paradigm shift as well, Driven by an increasingly open and liberalized structure, our private sector has matured into a vibrant and dynamic force, operating not just at the international cutting edge, but also with a global scale and reach. This changed economic landscape requires a new administrative pa wii ernment must fla command and control eco: 0 a far more FGirecting. calihrating, supportingand regulative a market eco-system. Nationel ‘developmént Sen beyond the limited sphere of the Public Sector. Government must thus transition from being a ‘provider of first and last resort’ and ‘malor plaver’ in the economy, to being a ‘catalyst’ nurturig an enabling environment, where the entrepreneurial spirits of all, from SS om ee Tepreneurs to large corporations, can flourish. This “Thportantiy, frees Up the Government to focus its precious resources on public welfare 7 domains such as esBential entitlemeits of f68U, nutrition, health, education and livelihood of vulnerable and marginalized groups, 7 Globalisation: The World at large has also evolved. Today, we live in a ‘global village’, connected by modern transport, communications and media, and networked international markets and institutions. As India ‘eontributes: ics, itis l50 influenced by happenings far removed from our Borders. This¢ontinuing integration yith theworld needs to be incorporated into our policy making as well as functioning of government.hie ‘The States of the Union of India have evolved from being mere appendages of the Centre, to being the actyal drivers. of national development. The development “of States must a, thus become the national goal, as the nation's progress lies in the progress of States. As 2 consequence, th one-size-fits-all approact) often inherent in cen) nniag is no y acerain nceee longer practical or eFficlane States reed fo be heard and gen te FeaDMty reauited For “effective implementation. Or. B. R. Ambedkar had said with great foresight that it is “UnfeasOnaDIe to TeAtralise powers where central control and uniformity is not clearly Essential or 1 impracticable’. Therefore, while emanating from global experiences and jational Synergy, our strategies will need to be calibrated and customized to focal needs and opportunities, réchnology: Advancements in technology and access to information hay yemssted the Treative energy that emerges from the Indian kaleidoscope. They hav ‘our varied regions and eco-systems in an interlinked national economy and society, opening up. Ht Tawar avenues OF coordination and cooperation. Technology is also playing a substantial role ‘jnemhancing (cansparsacy 3s Well SITETEMCT, holding government more accountable. Ie thus needs tobe made central to our systems of policy and governance,_ INSTITUTIONS : UST CHANGE 7Rationale: INSTITUTIONS MUST CHANGE ‘This changing reality and growing mismatch has been recognized for years now with experts, including many from within the erstwhile Planning Commission, recommending appropriate changes: «The Bt* Five Year Plan document - the very first after the liberalisation of 1991 - itself categorically stated that, as the role of Government was reviewed and restructured, the role ‘and functions of the Planning Commission too needed to be rethought. The Planning Commission needed to be reformed to keep up with changing trends; letting go of old practices and baliefs whose relevance had been lost, and adopting new ones based on the past experiences of India as well as other nations. «The Standing Committee on Finance of the 15® Lok Sabha observed in its 35% Report on Demand for Grants (2011-12) that the Planning Commission "has to come to grips with the emerging social realities to re-invent itself to make itself more relevant and effective for Signing the planning process wifh econamic reforms and its consequences, particularly fer the poor® ee © Former Prime Minister and noted economist, Dr. Manmohan Singh - in his farewell address to the Commission in April 2014 ~ also urged reflection op“what the if the Planning Commission needs to be in this new world. Are we still usin froolsjnd af hes which were designed for. titional roles should the Plannit hat Gpacitios does it need to build teensure that it continues to. process OreMahatma Gandhi had said: "Constant development isthe law of life acd aman who always tries to ‘maintain his dogmas in order to appear Consistent drives himself into « false position”. Keeping trus to this Principle our Misttations Of governance and polly must @vONe with the changing Gynamics of the new india, while remaining true to the founding principies of the Constitution of India, and rooted in our Bharatiyata or wisdom of our civilizational history and ethos. 'NIMI Rayag (National institution for Transforming india) is to be the institution to give life to these aspirations, It is being Formed based on extensive consultation across *he spectrum of stakeholders, including inter alia state governments, relevant institutions, domain exserts and the people at large.Nii;AS ae natic hood has metured anc deepened wwe have: -aribraced a greater measure pluralism and decentralization. This necessitates oper hittin how the Central jenna Cooperative Federalism; enabling States to hayé active participation \p the formulation of national policy, as well as achieving time- hart Tmaplementa'ion of quantitath _ “qualltative targets through the combined authority of the Prime eee ae and Chief Ministers. This will Bé by means of systematic and structured interacticns between the Union and State Governments, to better understand developmental issues, as well as forge a consensus on strategies and implementation mechanisms, The above wou'd mark the replacement of the one-way flow of policy from centre-te-state, with a genuine and continuing Centre-State partnership. 7 Cooperative and Competitive Federalism: Be the primary pat ager, ‘This Cooperation would be further enhanced by the vibrancy af Competitive Federalism; with the Centre competing with the States and vice versa, and the States competing with each Bler, in the joint parson aia dip ae a Yan 7 be cer iesten ene tae lop OES | a 2, Shared National Agenda: Shy sharevsen)y rational development priorities and a strategies, with the active invoWment oF States. This will provide the framework ‘national agenda’ for the Prime Minister and Chie? Ministers to implement. 3, State's Best Friend at the Centre Support States in adldressing their own challenges. as well as buliding on strengths and comparative advantages. This wil be through various means, sucha nating with Ministries, championing their ideas at the centre, providing ‘consultancy support An building capacity 4, Decentralized Planning: Restructure the planning process into bottom-up model, empowering States, and guiding them to further empower locaYSovermi TTREoping ‘mechanisms to formulate credible plans at the village level, which are progressively aggregated ~ “Upto higher TEE of govErmment. “Gp the higher Tevels of government. _ elecesig the pecan oh q jergize-the distinct strategy’ element “As a dedicated Think Tank : seally chav g the future ce = s Vision & Scenario Planning: Designiediumpnd rameworks of the big picture vision of india's future ~ across schemes, Sectors, regions and time; factoring in all possible alternative assumptions and counterfactuals, These would be the drivers of the nation a, especialy focussed or( dentifying critical gap} and harnessing (Gisopeptert same would need ic with thelr progress ‘and efficacy constantly monitored for coe mid-course recalibratiopPand the overall environment (domestic and global) continuously Scarined for incorporating evolving trends and addressing emerging challenges. ‘The above would mean a fundamental transition from merely planning for where the Nation’s money goes, to planning where we want the Nation to go. And given its unique position as the aggregator and integrator of all developmental initiatives of the Government of India and States, the NITI Aayog would be ideally suited for the same, at planning as well problem solving needs. This will especially enable the imbibing of good governance best practices, both national as well as international: especially with regards to structural reform 7. Sounding Board: Be an in-house sounding board whetting ard refining government positions, through abjective criticisms and comprehensive counter-views. 8. Network of Expertise: Main-stream external ideas and expertise into government policies and programmes through a collaborative community of naticnal and international experts, practitioners and other partners. This would entail being Gavernment's link to the outside ‘world, roping in academia (universities, think tanks and reseerch institutions) private sector Bipertise, ane the people ‘at Targé, for close involvernent in the polity making process. As is said “nthe F Riguecs CH A at: wera *y Fea: Set us welcome noble thoughts flowing in from all directions. —— 9. Knowledge and Innovation hub: Be ai Gcurulatop's well & disseminatorof research and best practices on good governance, through a state-of the-ert Resource Centie whic Hentifies, arialyses, shares and facilitates regitavon cotheSame——— An increasingly mature Indian population has steadily increased the focus on, and demand for, actua! delivery and results, To keep up with such enhanced aspirations, NITI Aayog's mandate will have to go beyond mere planning and strategizing, to facilitating Implementation of the development agenda as well. This would involve making implementation central to the planning process, through an emphasis on tangible outcomes, realistic targets, strict timelines and robust monitoring and evaluation - a transition from the isolated conceptuatisation of merely ‘planning, to‘planning for Implementatiow’. Niti Aayog will also act as a catalyst to the government machinery at large; filling gaps, enhancing capabilities and de-clogging bottlenecks, as and where required:especially when involving tross-Cutting and overlappingissues across multiple sectors; through communication, coordination, collaboration and convergence amongst all stakeholders. The ‘emphasis will be on bringing all together on an integrated and holistic approach to development. 44. Conflict Resolution: Provide a platform for miytual resolution of inter-sectoral, “Tnter-departmental, inter-state as well as centre-state issues; facilitating consensus acceptable and beneficial to all, to bring about clarity and speed in execution. 12, Coordinating interface with the World: Be the nadal point for strategically harnessing global expertise and resources coming in from across nations, multi-fateral institutions and other international organisations, in India's developmental process. 43, Internal Consultancy: Offer an internal consultancy function to central and state governments ‘on policy and program design; providing frameworks adhering to basic design principles such as decentralization, flexibility and a focus on results, This would include specialised skills such as structuring and executing Public Private Partnerships. 414, Capacity building: Enable capacity building a 7 ross government, benchmarking with latest global trends and providing managerial and technical knowhow. 15, Monitoring and Evaluation: Monitor the inn and programmes, and evaluate their impact; through rigoroug tracking of performance metrics And comprehensive program evaluations. This will not only Welp identify weaknesses and Bottlenecks for recessary Course correction, but also enable data-driven policy making; encouraging greater efficiency as wall as effectiveness,~ Purpose: GUIDING PRINCIPLES oa _ > Iarrying out the above Functions, NITI Aayog wil be guided by an overall vision of development ‘which is inclusive, equitable and sustainable. A strategy of empowerment built on human dignity “ and national self-respect, which lives up to Swami Vivekanande’s idea of our duty to encourage 7 everyone in his struggle to live up to his own highest idea . A model of development which is wafers (all round), aeFereff (all pervasive), wamnaers (ail inclusive) and wate (holistic): - «© Antyodaya: Prioritize service and uplift of the poor, marginalized and downtrodden, as enunciated in Pandit Deendayal Upadhyay/s idea of Antyodaya’ Development is incomplete o and meaningless, if it does not reach the farthest individual. In the centuries old words of ~ Tiruvalluvar, the sage-poet, nothing is more dreadfully painful than poverty = © Inclusion: Empower vulnerable and marginalized sections, redressing identity-based 7 inequalities of all kinds gender, region, religion, caste or class. As Sankar Dev wrote cecades ago: ‘to see every being as equivalent to one’s own saul is the supreme means (of attaining a deliverance)", Weaker sections must be enabled to be masters of their own fate, having equal za influence over the choices the nation makes. ot © Village: Integrate our villages into the development process, to draw on the vitality and energy of the bedrock of our ethos, culture and sustenance.Demographic dividend: Harness our greatest asset, the peoale of India; by focussing on their development, through education and skilling, and their empowerment, through productive livelihood opportunities. People's Participation: Transform the developmental process into a people-driven one, making an awakened and participative citizenry the driver cf good governance. This includes ‘our extended Indian family of the Non-Resident Indian com munity spread across the world, whose significant geo-economic and geo-political strength must be harnessed. Governance: Nurture an open, transparent, accountable, pro-active and purpaseful style of governance, transitioning focus from Outlay to Qutput to Outcome, Sustainability: Maintain sustainability at the core of our planning and developmental process, building on our ancient tradition of respect for the environmant.CH Ree HeaEet eer CCE CCE «6Mechanism: STRUCTURE OF NITI ‘ITI Aayog will bea lean organisation, modelled asia network of expertise; focusing on functionality, flexibility and domain knowledge. NITI Aayog will comprise: © Chairperson: Prime Minister of India » Governing Council: comprising the Chief Ministers of all Stats and Lt. Governors of Union Territories. ‘© Regional Councils: will be formed to address spocific issues and contingencies impacting more than one state or region. Strategy and Pianning in the NITI Aayog will be anchored from State-level, with Regional Councils convened by the Prime Minister for identified priority ‘domains, put under the joint leadership of related sub-groups of States [grouped around commonalities which could be geographic, economic, social c otherwise) and Central Ministries. Regional Councils will + Have specified tenures, with the mandate to evolve strategy and oversee implementation. ‘+ Bejointly headed by one of the group Chief Ministers (07 a rotational basis or otherwise) and a corresponding Central Minister. ‘+ Include the sectoral Central Ministers and Secretaries concerned, as well as State Ministers and Secretaries.«Be linked with corresponding domain experts and academic institutions. + Have a dedicated support cell in the NITI Aayog Secretariat. States would thus be empowered to drive the national agenda, As a consequence, deliberation ‘would be more grass-roots informed, and recommendations would have more ownership, given their joint formulation. Special invitees: experts, specialists and practitioners with relevant domain knowledge as special invitees: nominated by the Prime Minister. iil comprise of, in addition to the Prime Minister as the Full-time Organisational Framework: Chairperson: «Vice-Chairperson: to be appointed by the Prime Minister. Members: full-time. © Part-time Members: ther relevant institutions in an ex-o' rotational. © Ex-Officio Members: maximum of & membs nominated by the Prime Minister. «Chief Executive Officer: to be appointed by the Prime Minister for a fixed ten rank of Secretary to the Government of India «Secretariat: as deemed necessary maximum of 2, from leading universities, research organisations and fficio capacity. Part time members will be on a ers of the Union Council of Ministers to be ure, in theNITI Aayog will also house a number of specialised Wings, including: » Research Wing that will develop in-house sectoral expertise as a dedicated think tank of top notch domain experts, specialists and scholars, ® Consultancy Wing that will provice a market-place of whetted panels of expertise and funcing, for Central and State Governments to tap into; matching their requirements with solution providers, public and private, national and international. By playing match-maker instead of providing the entire service itself, NITI Aayog will be able to fecus its resources on priority matters, providing guidance and an overall quality check to the rest. © Team India Wing comprising representatives from every State and Ministry, will serve as @ permanent platform for national collaboration. Each representative will Ensure every State/Ministry has a continuous voice and stake in the NITI Aayog. «Establish a direct communication channel between'the State / Ministry and NITI Aayog for alt development related matters, as the dedicated liaison interface. Anational Hub-Spoke institutional model will be developed, with each State and Ministry encouraged to build dedicated mirror institutions, serving as the interface of interaction. These institutions, in turn, will nurture their own networks of expertise at State and Ministry level, NITI Aayog will function in close cooperation, consultation and coordination with the Ministries of the Central Government, and State governments. While it wit! make recommengations to the Central and State Governments, the responsibility for taking and implementing decisions will rest with them,Ye co ~° NANCEConclusion: VEHICLE OF GOOD GOVERNANCE Chanzkya had mapped out centuries ago how good governance was at the root of a nation’s wealth, values, comfort and happiness—‘qaret ew: — wher ye arf: — orefer aye asa” NITI Aayog will seek to facilitate and empower this critical requirement of good governance, which is people-centric, participative, collaborative, transparent and policy-driven. It will provide critical Girectional and strategic input to the development process, focussing on deliverables and ‘outcomes. This, along with being as incubator and disseminatcr of fresh thought and ideas for development, will be the core mission of NITI Aayog.ac®wera aA Government of IndiaArticle How has Indian Federalism Done? ees © 2013 Loki, Cee forthe Study of Developing Socios SAGE Publications Los Angeles, Landon New Dati, Singapore, Mshington De Ashutosh Varshney Dor: 10. t777321023015680767 ‘epnpsgepub com Abstract ®SAGE Two tropes have dominated discussions of Indias exceptions aside, scholars have not lin] or to a comparative éxploration offfational identilpe. To examine how India’s federalism Fas done, we may also need to ask what kind of nat ia'i8. Once we answer that question, the oft-assumed binary—that the stronger the states afé te weaker the centre will be-loses its edge. Both can be simultaneously strong. The new exception may be the problem of cross-border terrorism, which indeed generates a binary for the new age. Secessionism also creates centre-state binaries, but that may be more on account of how the basic ideational principles of Indian nationhood have been violated, not followed, or about how far the historical process of nation-building penetrated the rebellious regions. ‘Such problems have not been about the basic flaws of Indian federalism. lism: fiscal and constitutionaltsolat feralism Xo comparative theories of nationalism, Keywords State-nation, nation-state, multicultural nation, linguistic states, cross-cutting identities, cross-border terrorism This article departs from the conventional work on India’s federalism’, Most traditional scholarship took two forms. The focus wes either on what is called fiscal federalism, or on strictly constitutional matters, The literature on fiscal federalism revolved around resource transfers from the centre to the states: its logie, equity and quantum. The constitutional scholarship basically laid out the division of powers between the central and state governments, and debated whether India was a ‘centralized federation’, a ‘quasi federation’, a system pee than federal, ete While not denying that the question of = <¢ transfers or constitutional division of powers is, important, this article focuses primarily on the politids of centre~state relations. This is so for some obvi- ous reasons, The pattern of resource transfe? fecrif the political cucrents of the time. So is the question of how to interpret and, more importantly, apply the vatious constitutional clauses. These claims can be casily demonstiated. Everyone, for example, acknowledges that the power of states has been rising in the coalitional era of Indian politics that began in 1989. As a result, it should not be surprising that the use of Article 356 of India’s constitution, used repeatedly by Delhi to dismiss state governments in the 1970s and 1980s, has dramatically declined over the last decade and a half, Article Ashutosh Varshney is Sol Goldman Professor of International Studies and the Social Sciences, Department of Political Science and Watson Institute of International Studies, Brown University, Providence, USA, E-mait ashutosh_varshney@brown.edu44 Ashutosh Varshney 356 still exists in the constitution, but political realities are such that Delhi can use it to suspend state governments only at its own peril. While the coalitional era. does make the country more federal, Indie remains bighly Delhi-centric. Most of all, Delhi continues to have remarkable control of public resoure:s, Delhi can sometimes indeed be helpless and a contemporary version of that helplessness, counter-te:rorism, will be explored in this article—but on the whole, even in the coalitional era, Delhi’s powers are enormous. Does this mean that of late, both states and Delhi have been simultaneously strong? To answer this question, we need an understanding of the deeper dynamics of Indian nationhood. We cannot fully com- prebend the logic of India’s centre-state relations unless we begin with a discussion of what kind of nation India is, Is India, like France, a nation-state? Is it like the U.S. a multicultural state? Or is there another conceptual category that is better? And what are the implications of Indian nationhood, however one may characterize it, for its centre-state relations? The article makes a contribution (o the literature by linking theories of nationalism with Indian feder- ‘lism, This has not been done systematicelly. Some recent variants of scholarship on Indian federalism are indeed explicitly political, not simply constitutional of fiscal, and have greatly advaneed our under- standing (Nooruddin and Chhibber, 2008; Sridharan, 1999; Stepan, Linz and Yadav, 2011; Tillin, 2007; ‘Yadav and Palshikar, 2003, 20092 and 20096). But the marriage of the two literatures—nationalism and Indian federalism—has not been fully attempted? In what follows, 1 begin with a conceptual discussion of how tc think about the relationship between federalism and Indian nationhood. Having clarified conceptual matters, the second section will deal with the constitutional clauses pertaining to centre-state relations. The third section will then present an overview of the vast literature on the fiscal dimensions of federalism. The fourth section will concentrate on the reasons underlying the successes and failures of Indian federalism. The fifth section will tum its gaze towards 2 contemporary topic, terrorism. It will be argued that India’s existing federal structure is in considerable tension the requirements of national security in an age of terrorism. The sixth section will summarize with conclusions. A Conceptual Framework What Kind of Federation? What Kind of Nation? A fundamental political question has been at the heart of India’s ‘teedom movernent and post- independence nation building: how should democracy and ethinic diversity be combined? For centre state relations per se, this question takes a specific form: how should democracy and geographically concentrated ethnic diversities be brought together? Federalism, after all, is never non-territorial.” Federal units are always territorially organized, india’s social diversities have basically taken four forms: caste, religion, language and tribe. OF these, Janguage and tribe are territorially concentrated. Castes have always been, and continue to be, highly dispersed. Brahmins are to be found everywhere, so are the lower cas:es or Dalits. Because they are geographically concentrated, language and tribe became the mainstay of Indian federalism. Before 1947, it was also claimed that Mustims were heavily geographically concentrated. Whatever one thinks about that claim, the formation of Pakistan broke the link between territory and religion. The Studies in Indian Politics, |, | (2013): 43-63How has indian Federalism Done? 47 This view accept{ pluralism 3s central to Indian nationhood, and protects it through laws (such as personal laws and projection of ipinority educational msttUiiOns) and through political fnstitutions (uch as federalism), Federalisa hort, ties up neatly with this view of nationhood, Hindu nationalists have historically disagreed with this narrative of Indian nationhood. A ‘salad bow!’, according to them, a recipe for disunity; a ‘melting pot’ produces national cohesion? Hindu nationalism insists on assimilation.” Initially, the term covered linguistic assimilation as well, ‘8s Hindu nationalists emphasized the centrality of Hindi to Indian nationhood (Graham, 2007). The reali. ties of political life have ied them to drop such insistence. Their view, by now, concentrates primarily on religious minorities, who, according to them, must assimilate, which for all practical purposes means acceptance of Hindu dominance and/or an abandonment of special privileges such as maintenance of religious personal laws. Ekya (assimilation) is the proof of loyalty to the nation. To begin with, this view was much more in favour of political centralization and not hospitable to federalism. But political experience has changed Hindu nationalism. Hindu nationalists may not explic- itly debate whether federalism is about the multiple identities of Indians. But at the very least, they have accepted federalism as pethaps the only way to administer India, as a convenient administrative device for running a continent-size polity. India. aa State-Navion ‘The new Concepr Of state-nation takes the previous discussion significantly forward. In two ways, it adds a new perspective and clarity to arguments about Indian federalism. Fist, an understanding of India’s federalism does not require adherence to the notion of Indian exceptionalism, which is an underlying current in much India-specific literature, Insights from Spain, Canada and Belgium show that state-nation is a larger category, not just a single case. India's diversities may be greater than those of Spain, Canada and Belgium, but essentially all these countries belong to the same conceptual category. They have territorially-centred cultural differences. For stability and unity, state-nations generally require policies that are respectful of such tervitorially concentrated cultural diversities, The India-Sri Lanka contrast is worth briefly noting here. Sri Lankan Tamils were heavily concen- trated in the North and for long years, demanded federal autonomy, not independence. Despite the desir- ability of state-nation policies such as federalism under such circumstances, Sri Lana followed nation- state policies @ Ja France, leading to one of the nastiest civil wars in Asia, lasting a quarter century. Few significant political leaders in India have made a case for Sri Lanka-style unitary policies: imposition of Hindi, for example, over the entire population." Even under Mrs Gandhi, when Delhi often used its powers to undermine state governments, the argument was never about the imposition of Hindi for the sake of national cohesiveness. Mrs Gandhi's argument was about the respective powers of the centre and states, Similarly, even after they came to power, the Hindu nationalists, generally viewed as centralizers, never attacked the linguistically based federalism. ‘Second, the concept of state-nation does not simply indicate an institutional safeguarding of diversi- ties, but also a simultancous nurturing of commitment to the larger Indian political community. The ‘salad bow!’ metaphor does not adequately capture this dualistic dimension of nation-building; it prima- ly speaks of embracing diversities as a way of building the Indian nation. The concept of state-nation is both about recognizing diversities and building larger all-India loyalties. Jin India, the institutions that have played a key role in generating all-India loyalties, historically or currently, include the Congress party, the armed forces, the Indian Administrative Service (AS), Studies in Indian Politics, #, 1 (2013): 43-6348 ‘Ashutosh Vorshney ‘educational institutions such as the Indian Institutes of Technology and Indian Institutes of Management, ‘central high schools, the Supreme Court and over the last two decades, the Election Commission. Though ro good studies of the film industry and sports are available, the hypothesis that Bollywood and Cricket have enlarged the corpus of all-India loyalties has enormous plausibility and is worth exploring later. Some might object to the inclusion of the IAS in this fist. The LAS is often criticized for its red tape and for obstructing India’s economic progress. That may well be true, lsut from a nation-building per- spective, another side of the IAS deserves fresh scrutiny. Since IAS officers are part of both centre and stetes—in that they are selected by Delhi but assigned to a state cadre and they go back and forth between Delhi and states during their careers—they are in many ways an embodiment of the stafe-ntion concept. They simultaneously belong to a state as well as to the Indian netion. Their incentives are struc~ tured in such a way that even when they serve states, Delhi is never far away from their consciousness. Had India had a civil service that was entirely state-based, or wholly Delhi-centric, the problems of nation-building would have been far more, not less, serious. ‘A simultaneous pursuit of recognizing diversity and building unity is not an easy political undertak~ ing. India’s record is not perfect, as secessionisin in some states, to be discussed later, clearly demon- strates, But it is worth asking how the concept of state-nation has empirically fared thus far Luckily, survey research provides evidence. Table | summarizes data, collected in four surveys, on ‘whether Indians are proud of India. The proportion that is ‘very proud’ or ‘proud’ adds up to more than 85 per cent in each survey. Table 2 presents data on subjective national identity in India, collected between 1998 and 2005, Roughly tvo thirds of Indians say thet their identity is (a) cnly Indian, (b) more Indian than ‘Table |. Pride in India, 1990-2005 (per cent) WYSI990 WS1995 VNS2001 SOSA2005 Very Proud 67 66 él Proud 5 19 2B Not Proud 8 9 3 Don’t KnowiNo Answer 0 6 8 Gample Size) (2466) 2040) (6387) ‘Source: 1990, 1995 and 2001 rounds of che World Values Survey (WVS), and the 2005 round of the State of Democracy in South Asta survay (SDSA). WVS is conducted by the Inter-University Consorsium for Political and Socal Research, headquartered at the University of Michigan, Ann Arbor, USA. SDSA is conccted by the Centre for the Study of Developing Societies, Delhi ‘Table 2, Subjective National Identity in india, 1998-2005 (per cent) NES 1998 SSA 2005 Only Indian 50 35 More indian than state identity NA 2 As Indian as stave identity 16 9 More state identity than Indian NA to ‘Only state identity 20 2 Don't know!No answer 14 ey ‘Gampie Size) (e140) (5385) Source: 1996 round of the Nacional Election Seady (NES) and 2005 round of State of Damocracy in South Asia survey (SDSA), both conducted by the Centre for the Suudy of Developing Societies, Delhi Studies in Indian Politics, i, | (2013): 43-63How has Indian Federalism Done? 49 state-based and (c) equally Indian and state based. Only 20-22 per cent of the random sample says that it has either an (d) entirely state-based identity or (¢) more stete-based than at Indian identity. Comparative research on this question suggests that these are very high numbers for commitment to a larger political unit, despite the institutional safeguarding of state-based diversities (Stepan, Linz and Yadav, 2011). In sum, it would appear that the simultaneous pursuit of nationalism and subnationalism has been reasonably successful in India. The commitment to the larger polity has not been achieved not by a sup- pression of diversities, but by their recognition. The Linguistic Principle and Constitutional Division of Powers'? Of all of India’s cultural identities, as already explained, language and tribe are the only geographically based ones. Religion and caste tend to be unevenly spread all over the country. I Because language was the rationale for statehood for most parts of India, the federal scheme came to called linguistic. Each state has its own official language: central government business is conducted i either in Hindi oF in English. Fifteen languages are spoken by an overwhelming majority of people in their respective states (Table 3), These fifteen form the basis of most Indian state boundaries. With the exception of Hindi (which is the lingua franca in six states), each of the fifteen languages is both the main language in a single state and only marginally spoken outside that state From a national perspective, multiple languages as a basis of stale communication were viewed initially as problematic. For greater national cohesion, Article 351 directed the central government to promote Hindi ‘so that it may serve as a medium of expression for all the elements of the composite culture of India’, and Article 343 provided for the English language only for a period of fifteen years. In practice, however, the inability to quell political mobilization that followed the attempts to introduce Hindi as an all-India language was decisive. Afier the bad experiences, the central government restrained its excessive enthusiasm for Hindi and, every fifteen years, Parliament reinstates English as an official language. Basically, a multi-lingual India has been accepted as a reality, especially after it beeame clear that the linguistic formation of states had led to a dissipation of language-based violence. Table 3, India's Principal Languages Langeage Spoken by Percentage of India's Population Hing 399 Bengali . TTeugu 78 Marathi 74 Tamil 63 Ura 5.1 Gujarati 48 Kenneda 39 Malayalam 36 Oriya 33 Punjabi 28 Assamese 1s ‘Source: Census of inca, 2001. Studies in indian Politics, 1, ! (2013): 43-6350 Ashutosh Varshney ‘The discussion of the concept of state-nation might have suggested that the choice of linguistic identi- ties as a basis for statehood in the federation was a principled act of far-sighted statesmanship, but that would not be entirely true, Understanding the nature of Indian diversities as early as 1921, the Congress party did commit itself to a linguistic federation. But doubts about the validity of the idea also devel- oped.! Many of India’s violent political mobilizations in the post-independence period were organized along linguistic lines, The first linguistic state, Andhra, was cteated in 1953 following riots touched off by a “fast unto death’ by a linguistic promoter. As it finally emerged, the linguistic basis of federalisma was a synthesis of considered principles and learnt pragmatism. This prisciple was given conerete insti- tutional and administrative form only following linguistically based political mobilization in the 1950s. By the late 1960s, India’s state boundaries had been fundamentally restructured along linguistic lines. Constitutional Division of Powers ‘The debate in India’s constituent assembly showed a fair degree of consnsus on the subject of centrali- zation. The horrors of India’s 1947 pactition provided the context for suc a consensus, Nehru contended that ‘it would be injurious to the interests of the country to provide for a weak central authority which ‘would be incapable of ensuring peace, of coordinating vital matters of common coneem and of speaking effectively for the whole country in the intemational sphere’ (Bhattacharya, 1992, p. 96). Ambedkar, chair of the Constituent Assembly, also liked ‘a strong united Centre, much stronger than the Centre we had created under the Government of India Act of 1935? (ibid, pp. 8-89). ‘Eventually, the constitution created three lists: Union, State and Concurrent. The Union list of legista- tive powers includes 99 subjects and the State list 61 and Concurrent powers belonging to the union and the states extend (0 52 items." The first list includes defence, external affairs, major taxes, ete.; the sec ‘ond covers law and ordes, police, agriculture, primary and secondary education, etc; the third includes economic and social planning and higher education. All the residual powers are vested in the centre, ‘The most Delhi-oriented constitutional provisions cover the powe:s of the national cabinet and parliament with respect to the making of states. Articles 2 and 3 of the constitution enable Parliament by Jaw to admit a new state, increase or reduce the area of any State or chenge the boundaries or name of any State. The consent of the state is not required. Articles 352-360 of the constitution have generated the maximum cebate. Under these emergency provisions, the country begins to function more or less like a unitary stats, The emergencies are broadly defined as: financial emergency, external threat to the state and cases of internal disturbance. In June 1975, Prime Minister Indira Gandhi declared emergency urder Article 352 on grounds of internal disturbance, During the term of the emergency, lasting till March 1977, the 42nd amendment was passed which made the constitution quite centralized. Later, when Iadira Gandhi and the Congress party were electorally defeated in 1977, the 43rd and 44th amendments corrected the imbalance, Jn the event of a state-level break down of the constitutional machinery, Article 356 allows for the invocation of ‘President's Rule’, whereby the president, on the recommendation of the Union cabinet, can assume the normal powers of @ state, remove a state government, dissolve the state legislature, and empower the Union legislature to exercise the respective state’s power for 2 temporary period. Over the past five decades, Article 356 has been used on more than a hundred oceasions. A commis- sion appointed by the Government of India—ihe Sarkaria Commission—o investigate the abuse of this Studies in Indian Politics, 1, | (2013): 43-63How has Indian Federalism Done? 5 provision found that out of 75 cases until then, only in 26 was the use clearly justified or inevitable, The pattern, however, changed in the 1990s, when the frequency of President's Rule and the use of Article 356 went down significantly. In 1994, the Supreme Court ruled—in the S.R. Bommai case—that a proc ‘amation under Article 356 can be judicially reviewed and the central government would have to reveal to the court the relevant material justifying its decision to exercise its power under the provisions of this article. In the 1990s, the President also exercised the constitutional privilege to return to the cabinet the executive request to impose President's rule on a state. Over the past decade and a half, three such requests have either been denied or sent back for review. These interventions, by the Supreme Court and President, have seriously reduced the risk of arbitrary central intervention in state politics and begun to restrain central leaders from using exceptional powers for partisan purposes. Another important constraint is simply the coalitional nature of polities, Both ‘major coalitions that have ruled Delhi over the last two decades have depended on regional parties for their survival. Suspending state governments would undermine coalitions and bring about the downfall of national governments. A political consensus that the use of Article 356 should be minimized has emerged in India, which appears to have made federalism deeper and more secure, Resource Transfers ‘The literature on fiscal federalism that deals with the transfer of resources from the Centre to states is truly voluminous."* Abstracting ftom details, an overview of the basic edifice of resource transfers is presented below. For the purposes of this article, especially important is the question of how and in what ‘ways, polities influences the distribution of resources. Resource transfers from Delhi to the states takes place in implicit and explicit ways, Not easil caleu- lable for each state but increasingly part of the discourse, the implicit transfers consist of subsidies, especially for food, fertilizer and fuel; tax concessions for special economic zones; and subsidized loans to states from the central government or the banking system, etc." ‘The explicit mechanisms of transfer are three-fold: 1. Devolution of taxes through the Finance Commission, set up by the central government every five years under Article 280; 2. Grants and loans given by the Planning Commission for implementation of development plans; 3. Transfers for various projects wholly funded by central government, or for the so-called centrally sponsored schemes, for which states typically bear a proportion of the cost. In the early 1950s, only 10-12 per cent of the central tax revenue used to be given to the states. By ‘the 1990s, that share rose to roughly 30 per cent, and since then, has fluctuated between 26 and 30 per cent (Figure 1). On the whole, the poorer and bigger states with larger populations receive more, though if their own tax effort is not substantial and fiscal discipline is lax, the share will be lower than would be justified purely in terms of population, area and income. ‘Plan transfers’, in the form of grants and loans and routed through the Planning Commission, consti- tute the second mechanism of resource transfer. The so-called Gadgil formula, approved in 1969, is the comerstone of plan transfers. Accordingly, India is divided into two types of states: special category Studies in Indian Politics, 1, | (2013): 43-63