https://www.jstor.org/stable/pdf/23065612.pdf?

refreqid=fastly-default
%3Ad7a971318b9f67aca581e0639761c6d1&ab_segments=&origin=&initiator=&acceptTC=1

https://academic.oup.com/book/10382?
searchresult=1&utm_source=TrendMD&utm_medium=cpc&utm_campaign=Oxford_Academic_Boo
ks_TrendMD_0

The 2014 general elections in India marked a significant shift in the political landscape, transitioning
from a prolonged period of coalition governments to the dominance of the Bharatiya Janata Party
(BJP) at the center. Previously, coalitions had been the norm, but the BJP managed to secure a
majority in the Lok Sabha on its own. While some seats were won through alliances with regional
parties like Shiv Sena, the BJP emerged as the dominant force, with the Congress party dwindling to
just 44 seats.1 This shift potentially signaled a move towards one-party dominance in the Indian
political system.

This change has implications for center-state relations in India. The decentralization of power in the
Indian federal polity since the late 1980s and early 1990s had been attributed to two main factors.
Firstly, the rise of coalition governments had strengthened the states, reducing the frequency and
duration of President's Rule. Additionally, political decentralization coincided with economic
liberalization, which empowered states to attract investments and manage their economies. However,
the central government still retained a regulatory role, particularly in controlling state budget deficits.

Despite the potential for centralization of Indian federalism after 2014, several factors suggest that
there may be more continuity in center-state relations than significant change. While the Bharatiya
Janata Party's (BJP) dominance might imply a tilt towards centralization, the party also expresses a
commitment to accelerating liberalization, which has historically decentralized power. Unlike the
Congress, the BJP's priorities may prioritize economic liberalization over federal redistribution,
potentially limiting the scope for central control and emphasizing state autonomy. Furthermore,
enduring trends in decentralization in both politics and governance, as well as institutional checks like
state governments and the Rajya Sabha, could serve as deterrents to centralization efforts.
Additionally, Prime Minister Narendra Modi's previous advocacy for cooperative federalism and
proposals for restructuring intergovernmental relations indicate a willingness to maintain state
autonomy.2 The BJP's 2014 manifesto highlighted the importance of consultation and fiscal discipline,
suggesting a balanced approach to center-state relations under Modi's leadership. Thus, while there
are indications of potential centralization, various factors may contribute to a more nuanced and
balanced dynamic in Indian federalism.

It is imperative to look at the intricate interplay of political dynamics, economic imperatives, and
historical precedents when analyzing the potential shifts in center-state relations post-2014. By
thoroughly examining the BJP's commitments to both centralization and liberalization, as well as the
enduring trends in decentralization and institutional checks, a more comprehensive understanding of
the evolving landscape of Indian federalism emerges.

1 https://www.tandfonline.com/doi/pdf/10.1080/13597566.2019.1614921
2 Arjan H. Schakel, Chanchal Kumar Sharma & Wilfried Swenden (2019) India after the 2014 general
elections: BJP dominance and the crisis of the third party system, Regional & Federal Studies, 29:3, 329-354,
DOI: 10.1080/13597566.2019.1614921
Those who anticipated a state-friendly direction highlighted the Bharatiya Janata Party's (BJP)
pragmatic approach to coalition building, forming alliances with various regional parties such as the
Sikh nationalist Akali Dal in Punjab, the Tamil AIDMK, or the Assamese nativist Assam Gana
Parishad.3
However, contrary to these expectations, centre-state relations have become more centralised since
2014, despite the BJP's rhetoric of competitive-cooperative federalism. Nonetheless, this
centralization process has not been consistent across three key dimensions: political, fiscal, and
administrative. The political centralization receives the most support, while fiscal centralization
receives the least, influenced by decisions made by the Finance Commission and the impact of a
comprehensive reform of India's indirect tax system.

In comparative literature, "competitive federalism" typically refers to a system where states are
granted increased autonomy to pursue their political, fiscal, and policy objectives without undue
interference from the central government.4 This autonomy implies that states must take greater
responsibility for their actions and decisions, crafting tax policies and social services tailored to their
electorate while maintaining competitiveness relative to other states within the federation. The
underlying idea is that competitive federalism maximizes the role of states as laboratories for
democracy and policy experimentation, inherently promoting decentralization.

However, in India, the concept of "competitive federalism" often carries a different connotation and
may not truly embody competition.5 For example, the Modi government has utilized it to denote
states' ability to compete for central funding based on goals and objectives set either centrally or
jointly by the center and the states. Interpreted in this manner, "competitive federalism" may actually
foster a centralizing rather than a decentralizing trend.

Furthermore, the Indian government's strategy to stimulate competition among states to attract foreign
investment loses its decentralizing potential when the ruling party at the national level selectively
promotes investments in states under its control, presenting them as premier business destinations. 6 In
such cases, "competition" becomes more akin to "partisan federalism" rather than genuine
"competitive federalism."

Wfeisdknlzm,

Wafsdkjzncx,m

Wfhosdjlnkcxm,.

3 Ideology and Organization in Indian Politics: Growing Polarization and the Decline of the Congress Party
(2009-19) by Z Hasan 2022

4 Bednar, Jenna, William Eskridge, and John Ferejohn. "A political theory of federalism."
Constitutional culture and democratic rule 223 (2001): 224.
5 Sofi, Waseem Ahmad. Autonomy of a State in a Federation: A Special Case Study of Jammu and
Kashmir. Springer Nature, 2021.
6 Chudnovsky, Daniel, and Andrés López. "Policy competition for foreign direct investment." In Trade
Negotiations in Latin America: Problems and Prospects, pp. 135-154. London: Palgrave Macmillan
UK, 2003.
Who;fsjdnklc.mx,

The NITI working paper acknowledges that synchronising general and state assembly
elections may need to be phased in gradually. Ultimately, the proposal settles for a
compromise whereby half of the state assembly elections would coincide with general
elections, while the other half would be scheduled midway between two general elections.
Comparative evidence indicates that the anti-incumbent sentiment toward the central
government is typically highest when state assembly elections occur midway between general
elections.7 Conversely, when state assembly elections align closely with general elections,
their outcomes more closely mirror the national election results. Therefore, while the
proposal would streamline the election campaign and outcomes on a national level, it may not
necessarily bolster the incumbent central government's position. The responsibility now falls
on the Election Commission to delve deeper into this proposal, studying its intricacies and
providing recommendations on its potential implementation.

The Fourteenth Finance Commission (2015–2020) introduced a "trust-based" paradigm of

Center–state relations in India.8 It advocated for a shift from tied transfers to untied transfers,
ending the plan-non-plan dichotomy, and providing support through devolution of tax shares.
Additionally, it recommended supplementing the resources of local bodies and redesigning
the Inter-State Council. The Commission rejected special debt-relief packages in favor of a
rule-based approach to fiscal discipline and eliminated the distinction between general and
special category states.9 It also proposed an independent fiscal council for monitoring fiscal
rule compliance and removed "fiscal discipline" as a condition for the distribution of tax
shares.

The Commission's report aimed to decentralize fiscal resources by increasing the share of
states in shared tax receipts from 32 percent to 42 percent. This increase aimed to grant state
governments more autonomy and flexibility in designing and implementing development
programs.10 The Commission hoped that this financial autonomy would foster healthy

7 Roy, Prannoy, and Dorab R. Sopariwala. The verdict: Decoding India's elections. Penguin Random
House India Private Limited, 2019.
8 Bhasin, Niti. "Centre-State Financial Relations: A Study on the Role of Finance Commission."
VISION: Journal of Indian Taxation 4, no. 1 (2017): 68-78.
9 Akιn, Çiǧdem, Bruno Carrasco, Sudipto Mundle, and Abhijit Sen Gupta. "Fiscal Responsibility and
Budget Management Act in India: A review and recommendations for reform." (2017).
10 Kavita Rao, “Goods and Services Tax: The 13th Finance Commission and the Way Forward,” Economic
and Political Weekly 45 (48) (2010): 71–77
economic competition among states, leading to improved provision of public services and
reducing incentives for subnational governments to exploit fiscal resources indiscriminately.

The Fourteenth Finance Commission made significant changes to the horizontal distribution
of shared tax receipts, notably by omitting the "fiscal discipline index" used in previous
Commissions.11 While some critics viewed this as potentially encouraging fiscal profligacy
among states, it eliminated a source of perverse incentives for fiscal mismanagement by
removing the distinction between plan and non-plan revenues. This move aimed to
discourage states from manipulating deficit estimates on non-plan accounts to secure grants.
Unlike previous Commissions, the Fourteenth Finance Commission included plan
expenditures in its projections for states, integrating block grants previously allocated by the
Planning Commission. However, this change disadvantaged special category states, which
had received preferential treatment in terms of funding.12 Consequently, the recommendation
effectively ended the special status of these states.

The Fourteenth Finance Commission (FC) adopted an approach aimed at providing funds on
a more economically rational basis.13 Furthermore, the Commission recommended post-
devolution revenue deficit grants for 11 states without differentiation based on general or
special category status, thereby assisting backward SCS without discriminating against
backward "general category" states. Most special category states, except Arunachal Pradesh
and Sikkim, qualified for deficit grants, and three general category states—West Bengal,
Kerala, and Andhra Pradesh—also stood to benefit.14

The Modi government accepted the recommendations of the Fourteenth Finance Commission
on February 24, 2015. However, one implication of the new scheme, as argued by the Prime
Minister himself in a widely publicized letter to the Chief Ministers, is that increased
devolution would reduce the fiscal space for the center. However, the actual effect differed;
the revenue forgone due to higher devolution to states was offset by savings from delinking
or reducing central support for various Centrally Sponsored Schemes (CSS).15 Consequently,
the increase in total transfers to states was marginal. Additionally, in line with the
Commission's recommendation to enhance resources for rural and urban local bodies, the
Modi government drastically reduced the budget allocated to the Union Ministry of
Panchayati Raj.

The Commission's devolution scheme marked a qualitative shift by increasing the

decentralising component (united transfers through tax devolution) in total transfers and
minimising centralising components (non-statutory grants).16 The share of statutory grants,

11 https://iegindia.org/working-paper/fiscal-space-and-expenditure-priorities-post-14th-finance-commission-a-
study-of-five-indian-states/
12 https://prsindia.org/theprsblog/central-transfers-to-states-role-of-the-finance-commission?page=34&per-
page=1
13 https://prsindia.org/policy/report-summaries/report-15th-finance-commission-2021-26
14 https://www.civilsdaily.com/story/finance-commission-issues-related-to-devolution-of-resources/
15 https://prsindia.org/policy/report-summaries/report-15th-finance-commission-2021-26
16 https://www.thehindu.com/opinion/lead/the-unions-reins-on-financial-transfers-to-states/article67818520.ece
falling between these two poles, saw only a marginal increase. With the implementation of
the FC recommendations, the center's ability to utilize discretionary grants to influence state
spending priorities or favor politically significant states significantly diminished. 17 This shift
was notable, especially considering past instances where the center made significant financial
promises to states for political reasons, as seen in the case of Bihar ahead of the state
assembly elections in 2015.

17 https://www.niti.gov.in/sites/default/files/2019-01/Strategy_for_New_India_2.pdf