Towards A Common Federal Agenda

685619 sonia gandhi mayawati mamata banerjee rahul gandhi n chandrababu naidu sworn in karnataka hd kumaraswamy

2019 Elections are upon us. It is clear that NDA led by Modi is facing an uphill battle. Policies like Demonetisation and haphazard implementation of GST has left Indian economy in shambles. Agrarian distress and curbs on cattle economy are pushing rural population to penury. Constitutional institutions have been compromised and rendered toothless. Federalism is on the brink of collapse – collective responsibility of states and centre has been given a go by. UPA helmed by Congress is expected to do better than before – but it is also clear that regional parties are going to hold sway and shall decide who and how India shall be governed post 2019.

It is in this context that we have to think of unifying factors that can galvanise regional parties and the National parties to form a lasting coalition and set right India’s flawed course of development. To come together – these disparate formations need a common base. I am arguing a Common Federal Agenda (CFA) shall provide that base.

It is a paradox of Indian development paradigm that most of the spending is done by the states, but most taxes are collected by centre. Recently with the dismantling of planning commission – centre has arrogated itself the power of spending this amount arbitrarily. This is affecting long term development as well as distribution equity. Frequent meddling in state affairs has become the norm.

Regional parties want to have a say at the centre and even be at the helm of affairs due to this sorry scenario. By moving economic and administrative power in favour of states, the coalition can ensure all round development and at the same time provide a stable government at the centre. If states are given fiscal and administrative autonomy – regional parties shall choose to concentrate and develop their base in respective states.

Here are some of the recommendations that can be part of such a Common Federal Agenda (CFA) on the basis of which this pre/post election coalition can work.

1. Devolution of Taxes – GST has taken away all taxation discretion from the states. More over states get only 50% of taxes owed to them directly in the form of SGST. 50% is collected by centre in the form of IGST and is released at its discretion putting state finances in jeopardy. This is making states desperately dependent on centre which was not envisaged by constitution.

GST devolution has to be reworked in favour of states – 60% should go to states and 40% to centre. This should eventually become 75-25% in favour of states once concurrency list is pared down to minimum.

Direct taxation including individual and corporate income tax is collected by centre and 42% of the amount is being devolved to states using Finance commission formula today. This is not only inefficient, but also stifles economic competition among states. Also, much of this money comes in the form of central schemes without taking into account diversity of Indian states.

States and centre should equally divide direct taxes. There should be state income tax and central income tax which shall be equally split. This will provide a new revenue stream to states. States generating more employment and industry gets incentivised while states with lower employment can compete by reducing tax rates at their discretion.

2. Central Overreach – Current central overreach is affected through governorship and central administrative service both of whose discretion and loyalty comes into question time and again. This is contrary to the spirit of constitution which treats centre and states as equal stakeholders.

Governorship should be entirely abandoned, or its powers should be severely curbed to make sure there shall be no meddling in the affairs of a state. Judicial remedy shall be sufficient deterrent for errant administrations at the centre as well as states in accordance with constitution. President can be the sole custodian of both centre and state constitutional mechanisms.

Central administrative services shall be restricted to centre and each state shall be allowed to have their own civil administrative service which is trained to be aligned to their needs. There can be limited movement between central and state services – but we need to abandon IAS/IPS/IFS in its current form which is an imperial legacy.

3. State Autonomy – Many items in the concurrency list including land acquisition, agriculture, forests, wildlife, education, inland transport, vehicles, stamp duty, local judiciary, mining and minerals etc. squarely affect local population and should be summarily handed over to states list.

States shall form councils for policy formation and guidance in areas like primary and secondary education and university education which shall supersede today’s bodies like UGC, NCERT, AICTE etc. Each state shall have exactly one vote at the council.

Central education institutions shall be handed over to states council for higher education for policy and governance.

Some union list items like direct taxes, banking, and railways should be moved to concurrent list in keeping with times. Duties including estate duty, stamp duty and succession duties should be summarily moved to state’s list.

Eventually most items in concurrent list should be moved to state’s list. States shall co-ordinate to have state councils in each area for policy co-ordination.

4. Judiciary – State high courts should be elevated to State Supreme Courts and shall serve as courts of last resort. Union Supreme Court shall only adjudicate Interstate disputes and cases involving constitutional questions alone.

Execution of CFA shall result in real power and monetary transfer to states. This shall allow states to follow appropriate development paradigms and also foster strong local leadership. This will also give a fillip to further devolution of powers to local bodies. Regional parties can concentrate on developing their respective bases. CFA thus is the necessary and sufficient condition for all-round development and stable governance of India.

Anuraj Ennai is an entrepreneur based in Bangalore

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