Opinion State of the art

Prime Minister Narendra Modi has embarked on a broad reordering of Centre-state relations which, apart from immediate economic effects, could have political implications in the long term. Having dealt with the Centre as a chief minister, he is uniquely qualified to smooth out a problem that has been intractable from at least the early Eighties, when the Sarkaria Commission was appointed. Modi has been building on the theme of enlarging federalism from his election campaign and, while inaugurating a special economic zone at the Jawaharlal Nehru Port Trust near Mumbai, he has now announced that the Centre would decentralise export promotion by setting up commissions at the state level. Local organisations in which Centre and state collaborate to spur manufacturing and export should be more efficient than the present system, in which the promotional impetus comes entirely from the Centre, which is remote from prospects and problems on the ground.

Even earlier, Modi has acknowledged that one size does not necessarily fit all states. He has shown a willingness to allow states to play a bigger role in managing political and economic ties internationally. In recent years, states like Tamil Nadu and West Bengal which share resources, languages and culture across borders have embarrassed diplomacy by using Delhi’s policies as provocations for playing local politics. If they find representation in the policy-making process, on the contrary, they could become powerful agents of regional diplomacy. On Independence Day, the prime minister had abolished the Planning Commission and explicitly given states a bigger role in planning. This, too, will unleash efficiencies and encourage states to work their finances responsibly, instead of complaining about having inappropriate development stuffed down their throats.

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Such steps amount to real, substantial federalism, reminiscent of the experience of Europe, which used economic union as the foundation for durable political unity. Federal reform could become a major success of this government and Modi can expect a substantial political dividend. If the states are encouraged to take or share responsibility for planning, development, business promotion and even international relations, interest should flag in the rat race for special status and the politics of special packages. Wringing better deals from the Centre would become less rewarding for state politics than securing better economic and developmental benchmarks. In West Bengal, for instance, it would deny both the CPM and the Trinamool Congress the trusty plank of the “stepmotherly” Centre. And if the central government has a positive, ongoing engagement with the states, the BJP could carry them with it, effortlessly improving its political fortunes nationwide.