The late N.T. Rama Rao once described the Centre as “a myth”. That was peak federalism, if you will. It’s a spirit that flourishes in India, if you take the swelling in the number of states as the distinct metric. From the 17 provinces and 565 princely states that came together to form the Indian Union, a total of 14 states and six Union Territories (UTs) were formed following the Reorganisation of States in 1956. Agitations for separate statehood increased the count to 29 states and seven UTs by 2014. Now, after the bifurcation of Jammu and Kashmir, there have been 28 states and eight UTs since October 2019.
Beyond boundaries and demographics, in electoral and governance terms, federalism has inspired a transition from single-party rule to that by alliances. As democratic theorists have long argued, the doctrine of fiscal and administrative centralisation, pursued vigorously by successive governments in New Delhi, is built on specious arguments. It ignores the contention that an effective, efficient Union of States—and indeed, growth—can only emerge out of robust federalism, built around sustained societal deliberations.
The National Development Council (NDC), a unique platform that brings together all states and UTs, has failed the onus of creating a real debate here. On balance, states have been better at promoting inclusive growth—the uniform spread of health, education and poverty reduction—because they are focused on, and alive to, region-specific realities. Being more familiar with the ground, and driven by democratic impulses, they also have a better record of opening social and political spaces for subaltern groups.
Kerala and Tamil Nadu, for instance, have done more to improve the lives of their residents, across communities, than any other state, and, therefore, figure on top of human development indices. In Kerala, India’s first non-Congress government, led by E.M.S. Namboodiripad, initiated land reforms that have served as the bedrock for the state’s success in education and health. In Tamil Nadu, MGR introduced the noon meal scheme for children that bettered nutrition in what is perhaps the earliest direct benefit transfer scheme. Employment guarantee in Maharashtra, local governance initiatives in Karnataka and Kerala, and school education in Himachal Pradesh are among schemes that were later adopted at the national level. In 2021, the Dravida Munnetra Kazhagam reintroduced the narrative on respecting state’s rights, first articulated by party founder C.N. Annadurai.
What is worrisome is that states that have successfully moderated population growth may lose out on resources if demographics remain the sole determinant for development funds—poorer states contribute far less to the economy but require greater fiscal inputs. This has created a context where collective action among states becomes difficult.
As it is, analysts say, India’s macro fiscal realities actually increase the fragility of state finances. The central strategy of squeezing revenue from states—by increasing cesses or increasing state shares in Union schemes—and insisting on giving GST compensation only in the form of loans, that too in a process beset with long delays, runs contrary to the spirit of fiscal federalism. But the biggest conceptual failing is to look at the politics of regional identity as inherently isolationist. What the one-size-fits-all theory misses in the realm of social development, it also misses in the political domain—the fact that states offer a finer sieve and more sensitive lens with which to negotiate diverse political contexts and identity claims.