Daily Editorial Analysis for 13th May 2020

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Reaffirm cooperative federalism

Paper: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations.

Sub-Topic:  Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges


  • Responding effectively to the pandemic requires the Centre to view the States as equals.
  • The challenges on the principle of federalism due to the current circumstances in India.

What is Cooperative federalism:

  • Federalism signifies the independence of the Union and State governments of a country, in their own spheres.
  • However, while framing the Indian Constitution, the Constituent Assembly carefully studied the constitutions of other federations like the U.S., Canada, Australia and Switzerland and adopted a ‘pick and choose’ policy to formulate a system suited uniquely to India’s need.
  • As a result, India’s Constituent Assembly became the first-ever constituent body in the world to embrace what has been referred to as ‘cooperative federalism’.
  • Cooperative federalism essentially is defined as the administrative cooperation between the Centre and the States, and a partial dependence of the States upon payments from the Centre.
  • Despite a strong Centre, cooperative federalism doesn’t necessarily result in weaker States.


The current circumstances under the pandemic crisis have severely strained the principle of federalism in India.

  • The central government’s zone classifications into ‘red’ and ‘orange’ zones have evoked sharp criticisms from several States. The States have demanded more autonomy in making such classifications.
  • Despite State consultation being a legislative mandate cast upon the Centre under the Disaster Management Act of 2005, there has been minimal consultation with the states and the guidelines issued so far have been mostly based on a top down approach.
  • The Disaster Management Act of 2005 envisages the creation of a ‘National Plan’ as well as issuance of binding guidelines by the Centre to States in furtherance of the ‘National Plan’. The Act mandates State consultations before formulating a ‘National Plan’, so that the binding guidelines issued under it, also represent the views of the States.
  • The Centre has not formulated a ‘National Plan’, and has chosen instead to respond to COVID-19 through ad hoc binding guidelines issued to States, thereby circumventing the legislative mandate of State consultations.
  • The Centre has directed the State governments to strictly enforce the set of guidelines, prohibiting the States from lowering the Centre’s classifications.
  • The selective application of the Act serves to concentrate all decision-making powers with the Centre.

The states are facing a huge financial burden:

  • Corporations donating to PM-CARES can avail CSR exemptions, whereas such provisions are not available for the Chief Minister’s Relief Fund. This disincentivizes donations to the Chief Minister’s Relief Fund and diverts crores in potential State revenues to PM-CARES and thus, makes the States largely dependent upon the Centre.
  • The revenue streams of several States have dried up because of the liquor sale ban, negligible sale of petrol/diesel, temporary halt of land dealings and registration of agreements.
  • States’ GST collections have been severely affected with their dues still not disbursed by the Centre.
  • This is a major concern given the fact that States act as the first responders to the pandemic, and supplying them with adequate funds is essential for effectively tackling the crisis.

Way Ahead:

  • The progress of the Indian Republic rests upon active cooperation between the states and the centre. Similarly, India’s success in defeating COVID-19 actively rests upon Centre-State collaboration.

The Centre needs to view the States as equals, and strengthen their capabilities, instead of increasing their dependence upon itself.

Perilous state

Paper: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations.

Sub-Topic:  Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.

Context: State government’s precarious financial condition.


The COVID-19-induced lockdown has severely affected State finances in the following ways:

  • The state’s revenue sources from liquor sales, stamp duty from property transactions and sales tax on petroleum products, which account for almost half the total revenues, have collapsed.
  • The state’s expenditure on interest payments, social sector schemes and staff salaries remain unchanged.
  • The states are having to spend more on strengthening their health infrastructure and on COVID-19 measures, including testing, treatment and quarantining.


  • Given the state of finances, some States have gone ahead and cut salaries of their employees and pension benefits to rein in expenses.
  • Even the traditionally well performing states such as Maharashtra, Tamil Nadu and Karnataka, are now requesting for funding support from the Centre and relaxation in borrowing rules by the RBI.
  • Tamil Nadu, Karnataka and Maharashtra, looking for revenue sources commenced liquor sales with outlets flouting all physical distancing norms. The fear is that this could seed fresh infections.

What is to be done?

  • The burden is on the Centre to find the resources to immediately release the dues of the States and also reimburse them for their COVID-19-related expenses.
  • Though the Centre itself is not in a comfortable financial condition, the centre at least has the means to replenish its finances through conventional and unconventional means.
  • The centre has been able to appropriate the benefits of falling oil prices through increase in duties.
  • The centre has also recently announced an increase in its borrowing by half for the current fiscal.
  • There is a need to relax the fiscal deficit levels of the States from the current 3% level to at least 4.5%. The States should be allowed to borrow more.
  • The Centre should give States the freedom to restart economic activity based on their own assessment. Greater leeway in restarting economic activity will relieve some of the financial stress, not just on the States but also on the Centre.

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