What changes has the Union Government recently introduced in the domain of Centre-State relations? Suggest measures to be adopted to build the trust between the Centre and the States and for strengthening federalism.

Recent Changes in Centre-State Relations and Measures to Strengthen Federalism in India: A Comprehensive Analysis

The relationship between the Centre and States in India is at the heart of the country’s federal structure. This dynamic relationship has seen numerous developments over time, particularly with regard to financial and administrative matters, reflecting the evolving nature of India's governance model. The Union Government has recently introduced several changes in the domain of Centre-State relations to address contemporary challenges and ensure a more efficient functioning of the federal system. Along with these changes, it is essential to explore measures that can be adopted to build trust between the Centre and the States, and further strengthen the federal framework to promote cooperative governance and balanced development.

Centre-State relations

Recent Changes in Centre-State Relations

Extension of GST Compensation Cess: One of the most significant changes introduced by the Union Government is the extension of the Goods and Services Tax (GST) compensation cess. Originally, GST implementation was expected to result in revenue-neutral rates for states. However, many states expressed concerns about revenue shortfalls post-GST implementation. To address these concerns, the Centre has agreed to extend the compensation cess, which ensures that states will be compensated for any revenue loss for a specified period. This move aims to provide financial stability to states, particularly in the wake of the economic impact caused by the COVID-19 pandemic, where states experienced revenue deficits.

Impact: This measure signifies a proactive step by the Union Government to reassure states and protect their financial interests, helping to promote a sense of fairness and cooperation within the federal system.
Implementation of the 15th Finance Commission’s Recommendations: The 15th Finance Commission, which assesses the financial health and distribution of resources between the Union and the States, made several recommendations concerning fiscal federalism. While the commission recommended a reduction in the states' share in central taxes from 42% to 41%, it proposed an increase in grants to the states to ensure that they remain financially secure. However, some states have raised concerns regarding these changes, viewing them as detrimental to their autonomy in fiscal matters.

Impact: The issue of resource allocation remains contentious, and while some states welcome the increase in grants, others argue that the reduction in their share of central taxes undermines their fiscal autonomy and hampers their capacity to address local needs.
Amendments to All India Services Rules: In a bid to streamline governance and enhance administrative efficiency, the Centre has amended the rules regarding the transfer and deputation of officers from the All India Services (AIS) — including the Indian Administrative Service (IAS), Indian Police Service (IPS), and Indian Forest Service (IFoS). These amendments centralize some aspects of service control, which has led to concerns about states’ ability to manage their administrative affairs independently. State governments argue that the greater involvement of the Centre in these matters dilutes their control over the functioning of their bureaucracy.

Impact: This change has sparked debates over the centralization of power and the weakening of state autonomy in administering local affairs. Many see it as an infringement on the principles of cooperative federalism.
Promotion of Competitive Federalism through National Indexes: The Union Government has introduced competitive federalism initiatives through the introduction of various indices, such as the State Health Index, School Education Quality Index, and the Composite Water Management Index. These indices assess the performance of states on various developmental parameters, thereby encouraging states to improve their performance and compete in sectors like education, health, and infrastructure. The idea is to use positive competition to promote better governance and development outcomes at the state level.

Impact: These measures encourage states to align with national goals while simultaneously respecting their individual developmental needs. It fosters a spirit of friendly competition and incentivizes states to adopt best practices.

Measures to Strengthen Trust Between the Centre and the States

While there have been recent changes, it is essential to ensure that the federal framework remains strong, and the relationship between the Centre and the States is based on trust and collaboration. To achieve this, several measures can be adopted:

Enhancing Fiscal Autonomy of States: One of the core issues in Centre-State relations is the fiscal imbalance between the Union and the States. The 15th Finance Commission’s recommendation to reduce the states’ share in central taxes has raised concerns about the erosion of fiscal autonomy. Therefore, a greater emphasis should be placed on empowering states financially to cater to their developmental needs.

Recommendation:
- Increase the devolution of central taxes to states.
- Review the Finance Commission's recommendations periodically to ensure that states’ fiscal needs are met.
- Implement measures to allow states to have greater control over their revenue-generating mechanisms without excessive interference from the Centre.
Strengthening the Role of the Inter-State Council: The Inter-State Council, established under Article 263 of the Constitution, plays a crucial role in resolving disputes between the Centre and the States. However, its functioning has been sporadic and often lacks the necessary authority to resolve issues effectively. The Council needs to be revitalized and made more dynamic.

Recommendation:
- Hold regular meetings and make its functioning more proactive in resolving disputes.
- Empower the Council to take binding decisions on inter-state issues to prevent delays in resolution.
Reforming the Role of Governors: Governors play an important constitutional role as the representatives of the Union in the states. However, there have been instances where governors have been accused of acting in a manner that undermines state autonomy. Strengthening the federal nature of governance requires a more neutral and non-interfering role for the governor.

Recommendation:
- Review the powers and roles of governors to ensure that they function in a way that strengthens the autonomy of the states.
- Encourage a collaborative relationship between the state government and the governor, particularly in matters relating to administration.
Ensuring Better Coordination between the Centre and the States: Coordination between the Centre and the States is vital for the smooth functioning of the federal system. The NITI Aayog, which is responsible for formulating and coordinating national policies, can be utilized more effectively to ensure that state governments are actively involved in the decision-making process.

Recommendation:
- Increase the frequency and depth of consultations between the Centre and the States on key national issues.
- Ensure that states’ concerns are incorporated into the national policy framework, particularly in sectors like health, education, and infrastructure.
Revisiting the Centre-State Power Sharing Framework: The distribution of powers between the Centre and the States, as outlined in the Union, State, and Concurrent Lists, should be periodically reviewed to ensure that it reflects the evolving needs of the country.

Recommendation:
- Amend the Constitution to update the allocation of powers, especially in emerging sectors like information technology, environmental policy, and public health.
- Empower states to legislate on new subjects, particularly in matters affecting local governance.
Promoting Transparency and Accountability: Transparency in governance, especially in the allocation of resources and the implementation of development projects, is essential for maintaining trust between the Centre and the States.

Recommendation:
- Implement mechanisms that ensure transparency in the flow of central funds to states and the monitoring of their utilization.
- Establish accountability measures to ensure that resources are used effectively and equitably across states.

Conclusion

The relationship between the Centre and the States is the cornerstone of India’s federal structure. While the Union Government has introduced several changes to strengthen governance and address financial imbalances, it is equally important to ensure that the federal system remains inclusive, collaborative, and respectful of the autonomy of states. By enhancing fiscal autonomy, improving coordination, and strengthening institutional frameworks such as the Inter-State Council, India can build a stronger, more resilient federal system that fosters growth, trust, and mutual respect between the Centre and the States.