Addapedia Editorial: Daily News Editorial PDF, 30 October 2024

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A picture of a growing economic divide in India

Context

Data from the paper titled, ‘Relative Economic Performance of Indian States: 1960-61 to 2023-24’, show a growing gap that is leading to the questioning of federalism

Introduction

In September this year, the Economic Advisory Council to the Prime Minister (EAC-PM) released a paper shows the Relative Economic Performance of all States: 1960-61 to 2023-24. It presents the share of each State in the country’s income and the per capita income compared to the all-India average.

For Example, Maharashtra, which is the highest contributor to the nation’s economy, has a per capita income of about 150% of the national average. It consists of Mumbai, which is rich, and Vidarbha, which is known for farmers’ suicides due to poverty.
Mumbai’s rich contribute the largest amount of direct taxes and the city’s municipality is the richest in the country. But it has huge slums with uncivilised living conditions.

Regional Differences

The report provides the consistently better performance of the western and southern regions of India and the weak performance of the eastern States.
The northern States of India have poor performance with the exception of Haryana and Delhi.
the data shows that, the growing economy divide in the country,which is not good for a federal and diverse nation like India.

Effect of federalism

Definitions: Federalism is a system of government that distributes powers and responsibilities between a central government and regional governments.

Representatives of the richer States recently held a conclave in Kerala and argued that they are not receiving their fair share of resources from the Centre. That shows the weakening of the spirit of federalism.
In the year 2000 also, there was a ‘Conclave of the successful’ to protest the devolution by the Eleventh Finance Commission of India.

Threat to federalism

The continue differentials in the economic performance of different States are threatening the federalism.
- The policy needs to reverse this trend by keeping differentials at the present level is no more an option.
- The requirement of a reversal trend of private investment, weaken the governance and poor infrastructure in the States are lagging.
Required Actions from Centre and States: Both the Centre and the States need to act on strengthening the federalism.
- The States need to improve governance and reduce the levels of corruption in their jurisdiction.
- Public expenditures on social sectors need to be raised substantially. Private investment in the poorer States cannot be raised by fiat in the market-driven economy.

Way Forward

Reassess the Role of Governors
optimal Utilization of Inter-state Council
Empowerment of Local Self-Governments
Electoral Reforms for Political Equity

Conclusion

Addressing persistent frictions in Indian federalism requires a comprehensive approach, it is crucial to work on issues like fiscal policies, institutional mechanisms, and political empowerment, ensuring a more cooperative federalism and effective governance system which could help the poor performing states to concretise the federal structure.