Business India ×
  Magazine:
States

Published on: Aug. 9, 2022, 4:46 p.m.
States of the nation: Evolution, assertion and innovation
  • For a long time, India had seen a Big Brother attitude from the Centre towards states

By Rakesh Joshi. Executive Editor, Business India

Before they took their current shapes, sizes and names, the constituent states of the Indian Republic went through a long process of evolution. While India gained independence officially in 1947, there was a demand for state reorganisation in parts of the country. While the demand for new states was primarily based on language, constitutional drafters held a variety of perspectives. Since the Constituent Assembly did not have enough time to examine such a huge issue and administrative difficulty, they formed Commissions to investigate the matter. The matter rested there for some time.

Earlier, the British authorities had tried to deal with the problem in their own insular way. For instance, the first Partition of Bengal in 2015 was a territorial reorganisation of the Bengal Presidency, which encompassed Bengal, Bihar, parts of Chhattisgarh, Orissa, and Assam, implemented by the authorities of the British Raj.

The reorganisation separated the largely Muslim eastern areas from the largely Hindu western areas. What happened in 1947 was not so much the partition of the whole of Britain’s Indian Empire as the partition of two of its eleven provinces: Punjab and (again) Bengal, again on religious lines.

Prior to independence, India had three types of states – territories of British India, princely states and colonial territories, formerly occupied by France and Portugal. By the 26 January 1950, India had formally transitioned from a dominion to a republic of states. Following the establishment of an Andhra state in 1953 for Telugu-speaking regions of Madras state, the State Reorganisation Commission was formed to evaluate the republic's restructuring, largely along linguistic lines.

As many as 14 states and six Centrally administered territories were created in 1956. The states included Andhra Pradesh, Bihar, Bombay, Jammu and Kashmir, Kerala, Madhya Pradesh, Mysore, Tamil Nadu, Orissa, Punjab, Rajasthan, Uttar Pradesh and West Bengal. Since independence, however, the boundaries of the Indian states have kept on changing year by year.

For instance, Punjab got divided into Haryana, Himachal Pradesh and what now remains Punjab in 1966. Earlier, the states of Maharashtra and Gujarat were divided and given statehood under the Bombay Reorganisation Act 1960. This was in response to strong demands and agitations.

Currently, India has 28 states and nine Union Territories (UTs), with Telangana becoming the newest state of the country. 

With rising demand from its populations, Indian states are in an assertive mode. Chief ministers belonging to the Opposition, aware that the law of diminishing political returns will set in if they don’t deliver, have taken an adversarial position vis-a-vis the Centre, so that they can explain away (partly, if not fully) their shortcomings at the moment of reckoning. States aligned with the ruling party at the Centre have taken advantage of this factor, getting various Union ministries to loosen the financial and regulatory strings to push various projects and getting the Prime Minister’s imprimatur on it.

Of course, there are exceptions to this rule. For instance, the Naveen Patnaik-led Odisha, which has emerged one of the top performing states in the country in terms of improvement of Human Development Index, is a model of people-centric governance.  But, the manner in which Patnaik, who is also president of his party, BJD, has sought to carry out the business of governance has deeper connotations – a signal of his, and his system’s, unchallenged supremacy in the state reflected in his rampaging victories in recent polls.

A happy coincidence has been that states are now in competition to outgrow each other. Uttar Pradesh, led by Adityanath, is trying to compete with industrialised states like Maharashtra, Tamil Nadu and Gujarat, aspiring to become a $1 trillion economy in sync with Narendra Modi’s declaration to make India a $5 trillion economy.

  • Patnaik: unchallenged supremacy in the state

    Patnaik: unchallenged supremacy in the state

What does the future hold for the states? Some time back, there was talk about India having at least 50 states in future, if demands for new states received by the Union home ministry are to be conceded. This was on the basis of representations received by the home ministry. And, Uttar Pradesh, during the Mayawati-led BSP government, did propose to create four states, by dividing the country's most populous state.

However, the eclipse of Mayawati put an end to this proposal. Later, the Vajpayee government, receptive to the demand for smaller states, did carve out Uttarakhand (from UP), Jharkhand (from Bihar) and Chhattisgarh (from Madhya Pradesh).

Models of innovation 

Political scientists aver that innovation will hold the key to the future and growth of states. The  classic model of innovation rests on  pillars like industry innovation and entrepreneurship (R&D, creation of new firms, industrial clusters, creation of New Knowledge like patents, copyrights etc), factors of production (land, labour, infrastructure, human capital), demand conditions (market size, market sophistication and market growth) and social and political institutions (relating to healthcare, education, administration and finance).

Already, different examples of innovation are evident. Telangana, for instance, is aspiring to emerge as a palm oil hub to take advantage of the endemic shortages, which occur in this commodity. It is targeting 2 million additional acres under oil palm cultivation in the next four years and is going to great lengths to achieve this goal – from building large dams and irrigation canals to importing millions of germinated sprouts.

Generous government subsidies and bumper profit potential (compared to other crops) are encouraging farmers to shift to oil palms. If successful, the drive could reduce India's mammoth vegetable oil imports, which cost the country a record $18.9 billion a year ago and widened the trade deficit.

Chhattisgarh’s scheme to improve livestock conditions by securing the participation of communities has earned praise from the likes of Raghuram Rajan, former governor of RBI. The state government manages livestock care, the provision of free fodder and water, health check-up, treatment, and vaccination of animals.

Under the scheme, income-generating activities like the production of organic manure, mushrooms cultivation, large-scale vegetable production, oil distillation, fisheries, poultry, and goat rearing are carried out by women groups. An example of a bottom-up solution for farming and livelihood issues, it also reduces the problems of decreasing fertility of the land due to indiscriminate use of chemical fertilisers and pesticides in agriculture.

For states and UTs to perform to their full potential, outstanding issues will have to be resolved, if states are to deliver on their own. For instance, citizens residing in certain UTs have to swallow whatever is thrust down their throats by their rulers, with no recourse to hold them responsible. A few UTs have partial democracy, where they have a chief minister (in name only) with limited powers (as in Delhi).

As of now, only the people of Delhi and Puducherry have the right to elect a Legislative Assembly, which though has only limited powers. The other UTs are at the mercy of the appointees of the Central government called lieutenant governor or administrators, who have no stake or relationship with the areas they govern (a la Lakshadweep).

  • Raja: don’t compel us

    Raja: don’t compel us

Redraw the power equation

For some time now, states ruled by the Opposition parties have chosen to confront the Centre on a variety of issues in recent weeks. Is this a sign of a new assertiveness among the states against a powerful Centre, which was enjoying a clearly superior status, as per the Indian Constitution? Is a redraw of the Centre-states power on the anvil? 

Recently, Andimuthu Raja, the DMK MP from the Nilgiris and, more famously, the former telecom minister, who was at the centre of the 2G auction controversy during the UPA years, demanded in the presence of Chief Minister M.K. Stalin that, if the Central government   did not give Tamil Nadu greater autonomy, the DMK could be ‘compelled’ to revive the demand for a ‘separate’ state.

“The Chief Minister is walking the Anna’s way; don’t push us to take the Periyar’s way. Don’t compel us to ask for our own country, give us state autonomy. Until then we will not rest,” Raja wrote on Twitter, where he posted a video of the speech. Raja did underline, however, that ‘national integrity and democracy are important’. His comments come at a time when the DMK government in Tamil Nadu has repeatedly and vocally disagreed with the policies of the Central government and accused it of undermining India’s federal structure.

The reference to E.V. Ramasamy ‘Periyar’ (1879-1973) is important. He had started the Self Respect Movement to “redeem the identity and self-respect” of Tamils. He envisaged an independent Dravida homeland of Dravida Nadu, comprising Tamil, Malayalam, Telugu and Kannada speakers, and launched a political party, Dravidar Kazhagam (DK), to pursue this goal.

C.N. Annadurai (1909-69), who was the last chief minister of the Madras state, and the first chief minister of Tamil Nadu, and his party, Dravida Munnetra Kazhagam (DMK), chose to go slow on the demand for an independent Dravida Nadu and, instead, worked for greater autonomy for Tamil Nadu and better co-operation among the southern states.

Today, TN is in the forefront of the newfound assertiveness by states. From 1 July, states will not be receiving the GST compensation they were receiving till now, which will deprive them of an assured source of income. The Centre has also pared down the subsidies due to the states in various sectors, including food, employment guarantee scheme or kerosene subsidy, all of which are adding to their deficit. “Even more disturbing is the Centre’s attempt to slash the states’ borrowing limit, despite our protests,” complains K.N. Balagopal, finance minister, Kerala. 

Though Raja did not say it, his demand was a reminder of the 1950s and 1960s, when several southern states were rocked by riots over regional and caste politics, leading to a few states being placed under President’s rule and governed directly from New Delhi. Many western pundits had predicted the break-up of India then. However, the Cassandras of doom were proved wrong. Instead, southern states such as Andhra Pradesh, Tamil Nadu and Karnataka became the most orderly and prosperous in the country.

  • Balagopal: fighting for financial rights

    Balagopal: fighting for financial rights

To a large extent, this was because the caste and language disputes, which came up in these states, were eventually resolved by regional parties. Jawaharlal Nehru’s drive for reorganisation of states on linguistic basis also helped cool matters. Today, these southern states are in the forefront of the transformation of India’s federal system, where the Central government still yields power and influence, especially on economic and financial matters. 

Defusing the angst

When the Modi government at the Centre accepted the 14th Finance Commission’s recommendations in 2015, under which states got 42 per cent shares of tax revenue, as against 32 per cent earlier, it was expected to defuse some of the angst harboured by the states. Though, this left far less money with the Central Government, the latter then maintained that it had taken the recommendations of the 14th Finance Commission in a positive spirit, as they strengthen and provide autonomy to states in designing and implementing schemes as per their priorities and needs.

The move was meant to generate goodwill for the new government. The Centre has hoped that with the states being allowed to chalk out their programmes and schemes with greater financial strength and autonomy, they would also be observing financial prudence and discipline. There are mixed results, however.

The story of protest on financial issues by states has continued. Kerala’s K.N. Balagopal recently said that his state will have to move legally and constitutionally if the Centre continues to insist on eroding the financial rights of states. Kerala has expressed its dissent on the Centre unilaterally amending the terms of devolution of financial powers like slashing of the state’s share of tax revenue and the stopping of the revenue deficit grant in a supplementary memorandum submitted to the 15th Finance Commission.

The states’ share of the Central tax revenue pool, which used to be 42 per cent in the 14th Finance Commission, has now come down to 41 per cent. Kerala’s share in the divisible pool has dropped from 3.88 per cent to 1.93 per cent. 

And, it isn’t just financial matters. Punjab too has been restive with federal sentiments coming to the fore. The recent weeks have seen the Chief Minister Bhagwant Mann taking the lead in the state assembly to pass a resolution urging the Union government to immediately roll back the Agnipath scheme in the larger interest of the country.

There has been unrest over the attempts to push the matter for change of status of Panjab University into a Central University, following the reported directive of the Punjab & Haryana High Court. Meanwhile, the issue of river water sharing and the Sutlej Yamuna Link (SYL) canal too has come centrestage again.

  • Sibal: co-operative federalism or coercive unilateralism?

    Sibal: co-operative federalism or coercive unilateralism?

When Narendra Modi assumed power at the Centre for the first time, he spoke of co-operative federalism. Other right noises were also made. For a long time, India had seen a Big Brother attitude from the Centre towards states. A ‘one-size-fits-all’ approach had been used for years, not taking into account the heterogeneity of different states and their local requirements.

The NITI Aayog was formed, to provide the strategic policy vision for the government and to further empower and strengthen the states. It was said that the Union-to-state one-way flow of policy would be replaced by a genuine and continuing partnership with the states. 

Gaining salience 

Kapil Sibal, eminent lawyer and Rajya Sabha MP, believes that India has moved away from co-operative federalism to ‘coercive unilateralism’, and the reality is that politics of the Central government rules every state in the country. He feels that the Centre’s political and policy decisions have turned one-sided. Citing instances of toppling of governments in several states, he says it started with Uttarakhand, when President’s rule was imposed there.

The Supreme Court intervened, but an elected government (run by the Congress) was toppled through defection. The same game was repeated in Madhya Pradesh, Karnataka and then in Maharashtra. “Which democratic country allows an elected government to be replaced through processes that are murky, to say the least? Is this an example of co-operative federalism? It is coercive unilateralism,” Sibal asks. 

That may be a politically coloured view, as the phenomenon of aya Rams, gaya Rams had begun during the halcyon days of the Congress rule – of which Sibal was once a leading light. But it is a view nonetheless that is gaining increasing salience and the BJP would do well to get rid of the dubious tag.

Cover Feature

Gems across Business Cycles

Large caps should form a large portion of your portfolio

Cover Feature

Buy India gains momentum

Negative returns may be present for a few years but as long as optimism remains recovery will be equally swift

Corporate Report

VRL Logistics’s road to success

VRL has shown its ability to remain a significant player in the segment

Special Report

Preparing for 2024

BJP, government start countdown

E-MAGAZINE
Buy India
Should India bail out flood-stranded Pakistan?
Digital India
FROM THIS ISSUE

Retailing

Government

Government

Corporate Report

Corporate Report

Corporate Report

Company Feature

Classrooms go live, thanks to Airtel

Published on April 5, 2022, 11:25 a.m.

Despite the pandemic, Bharti Foundation has ensured that children are not deprived of learning opportunities

Column

Collaborative excellence

Published on April 4, 2022, 8:53 p.m.

A policy perspective for meeting SDG-9 in low resource setting of developing economies

Column

Innovation and infrastructure

Published on April 4, 2022, 8:10 p.m.

India is well-positioned to become a model of corporate sustainability

Column

‘More for less’

Published on April 1, 2022, 10:12 p.m.

The merger of technology and SDGs – A game-changing win of the era

Jobs

Jobs soar in RE sector

Published on Sept. 27, 2022, 9:50 p.m.

A report reveals that more and more countries are creating jobs in renewables

Finance

Brookfield’s clean power initiative

Published on Sept. 27, 2022, 9:31 p.m.

Brookfield to invest $2 billion in India

Green Hydrogen

Leh leads the way

Published on Sept. 27, 2022, 8:10 p.m.

India’s first green hydrogen fuelling station to be ready next May

Renewable Energy

Amazon bets big on solar farms

Published on Sept. 27, 2022, 7:49 p.m.

Amazon’s total number of solar rooftop projects in India stands at 41