Cooperative Federalism envisions a collaborative approach between the central and state governments in addressing common issues and achieving shared goals. Competitive Federalism promotes healthy competition among states to attract investments, promote economic development, and improve governance. India is gradually moving from a rigid, centralised model of federalism to a flexible model. The UPSC Indian Polity and Governance Syllabus includes Cooperative and Competitive federalism which is described in this article.

Federalism In India - Concept

• Indian federalism refers to the relationship between the state government and the union government.
• The Indian Constitution establishes the government's structure. The allocation of legislative, administrative, and executive functions between the union and the states of India is detailed in PART XI of the Indian constitution.
• However, the word Federalism is absent in the constitution. The Indian government has declared it to be a “Union of States” as the Constitution of India has established the federal structure.
• The Indian Government model is similar to that of the Canadian Model of government. Since independence, India has adopted the Quasi-Federal Structure.

Brief About The Quasi-federal Structure.

• Quasi-federal is a government system where the distribution of powers between the Central government and the state government are unequal.
• India is a federation having unitary bias and is referred to as a quasi-federal state because it has strong central machinery.
• Despite the fact that federalism is a fundamental feature of the Indian constitution, it cannot be amended or eliminated by the parliament without first being subjected to judicial scrutiny by the Supreme Court.

Cooperative Federalism

• Cooperative Federalism envisages a collaborative approach between the central and state governments in addressing common issues and achieving shared goals.
• It emphasizes joint decision-making, resource sharing, and coordination between centre and states.
• The idea is to work together to enhance the overall development of the country and address challenges that require a collective efforts.
• The union and the states have a constitutional responsibility to take action together on the subjects specified in Schedule VII of the Constitution.
• This entails collaboration among state and federal agencies, and also government entities, in order to reach a common goal.
• Cooperative federalism is a top-down approach, whereby the government is providing the policy framework and inputs, but still, the states are responsible for the execution.
• The Indian constitution has cooperative federalism as part of its basic structure.
• E.g.- GST, NAM, land reforms, model APMCs act, 73rd and 74th CAA 1992, Centre-State Investment Agreement (CSIA), and the 14th Finance Commission's 42 % devolution.

Challenges To Cooperative Federalism

• Financial Imbalance: States often complain about a lack of financial autonomy and dependency on the central government for funds.
• Political Differences:Political differences between the ruling parties at the center and in the states can hinder cooperation. Ideological divergences and political considerations may lead to a lack of consensus on crucial policy issues.
• Centralization Tendencies:Despite the push for cooperative federalism, there are instances where the central government tends to centralize decision-making and bypass the states.Eg.Disaster Management Act passed during COVID pandemic to effectively bypass states.
• Jurisdictional Overlaps: Overlapping jurisdiction and concurrent subjects in the Constitution can lead to confusion and conflicts regarding the division of powers between the center and states.Central government is often been accused of taking sides in case of disputes between states.
• Misuse of Central Agencies: Bodies like CBI,NCB etc are often accused of targeting states ruled by opposition parties.
• Despite the constitution's provision for a division of powers between the centre and the states, the Centre possesses superior legislative powers through residuary and legislative precedence.

Competitive Federalism

• Competitive Federalism promotes healthy competition among states to attract investments, promote economic development, and improve governance.
• States are encouraged to compete with each other in areas such as infrastructure development, ease of doing business, and social welfare programs to attract investments and skilled manpower.
• This approach aims to spur innovation and efficiency at the state level, leading to overall progress in the country.
• Following the economic changes of the 1990s, this approach gained traction.
• The relationship between the federal government and state governments is vertical in competitive federalism, whereas the interaction between state governments is horizontal.
• States compete with one another to attract finances and investment, resulting in increased administrative efficiency and development initiatives.
• The union and the states are not required by the Constitution to work together on the issues listed in Schedule VII of the Constitution. Executives make the decision.
• This entails states competing in a healthy manner on various social and development indicators.
• Horizontal component — The “one-size-fits-all” approach is modified to allow states to develop in accordance with their goals and local conditions. Also known as Bottom-Up Methodology.
• The Indian constitution does not include competitive federalism in its basic structure.
• Eg. School Education Quality Index, Composite Water Management Index, Sustainable Development Goals Index, India Innovation Index and Export Competitiveness Index, Delta rankings for the performance of Aspirational Districts, investment summits like Vibrant Gujarat, Resurgent Rajasthan to attract investment.

Challenges To Competitive Federalism

• Disparities among States: States in India vary significantly in terms of economic development, resources, and infrastructure. Competitive federalism might exacerbate these disparities, as economically stronger states may find it easier to attract investments and skilled manpower, leaving weaker states behind.Eg. Development disparity experienced by states like Bihar, Odisha, and Rajasthan in comparison to states like Maharashtra, Gujarat, Karnataka etc.
• Growing Centralisation tendencies: Growing centralisation tendencies can be traced in some of the steps taken by the Center in recent years. For Example, implementation of GST has taken away much of the autonomy available to states and has made the country’s indirect tax regime unitary in nature.(101st Constitutional Amendment Act),Disaster Management Act enforced during Covid pandemic used by centre to overpower states and recently passed Farms Laws etc.
• Lack of Coordination:Central government has been accused of targetting Opposition party-ruled states. Eg. Discrimination in the devolution of grants and other resources. Many states have rejected centre schemes like PMFBY and Ayushman Bharat which impact governance.
• Misuse of office of Governor: In many states Governor is accused of arbitrary interference in states’s affairs which causes delays in decision making. For example Medical Examination Bill of Tamil Nadu and, the Kolkata Municipal Corporation Bill obstructed by Governors.
• Resource Constraints: Many states in India face financial constraints, limiting their ability to invest in infrastructure, education, and healthcare. This can hinder their competitiveness and make it challenging to attract investments compared to more affluent states.
• Policy Coordination Challenges: States may pursue policies that are not in synchronisation with each other, leading to inefficiencies and suboptimal outcomes. Effective policy coordination among states is essential to avoid conflicts and ensure the overall success of competitive federalism.

Steps For Strengthening The Cooperative And Competitive Federalism In India

1. Decentralization of power and less intervention in state matters have been pledged by the central government.
2. With the implementation of the GST, the federal system is solidified even further.
3. The Planning Commission has been abolished, and NITI Aayog has been established in its place. The NITI Aayog's mandate includes developing competitive federalism. Under it:

• Following the Finance Commission's recommendation, the states' portion of central tax revenue has been increased from 32% to 42%.
• States are free to arrange their spending according to their own priorities.
• States and the centre would collaborate on a shared vision of national goals.
• Schemes that are subsidized by the government are being restructured.
• UDAY is a bailout scheme for the financial sector.
• Swachh Bharat Ranking
• To create a great sense of competitiveness, state-by-state Ease of Doing Business rankings will be used.

4. All states have not yet embraced competitive federalism. However, a few states are definitely taking steps to improve their business climates, including initiating difficult reforms on land acquisition and labour flexibility.

5. Federalism is no longer a point of contention in Centre-State relations, but rather the definition of a new team India relationship.

Role Of NITI Aayog In Cooperative And Competitive Federalism In India

1. The NITI Aayog pushed for competitive "cooperative federalism" in 2017, believing that this formula will transform the relationship between the Center and the States.
2. In one of the meetings, chief secretaries of states exhibited the best practices being implemented in their various countries, in an effort to promote cross-fertilization of ideas.
3. The functioning of the Aayog looks to have a silver lining because it allows states to compete with others to promote governance innovations in the spirit of "cooperative, competitive federalism."
4. One of NITI Aayog's main goals is to create a dynamic institutional structure where "eminent individuals outside the government system" can participate in policy development.
5. Given the greater scope for states to work together and learn from each other, it is obvious that for federalism to work well, these states must also fulfill their role in promoting shared national objectives.

Way Forward

• Cooperative and competitive federalism is India's future. Competitive federalism generates the dynamism that is needed.
• To balance competitive federalism, we need cooperative federalism.
• To foster Indian internal unity, the constitution needed to catch up with economics and “favour integration before preserving sovereignty.”
• Reactivation of the Centre-State Council: According to Article 263, this council is responsible for investigating and advising on disputes, discussing topics that affect all states, and making proposals for improved policy coordination.
• On issues like international treaties, WTO obligations, or the environment an institutional mechanism must be evolved where important decisions are appropriately discussed with states

Conclusion

Federalism that is both cooperative and competitive is not mutually exclusive. They are all based on the same basic premise. Federalism that is cooperative and competitive may be two sides of the same coin because competition alone cannot produce the best outcomes; it is competition combined with collaboration that will bring true change. Effective policy coordination among states is essential to avoid conflicts and ensure the overall success of competitive federalism.

FAQs

MCQs

1. Which of the following best defines cooperative federalism?

A) States compete with each other to attract investment
B) Central and state governments collaborate to achieve common goals
C) States operate independently without central interference
D) States compete with the central government for resources

2. What is the main objective of competitive federalism?

A) To promote decentralization
B) To create competition among states
C) To centralize power
D) To resolve inter-state disputes

3. Which institution plays a crucial role in promoting cooperative federalism in India?

A) Planning Commission
B) Finance Commission
C) NITI Aayog
D) Reserve Bank of India

4. Which of the following is a challenge to cooperative federalism in India?

A) Efficient resource distribution
B) Political differences between the Centre and states
C) Smooth collaboration between governments
D) Mutual sharing of resources

5. What role does competitive federalism play in governance?

A) It leads to the centralization of power
B) It promotes innovation and efficiency in policymaking
C) It discourages states from competing
D) It focuses only on economic policies

GS Mains Questions and Answers

Q1: Explain the significance of cooperative federalism in India’s governance structure. How does it contribute to resolving national issues?

Answer: Cooperative federalism is vital to India's governance structure as it promotes collaboration between the central and state governments to achieve shared objectives. This collaboration is essential for addressing complex national issues such as poverty, education, healthcare, and disaster management, which require coordinated efforts. Through the sharing of resources, knowledge, and expertise, both levels of government can implement policies more effectively. For example, the Goods and Services Tax (GST) is a product of cooperative federalism, with both the Centre and states working together to streamline tax structures and improve revenue collection. By fostering unity and joint decision-making, cooperative federalism helps maintain the balance between national and regional interests, contributing to India's overall development.

Q2: Discuss the role of competitive federalism in improving governance and promoting economic development in India.

Answer: Competitive federalism plays a crucial role in improving governance and promoting economic development in India by encouraging states to compete with each other to attract investment, improve infrastructure, and enhance service delivery. This competition motivates states to innovate and adopt best practices to achieve better rankings in performance indicators such as ease of doing business, healthcare, education, and social welfare. For instance, states like Gujarat and Maharashtra have historically competed to attract industries and investments, leading to economic growth and job creation. NITI Aayog’s rankings further incentivize states to focus on governance reforms and implement policies that foster sustainable development. As states improve their competitiveness, the overall governance and economic landscape of the country benefit from enhanced efficiency and innovation.

Q3: Analyze the challenges and prospects of cooperative and competitive federalism in the context of India’s federal structure.

Answer: India’s federal structure is characterized by both cooperative and competitive federalism, each with its own set of challenges and prospects. One of the key challenges of cooperative federalism is political differences between the central and state governments, which can impede collaboration on crucial national issues such as resource allocation, disaster management, and welfare schemes. Additionally, disparities in the financial capabilities of states can hinder their ability to cooperate effectively with the Centre. In contrast, competitive federalism faces challenges in terms of creating uneven development across states, where wealthier states may have an advantage over poorer ones in attracting investment and improving governance. However, both cooperative and competitive federalism hold significant prospects for India’s governance. Cooperative federalism encourages unity and collaboration, while competitive federalism fosters innovation and improved performance. The combined use of these frameworks can lead to balanced regional development and enhance the overall functioning of India's democracy.

Previous Year Questions on Cooperative and Competitive Federalism

1. UPSC CSE Prelims 2021:

Question: Which institution in India primarily promotes cooperative federalism through policy coordination between the Centre and states?

A) Planning Commission
B) Finance Commission
C) NITI Aayog
D) Election Commission

Answer: C

Explanation: NITI Aayog promotes cooperative federalism by fostering collaboration between the Centre and states on policy matters, replacing the Planning Commission in this role.

2. UPSC CSE Mains 2020 (GS Paper 2):

Question: "Competitive federalism promotes innovation and efficiency in governance, while cooperative federalism ensures policy coordination and national unity." Discuss with examples from India.

Answer: Competitive federalism encourages states to innovate and improve their governance to attract investment and perform better in rankings such as ease of doing business. States like Karnataka and Tamil Nadu have embraced competitive federalism by implementing reforms to attract IT industries and foreign investments. On the other hand, cooperative federalism is crucial for national unity, as seen in the GST Council, where the Centre and states work together to formulate tax policies. The dual framework of cooperative and competitive federalism ensures that while states compete to improve performance, they also collaborate with the Centre to achieve common national goals, ensuring balanced growth and development across India.

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