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The Centre and States Must Join Forces to Make India Compete on its Own Terms

Published: 11th April 2015 10:00 PM  |   Last Updated: 11th April 2015 11:33 AM   |  A+A-

modi

The significance of strategic continuance in foreign and domestic economic policy can rarely be overlooked if any government wishes to deliver a national economic model as mandated by the people within realistic timeframe. The relevance of this attribute for India can be put in a proper perspective through a quick global perusal of existential strategy dynamics.

Recent knee-jerk reactions in the US, Britain, France and Russia have entailed a cumulus of difficulties within their respective national contours. In the US and France, the people appear disenchanted by their government’s inability to reinforce the living standards they expect. In Russia and the UK, President Vladimir Putin and PM David Cameron are reported to be losing grip over their respective supporters because of their inability to deliver.

Cameron’s desperate call to his Conservative supporters who have defected to the UK Independence Party to “come home” is a sign of this unease. Pleading with them not to use their vote in the general election in May as a “protest”, he has assured that he has heard the message of frustrated Tory voters “loud and clear” but wants them help avert the danger of a Labour government. President Putin, on the other hand, confronts lost opportunities in Europe and the West as a result of his shift in policy towards Ukraine, once Russia’s ardent strategic partner.

Unlike in the rest of Europe, Chancellor Angela Merkel’s priority for economic strategisation has yielded rich results even as Germany continues to be the economic engine of significance for the European Union. The success of German economy is largely premised on economic integration, the right policy mix and most importantly, the abiding absence of any mistrust between Berlin and the rest of Germany. Merkel is known to possess a pragmatic mix of ‘strategic statecraft’ that was once displayed by leaders like Indira Gandhi, Margaret Thatcher and Golda Mier.

Although Lee Kuan Yew was deemed as less of a democrat, his in converting Singapore, essentially an island city state with no natural resources, into one of world’s richest countries was due to adherence to the ethic of ‘strategic continuance’ as state policy.

PM Jawaharlal Nehru’s comparative successes in the initial stages of India’s free evolution as a nation-state can also be attributed to his strategic approach premised on target-centric Five-year plans modelled on the Soviet Union. He subsequently faltered because his two industrial policy resolutions that created the mixed economy model could not invoke confidence among private investors.

Nehru had issues with his Cabinet colleagues and corporate giants like JRD Tata on the mechanics of plan implementation and this led to dilution of planning processes and goals. Around the same time, China’s unquestioned leader Mao Tse Tung succeeded in planting the seeds of strategic planning in the minds of the Chinese whose lifestyles have measurably improved. That is why China is way ahead of India in grappling with poverty alleviation as the prime goal of governance.

It is a pity that even today, the level of synergy among the disparate organs of the state remains lower than it should be. The end of the era of one-party dominance, the emergence of powerful regional outfits and compulsions of coalition politics have also contributed to this resulting in a delink between Delhi and the states and Union Territories.

This lack of an abiding national synergy, unlike in the case of People’s Republic of China is something PM Narendra Modi has to contend with if he has to deliver his time-bound agenda of inclusive development.

The new foreign trade policy that essentially focuses on Make in India can yield results only if both the Centre and states implement the tenets of true economic federalism. Modi seems to have realised this. While elaborating on the government’s policy of cooperative federalism, Modi has promised that the current NDA coalition will be different from the previous government that looked down upon other states. As long-time CM of Gujarat, Modi understands the problems CMs face when dealing with the Centre. That is why he has made a conscious effort since day one to give the states a greater say in running their affairs.

His commitment to cooperative and competitive federalism is reflected in the acceptance of the recommendations of the 14h Finance Commission. This has increased the share of the states in the ‘divisible pool’—the pot of tax revenue that is allocated between the federal and state governments—from 32 per cent to 42 per cent. This represents a historic increase. Adding together both conditional and non-conditional transfers, states get around 60 per cent of the divisible pool, so 42 per cent of this sum would mean that about 70 per cent of the transfers to states came without strings attached, making it the primary method of resource transfers to states.

In India, the state governments and the Centre are partners in the country’s development process. It is only when they combine their resources and efforts that India can compete with the world on its own terms.

 emmdiem@hotmail.com           

Menon is a former additional secy, Cabinet Secretariat



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