Covid-19 vs Indian federalism

Context:

● The pandemic has caused various challenges to Indian federalism as its handling required both centralised planning and localised implementation.

● Several states showed discontent with the policies of the Centre including vaccination policy

Probable Question:

➢ Do you think the Covid-19 pandemic is a litmus test of the federal structure of India? Critically Analyse

Federalism during Initial phase of Covid-19 Pandemic:

The initial stages of the Covid-19 response highlighted the unitary tilt in the Indian federal structure. For example,

● Implementing a national lockdown using the powers under Disaster Management Act.

● The Ministry of Home Affairs also issued extensive guidelines to states for controlling the pandemic.

● Although the State have independent powers under the Epidemic Diseases Act, 1897, State governments followed the Centre’s orders.

● State governments also requested the central government to continue its administration of the national lockdown. In doing so, states ceded considerable decision-making power to the central government

Federalism during tackling the Crisis:

If the initial phase of Covid-19 management resulted in high centralisation, then the later phase saw high decentralisation. For example:

● The Union government provided adequate autonomy to the states to strengthen their healthcare facilities. For example, the New Vaccination policy vests 50 per cent of the purchasing of vaccines to the State governments.

● Imposition of localised lockdowns: The central government permitted the State government to impose local lockdowns to control the spread of the pandemic. For example, Lockdowns by Delhi and Tamil Nadu governments.

● Implement social security measures to mitigate the impact of the pandemic. Many state governments have introduced local health policies, welfare measures for vulnerable sections, etc.

Challenges to federalism during the pandemic

● More centralisation:  At present the autonomy of the state is limited. The Centre uses its power to push reforms in the State list also.

● Loss of Fiscal revenue for States:The national lockdown resulted in shutting down almost all economic activity, the State Governments faced a drastic reduction in revenue. Even before the lockdown, many states in India already breached their mandated fiscal deficit limits. The lockdown has further increased their financial dependence on the centre.

● Migrant Crisis: The influx of migrant workers into their home states like Uttar Pradesh, Bihar, Jharkhand and Chhattisgarh, which already face severe financial and medical deficits, would worsen matters for the states.

● In this case, both Centre and States failed to devise a coherent and holistic plan of action to avert the migrant crisis.

● The power of the Centre to approve the FDI inflows: Even many states are negotiating with foreign investors, they do not have the power to bring FDI into their state. In India, the approval for FDIs is centralised.

● The power of the Centre to accept Foreign aid: The states have no power to receive foreign aid to tackle the disaster they face. For instance, During the Kerala Floods, the centre turned down foreign aid despite the Kerala government’s request for approval of aid.

● Suspension of MP Local Area Development Scheme (MPLADS): This is a discretionary fund that is spent as per the instructions of the respective MPs. The Centre has suspended the scheme due to the COVID-induced financial crisis. However, many experts have contended that MPLADS was an important instrument for decentralized development and its discontinuation, even if temporary, will have severe effects on the development projects in the local areas.

● Delay in GST Compensation: States were promised compensation over a period of 5 years for any revenue loss they would incur due to the imposition of GST. However, COVID has stretched the financial capabilities of the Centre due to a loss of receipts as well as an increase in health expenditure

Initiatives taken to strengthen Federalism during the pandemic:

● The concept of Fiscal Federalism: As the national lockdown impacted the State’s revenue the centre implemented many measures to strengthen “Fiscal Federalism.” Such as

➢ Union Government permitted the State Governments to borrow within the Net Borrowing Ceiling of 3% of their GSDP in a financial year.

➢ Ways and Means Advances are to help States tide over temporary mismatches in the cash flow of their receipts and payments. During the pandemic, the RBI increased the WMA limit of States.

➢ The central government announced the Scheme of Financial Assistance to States for Capital Expenditure in October 2020.

➢ Maintaining Tax Devolution to States: The 15th Finance Commission recommended 41% tax devolution. The centre accepted the devolution

● More active collaboration with states in policymaking: While drafting new legislation or trying to amend any existing legislation the Central Government consults all State Governments. We saw regular consultations with States on Covid management and other issues.

● States ability to perform foreign economic policy: The Centre encouraging states to negotiate loans / FDI directly with overseas banks/institutions. Such initiatives have helped some states in their economic development and reduced their financial dependence on the Centre. So at present, the State not only relies on the Centre’s grants in aid. But still, the approval for FDIs is centralised.

Conclusion:

India’s response to the Covid-19 pandemic has shifted the balance of its federal structure. The most important moment for federalism during the pandemic is the role of state governments on the ground level in managing the Covid-19 crisis. The Centre also provided more power and autonomy to states to tackle the pandemic. But the Centre and States have to ensure the right balance between extreme political centralisation or chaotic political decentralisation. As the right balance will protect the States from threatening national unity and providing adequate autonomy to states.