Cooperative federalism vs competitive federalism
deals with the relationship between union and state governments – in the matters of legislation, administration and finance. Schedule 7 of Indian constitution specifies Union list, State list and Concurrent list, based on which the scope of work and powers of union and state governments are decided. This division of powers between union and state government ensures stable and effective governance within the country. Union and states are constitutionally obliged to cooperate with each other on the matters specified in schedule 7 of the constitution. The powers are tilted in favor of union government to ensure unity and integrity of India. The 73rd and 74th constitutional amendment introduced panchayati raj (Rural) and Municipality (Urban) system to strengthen the roots of cooperative federalism in India. Cooperative Federalism is part of the basic structure of Indian constitution and cannot be amended by the parliament.
Exmples
1. NITI ayog is created with the objective of making states a party to the developmental plan and policies of the government.
2. States has been given freedom to select central scheme as per their requirement and can effect changes as per their need.
3. Joint venture between state and center to carry out infrastructure project like rail projects.
4.Replication of success of one state to other state or at national level like karnataka’s e-mandi has been replicated as National Agriculture Market.
On the other hand, competitive federalism deals with the relationship among two or more states (and not between union and state) in the matters of trade, investment and commerce. Union government is responsible only for making rules of this competition. States compete with each other to attract funds and investment, which facilitates efficiency in administration and enhances developmental activities. The Investors prefer more developed states for investing their money. Union government devolve funds to the states on the basis of usage of previously allocated funds. Thus, funds and investments flow in greater amount (both from central government and private investors) to those states which have shown optimum use of previously allocated funds. Thus, competitive federalism ensures minimum wastage and maximum use of resources. Healthy competition strives to improve physical and social infrastructure within the state. In simple terms, competitive federalism means – No work, No money. More work, More money. States compete with each other on developmental fronts to attract more money. To facilitate this, states are given more responsibility and autonomy in the matters of policy planning and implementation. This help states to learn from each other and implement the best practices as per their specific needs. It is after six decades of independence, India has recognized that progress of the nation lies in the progress of its states. Competitive federalism is not part of the basic structure of Indian constitution. It is the decision of executives.
for example ——
>>rajsthan and various other states have reformed their labour laws to attract investement and industrial expansion which will result into more jobs and dveelopment.
>> attending and promoting global investor summit by UP; maharastra etc which will sttract a lot of investemnet in these states.
>> allowing states to propose plan of smart city and competing for FFC apecial grant for local government are
$ Most of the state now organizes investors meet to showcase facilities in their state to attract business and investment. This has lead to improvement in business environment in various state.
Cooperative and competitive federalism are not mutually exclusive. They have the same basic principle underlying – progress of the nation as a whole.
Obstacles in the process of competitive federalism
While the competition between states, reflected in the World Bank’s Ease of Doing Business index, has generated a lot of enthusiasm, this must be a continuing exercise. There are only few well-off states like Maharashtra, Gujarat, and Tamil Nadu which are competing. The present inter-state competition in attracting investment is too early to determine whether it will really encourage competitive patterns of investment on a continuous basis.
There are varied economic patterns in different states. There are deficit states or the backward regions or the states under debt. Those states should not be treated on par with the well-off states. The states like West Bengal, Bihar, Orissa, and Assam have protested against the uniform approach in funding because of their special situations in which the central government has to provide special funds to these states. Without special funding these states cannot imagine their participation in competitive federalism.
Though the states are provided with financial independence, it is a fallacy to assume that all the states would perform uniformly in the process of development because while some states have favourable factors like skilled labour, capital and infrastructure, innovative service industries other states lagging behind. For that states with unfavourable climate still need the help from Centre.
The proposed GST law may help some of the less productive States to raise the revenue as the tax will be a destination-based levy. But t he opposition of few well-off states with respect to revenue loss in implementation of GST system points that there is lack of will in participating in the process of competitive federalism.
