UNIT – III Concept of Cooperative and Competitive Federalism

Federalism plays a critical role in politics, as it dictates how power is shared between different levels of government. This is especially evident in countries like India, where both cooperation and competition shape the relationship between the Centre and the States. Understanding this dynamic is essential for grasping how policies are developed and implemented across the nation.India follows a quasi-federal structure, meaning it has a strong centre with states having autonomy in certain spheres. The Constitution establishes a system where powers and responsibilities are divided between the Union and the States.

UNIT – III:

• Concept of Cooperative and Competitive Federalism
• Centre State Relations - Legislative, Administrative and Financial Relations

I. Cooperative vs. Competitive Federalism

Indian federalism has shifted from a "centralized" model to one that balances collaboration and healthy rivalry.

Feature	Cooperative Federalism	Competitive Federalism
Core Concept	Centre and States work together to solve national problems.	States compete with each other to attract investment and improve governance.
Relationship	Horizontal: Collaboration between equals (Centre & States).	Vertical & Horizontal: Competition for resources and better rankings.
Key Agency	NITI Aayog (Governing Council), GST Council.	NITI Aayog (SDG Index, Ease of Doing Business rankings).
Motto	"Strong States make a Strong Nation."	"Perform or Perish" (Efficiency-driven).
Example	Unified response to COVID-19, GST implementation.	Smart Cities Challenge, Vibrant Gujarat Summit.

Concept	Nature of Relationship	Key Objective	Examples in India
Cooperative Federalism	Horizontal: Centre and States work as partners.	Achieving national goals through consensus and mutual trust.	GST Council, Inter-State Council (Art. 263), Zonal Councils, NITI Aayog's Governing Council.
Competitive Federalism	Vertical & Horizontal: States compete with each other and the Centre.	Improving governance and attracting investment through "ranking" and "benchmarking."	Ease of Doing Business rankings, Swachh Survekshan (Cleanliness), Sustainable Development Goals (SDG) India Index.

Understanding Cooperative Federalism

Cooperative federalism is all about teamwork between different levels of government to tackle shared issues. This collaborative model enables the central government and state governments to join forces in delivering essential services to citizens.

In India, cooperative federalism began to take form post-independence, aiming to create unity while embracing the country's diversity. The Indian Constitution sets various mechanisms to facilitate this cooperation. For example, the Planning Commission was pivotal in harmonizing efforts between different government levels to drive social and economic development.

This cooperation is particularly visible during crises, like the COVID-19 pandemic, where coordinated responses proved vital. For instance, states and the Centre collaborated on health care measures that included a nationwide vaccination rollout, showcasing the importance of joint efforts in times of need.

Cooperative Federalism

Meaning:

Cooperative federalism refers to a system where both the Centre and States work together to achieve common national goals, respecting each other’s jurisdiction.

Features:

• Mutual cooperation in policy-making and implementation.
• Institutions like NITI Aayog promote collaborative decision-making.
• Examples include GST implementation, Covid-19 management, disaster response.

Competitive Federalism: A Different Dynamic

On the flip side, competitive federalism promotes a spirited competition among states, motivating them to improve governance and attract investments. Since the liberalization in the 1990s, states in India recognized that their growth depended heavily on their ability to create favorable environments for business.

For example, states like Gujarat and Maharashtra implemented tax incentives and streamlined regulations to draw investment. Statistics indicate that Gujarat's "Vibrant Gujarat" summit has attracted investments worth over 2 lakh crore INR since its inception, significantly boosting its economy. Such competition spurs states to adopt successful practices, driving overall improvement in governance and services.

Competitive Federalism

Meaning:

Competitive federalism is where States compete with each other to attract investments, improve governance, and deliver better services, while the Centre plays the role of a facilitator.

Features:

• Encourages efficiency and innovation among States.
• Rankings like Ease of Doing Business, Health Index, and Education Index promote healthy competition.
• Linked with performance-based grants from the Centre.

Legislative Relations Between the Centre and States

The legislative relationship between the Centre and States is established by the Constitution, which lays out different areas of jurisdiction through the Union, State, and Concurrent Lists.

• Union List: Topics like defense and foreign affairs that only the Centre can legislate.
• State List: Areas such as police work and agriculture that fall under state control.
• Concurrent List: Subjects like education and marriage where both levels can legislate.

Conflicts arise when laws clash, particularly in the Concurrent List. A clear example of this is the implementation of the Goods and Services Tax (GST). This system required states to forfeit some of their tax powers to the Centre, sparking debates over state autonomy. While GST has streamlined taxes and aided compliance, it has raised concerns among states about their financial independence.

Centre-State Relations

The Indian Constitution divides the powers and responsibilities under three heads:

1. Legislative Relations (Articles 245 to 255)

• Seventh Schedule:

• Union List (List I): Matters on which only Parliament can legislate (e.g., defence, foreign affairs).
• State List (List II): Matters on which only State Legislatures can legislate (e.g., police, public health).
• Concurrent List (List III): Both Centre and States can legislate (e.g., education, marriage).

• In case of a conflict on Concurrent List, central law prevails.

Centre-State Relations (Part XI & XII)

A. Legislative Relations (Articles 245–255)

This defines who has the power to make laws based on territory and subject matter.

Aspect	Description
Territorial Extent	Parliament makes laws for the whole or part of India; State Legislatures make laws for their specific state only.
Three Lists	Union List (100 subjects), State List (61 subjects), Concurrent List (52 subjects).
Residuary Power	Power to make laws on subjects not in any list (e.g., Cyber Law) rests with Parliament (Art. 248).
Parliamentary Supremacy	In case of conflict between Union and State law on Concurrent subjects, Union law prevails (Art. 254).

Administrative Relations: A Framework of Cooperative Governance

Administrative relations focus on how laws and policies are implemented across levels of government. Various constitutional provisions help facilitate communication and coordination between the Centre and the States.

The Centre often guides states through its ministries. For instance, central funding for rural health programs directly affects state-level health services. However, there are instances where the Centre's intervention, such as invoking Article 356, can lead to disputes over jurisdiction.

The role of All India Services, particularly the Indian Administrative Service (IAS) and Indian Police Service (IPS), is crucial. These officers work across both central and state governments, strengthening joint administrative efforts. Yet, there can be friction over perceived intrusions by the Centre, signaling the need for ongoing communication to ensure effective governance.

Administrative Relations (Articles 256 to 263)

• Obligation of States to follow laws made by Parliament.
• Centre can give directions to States for national importance.
• Inter-State Council (Article 263): For coordination among states and with the Centre.
• All India Services (e.g., IAS, IPS): Centre recruits, States utilize them.

Financial Relations: An Evolving Landscape

Financial dynamics are at the core of Centre-State relations. The Constitution guides how resources are allocated, with the Finance Commission playing a critical role in tax distribution recommendations. Historically, many states, especially those with limited revenue, relied heavily on central grants.

The introduction of the GST aimed to unify the tax structure, enhancing ease of doing business. However, implementation challenges raised concerns around states' financial autonomy, particularly during crises like the COVID-19 pandemic. States saw a surge in health expenditures, while revenues dropped, putting immense pressure on their budgets. As a result, collaborative fiscal measures became essential for sustainable recovery.

Financial Relations (Articles 268 to 293)

• Division of taxes: Certain taxes are levied by the Centre but collected and shared with the States (e.g., GST).
• Finance Commission (Article 280): Recommends distribution of financial resources.
• Grants-in-aid to states by the Centre.
• States can also borrow within limits and with Centre’s permission in certain cases.

 Financial Relations (Articles 268–293)

This defines how tax revenue and financial resources are distributed to ensure fiscal stability.

Mechanism	Description
Allocation of Taxes	Parliament taxes subjects in the Union List; States tax subjects in the State List. Both tax GST.
Finance Commission	Appointed every 5 years (Art. 280) to recommend how tax proceeds should be shared between Centre and States.
Statutory Grants	Provided under Art. 275 to states in need of financial assistance (charged to Consolidated Fund of India).
Discretionary Grants	Provided under ** Art. 282** for any public purpose or specific national plans.
GST Council	A constitutional body (Art. 279A) where Centre and States jointly decide on indirect tax rates.

The Balance of Power: Autonomy vs Coordination

At the core of discussions on cooperative and competitive federalism is the balance of power between the Centre and States. States often seek greater autonomy in taxation and policies, arguing that local governments are better positioned to meet community needs. Meanwhile, the Centre emphasizes that a cohesive national response is necessary for tackling broad issues.

Navigating this balance is essential for a successful federal system. The effectiveness of governance lies not just in clearly defined powers but in the ability of both levels of government to innovate and cooperate within that structure.

Final Thoughts

The interplay of cooperative and competitive federalism in Centre-State relations highlights the complexities of governance in India. While cooperation strives for coordination and public welfare, competition fuels innovation and responsiveness among states.

Striking the right balance between cooperation and competition is crucial for effective governance and ensuring that citizens’ needs are met. As the political and economic landscape evolves, so too must the framework of federalism, adapting to foster collaboration while honoring state autonomy.

Ultimately, fostering dialogue and collaboration between the Centre and States will shape the future of India's federal system, addressing diverse challenges and opportunities in the years to come.