Giving More Power To States Works; Modi's Road To 2024 Depends On More Devolution

The breaking of the government-opposition impasse in Parliament to get the constitutional amendment bill to let states make their own OBC reservation lists tells us two things: it is only when political interests converge can we get some degree of unanimity on policy approaches; and secondly, India can work best if states are left to do their own thing in a substantially larger number of areas.

This points to what the Narendra Modi government must do to move forward on reforms: it must devolve more power to states so that they can stop erecting obstacles to legislation that can be good for the country as a whole.

We are already seeing the benefit of devolution in Covid management, where, after leading the fightback last year, the Centre has ceded ground to states. It has made states responsible for their own Covid cases and they are learning to manage their healthcare resources better. If the lockdowns in the second Covid wave, which has been significantly more virulent than the first, are not resulting in the kind of economic damage that we saw last year, it is because each state is managing its own restrictions more sensibly.

They know that mismanaged lockdown will cost them in terms of economic activities and tax revenues. In short, state capacity to manage things on their own is improving. And despite the standard finger-pointing at the Centre for problems of their own making, they actually demanded centralisation of vaccine procurement after vociferously demanding the opposite some time ago.

Even the Supreme Court has piped down. It has realised that when the Centre and states can work things out politically, there is no scope for judicial meddling. That too is a good thing.

If Narendra Modi wants to win 2024, he has to take the process of decentralisation further. Consider how much easier it would have been to push through farm sector reforms if it was the states which had to do the heavy lifting.

Now, with the Centre doing it, all that the opposition states are doing is block and agitate. They are destroying the one thing that will deliver farmers better returns over time while also allowing excess labour on farms to seek work outside agriculture.

Also, if more resources get devolved downwards, the rich and poor states will not find it expedient to fight on the same side against the Centre.

Remember, when the Goods and Services Tax was agreed to, the big vote in favour came initially from the poorer consuming states, while the richer states resisted losing fiscal sovereignty.

The assumption that consuming states will benefit more from GST — which has not quite turned out that way — was key to getting a majority in favour of GST.

Now consider how many states will resist the farm reforms if the Modi government says that 90 per cent of the food security subsidies will be devolved to states to do their own procurement, based on a mix of population and poverty criteria.

This could leave the vociferous Punjab farm lobby isolated and fighting a losing battle.

The way out of India’s political logjam is greater devolution. This way, we will get a stronger Centre in more limited areas, and better state competence and reforms in the other areas.