Context: The article discusses how the 2024 general election in India led to more regional parties in Parliament, potentially strengthening democracy and federalism. 

• It highlights ongoing conflicts between the central government and states over resource allocation and suggests ways to improve cooperation and fairness.

What does the 2024 General Election result mean for India?

• In 2024 general election more regional parties gain seats in Parliament. This diversification in Parliament means that both the ruling coalition and the opposition will include a mix of regional parties, potentially leading to more representative governance.

• The success of regional parties suggests an electorate seeking to address local concerns more directly, challenging the dominance of central parties.

• The election outcomes reflect a response to central policies perceived as undermining state autonomy, as seen in the tensions over resource allocation and political statements during the campaign.

Centre-State Relations and Controversies

• Complaints from States: Opposition-ruled States have raised concerns about unfair treatment by the Centre, including inadequate transfer of resources, delayed funds for schemes like MGNREGS, and stepmotherly treatment in various administrative matters.

• Supreme Court's Stance: The Supreme Court has urged amicable resolutions to Centre-State conflicts, highlighting the growing need for cooperative federalism, which had been emphasized during the introduction of GST in 2017.

Diversity Among States and Need for Autonomy

• Diversity Among States: There is a huge diversity among the States — Assam is unlike Gujarat and Himachal Pradesh is very different from Tamil Nadu. A common approach is not conducive to the progress of such diverse States.

• Need for Autonomy: States need greater autonomy to address their issues in their own unique ways. This is both democracy and federalism. A dominant Centre forcing its will on the States, leading to the deterioration in Centre-State relations, does not augur well for India.

Financing and Conflict

• Financing Issues: States face three broad kinds of issues. Some of them can be dealt with by each State without impacting other States such as in education, health and social services. But infrastructure and water sharing require States to come to an agreement. Issues such as currency and defence require a common approach.

• Role of the Centre: The Centre has been given a predominant role in raising resources due to the efficiency in collecting taxes centrally. Among the major taxes, personal income tax (PIT), corporation tax, customs duty and excise duty are collected by the Centre. GST is collected by both the Centre and the States and shared.

• Finance Commission: A Finance Commission is appointed to decide on the devolution of funds from the Centre to the States, and the share of each State. The Centre sets up the Commission and has mostly set its terms of reference. This introduces a bias in favour of the Centre and becomes a source of conflict between the Centre and States.

What are the implications for poorer and richer states?

• Resource Distribution: Richer states generate more revenue but receive a smaller share relative to their contributions. For instance, Mumbai, as a financial hub, contributes significantly to national taxes but doesn’t proportionately benefit from these contributions in local investments or services.

• Development Disparities: Poorer states rely on greater resource allocation to accelerate development and reduce inequality. The Finance Commission aims to distribute funds more fairly, yet historical disparities persist.

• Market Dynamics: Richer states benefit from markets in poorer states, fostering their own growth. For example, poorer states provide larger consumer bases that richer states rely on to expand their economic activities.

How could federalism be improved?

• Increase Resource Devolution: Boosting the percentage of resources devolved from the Centre to the States beyond the current 41% could empower states, allowing for more tailored local governance.

• Fair Finance Commission Practices: The Sixteenth Finance Commission should aim for equitable treatment of all states. This could reduce friction and improve resource distribution, particularly favoring poorer states to address inequality.

• Enhance State Autonomy: Reducing the central government’s dominance in programs like the Public Distribution System and MGNREGS would affirm the constitutional roles of states as equal partners in governance. This will prevent the central government from overshadowing state efforts.

Conclusion

• A balanced approach respecting state autonomy within a unified national framework is essential to strengthen federalism and ensure equitable development across India.