People's Democracy

CENTRE-STATE RELATIONS

Three Decades Of Struggle – New Context, New Challenges - II

Nilotpal Basu

(The first part of this article was published in the July 08, 2007 issue of People’s Democracy)

NEW CHALLENGE: GLOBALISATION

THOUGH the process of globalisation started from the mid-seventies, it is only in the wake of collapse of Soviet Union and other East European socialist governments at the end of eighties, that the dangerous portents of this process came to be felt in a big way in the third world countries. The bankrupt path of capitalist development that was being pursued by our ruling classes in the post independence period had paved the way for the onset of globalisation friendly policies in our domestic economy. In the last one and half decade, it is being observed that irrespective of their different identities, all the political parties representing the ruling classes have directed the economy in keeping with the interest of neo-liberal globalisation. Precisely, our ruling classes as a whole favours these policies of globalisation.

The experience of the last one and half decade has created a new context for centre-state relations. The constant undermining of the planning process and the withdrawal of the State has made the role of the government itself comparatively insignificant. The uninhibited play of the market forces have brought about a major change in the efforts to mobilise tax and resources. The handful of elites, who have benefited from this new course, have seen their tax payments come down drastically. The downswing in the mobilisation of government resources has also adversely affected government expenditure. In keeping with the policies of globalisation, the central government has enacted the Fiscal Responsibility Act to peg budget and revenue deficit at a predetermined fixed level as a percentage of GDP. The Finance Commission, in turn, is making the state governments to adopt the same Act at the state level, a ‘condition precedent’ for transferring resources to the states.

Because the central government is inclined to adopt globalisation friendly policies, it cannot pursue this comprehensively in a country as big and as diverse as India, unless it is equally accepted by all the state governments. Thus, it is being observed that this new reality is imposing new constraints on the state governments’ autonomy to pursue policies to fulfill their electoral commitments in assembly elections. The old asymmetries in the centre-state relations are getting increasingly aggravated as a result of this new situation.

In its memorandum to the 12th Finance Commission, the West Bengal government has brought out – with a lot of candour – the new difficulty that the states have come to encounter. The memorandum stated – “ for instance, in the year 2000-01, according to the actual expenditure figures compiled by the Reserve Bank of India (Handbook of Statistics on the Indian Economy, 2002-03), the burden of annual developmental expenditure that was borne by the states taken together (Rs 2.11 lakh crore) was about 51 per cent higher than what was borne by the centre (Rs 1.39 lakh crore). At the same time, of the total revenue collected in the country in the year 2000-01 (Rs 3.06 lakh crore), as mentioned in the same publication of the Reserve Bank of India, nearly 62 per cent got raised in the hands of the central government and only 38 per cent by all the states taken together. Given this greater burden of responsibilities of the developmental expenditure of the states on the one hand, and more powers of revenue mobilisation in the centre on the other, there has not unfortunately been any matching transfer of resources from the centre to the states in terms of devolution of central taxes and grants as was envisaged in Chapter I, Part XII and Article 275 of the Constitution. In fact, the share of central transfer in terms of devolution and grants has remained as low as about 27 per cent of the states’ total yearly receipts over the last two decades.”

Apart from these basic factors for imbalance in the centre-state financial relations there is a new trend. This trend equally affects the states adversely. The number of centrally sponsored schemes are increasing by leaps and bounds. The globalisation friendly policies are being pursued aggressively in the form of conditions for releasing funds for these schemes. The social objectives and their regulation are being diluted by forcing amendments on laws which existed for protecting interests of the more vulnerable sections. The dilution of the Essential Commodities Act is such a case in point. In the sphere of decentralisation, resources are being directly transferred to the panchayats and municipalities, bypassing the state governments. Central tax exemptions are leading to major distortions in the choice of projects in the states and are further aggravating the process of regional imbalances. The role of the central public sector banks and financial institutions is also further contributing to this process of imbalance. At the same time institutions which have been created to ensure balance and harmony in the centre-state relations – Planning Commission, Finance Commission, Inter- State Council and National Development Council – are merely discharging certain formal functions. These fora are not facilitating the registering of the real concerns of the states.

INDIRECT PRESSURES

Apart from pressurising the state governments directly to pursue policies of globalisation, there is also an indirect attempt. Now that the role and intervention of the central government is increasingly receding in the sphere of economy, particularly in the sphere of industry, the question of industrial investment is becoming largely market-driven. The demands of the market are becoming synonymous with the extent of concessions offered by the destination states, particularly in the area of tax and land. Since the states are already in midst of a major financial crunch, so they are forced to engage in an unhealthy competition in order to attract investment. This competition is further eroding the capacity of the states in revenue and resource mobilisation

Though fundamentally opposed to this paradigm, even the Left governments are not always in a position to come out of this ‘vicious circle’. Because that would amount to overlooking the existing reality and lead to also eventually forfeiting all possibilities of industrial investment. The way the Special Economic Zone Act is being implemented and the central government is refusing to intervene in the wake of entry of big corporate players in the retail sector are clear demonstrations of the predicament faced by the state governments. These central policies undoubtedly erode powers that earlier belonged to the states. The extent of tax concessions allowed by the central government in the SEZs is fraught with the danger that it will be impossible to get investment outside those zones. Additionally, this is also potentially obtrusive and will impact the agriculture policy and strategies of the state governments. It is worthwhile to point out that agriculture is not only the most important sector from the people’s livelihood point of view but also, comes under the state list in our Constitution.

The only way to oppose this surreptitious attempt by the central government to erode the legitimate rights of the states is to fight for a change in the policies of the central government. In this struggle to change the policies of the central government, the Left Front can raise certain regulatory conditions which will expose the anti-people features of the central policy and can sensitise and unite the people of the country on the adverse influence of globalisation.

The over centralised approach of the centre, which is pushing for implementing these pro-globalisation policies, is also not in keeping with the political reality of the coalition government. When the Left Front government was formed in 1977, nobody had anticipated that this government can survive so long. But the fact that it has completed three decades of uninterrupted existence has also created conditions for pursuing ‘alternative’ policies. It is with this understanding that when the CPI(M) adopted its updated Programme in 2000, it stated the persuasion of such an ‘alternative’ in Para 7.17 as distinct from providing ‘relief’ as contained in Para 112 of the 1964 Programme.

But the formulation of an alternative policy and more importantly its implementation is an extremely challenging task under the present circumstances of a globalised environment. This environment and the policies emanating from the central government do not merely depend on the party or the coalition which is in office. We have also come to this conclusion that neo liberal policies are not only being followed by the party in power; it is reflecting the outlook of the entire ruling class. It is with this realisation, that we have adopted ‘CPI(M) stand on certain policy issues’ in our 18th Party Congress. Without denying the reality of globalisation, it has become necessary to raise certain conditions for regulating global financial flows (exposing the country’s economic management to their ramifications) and which will make it possible to unravel the real character and objectives of globalisation before our people. Obviously, this is the perspective of the Left Front government in today’s context.

TODAY’S STRUGGLE

In this unprecedented juncture where the Left Front government has completed three decades in office and given the complexities of the present times it has become extremely important to identify the new reality for carrying struggle on restructuring the centre-state relations forward. Obviously, this new phase of globalisation has accentuated the adversities which the states had been suffering traditionally in the past. At the same time, the broad consensus among our ruling classes on globalisation denies the opportunity that was available in the late seventies and eighties for creating a united platform of struggle on centre-state relations.

On the other hand, it is also clear that the people at large are becoming increasingly vocal against the policies of the globalisation, particularly in the economic sphere. In spite of lack of political clarity, the people – `aam admi’ have voted out almost all ruling parties in almost all recent elections both at centre and in states. A major exception to this trend is the Left Front government of West Bengal. The only conclusion that can be drawn from this emerging electoral trend is that the people are dislodging those governments because of the policies they are pursuing. This is notwithstanding the fact that they may not be in a position to specifically relate the nature of these policies and their roots in globalisation. However, it is obvious that the people are not prepared to accept these policies.

It is here that the question of relevance of the Left Front government’s pro- people and anti-globalisation approach lies. The meek submission before the market forces, withdrawal of the government by giving a go-by to planning, refusal to intervene in welfare-oriented social sector activities –– all these, are part of the present day reality. And the opposition to this approach is the basis of the Left Front government’s alternative. The struggle for safeguarding and expanding the rights of the states is, therefore, an integral part of the struggle for popularising this pro-people alternative.

It is because of this that after the last general elections in 2004, people had rejected the pro-globalisation policy, euphemistically tom-tommed for promoting ‘shining India’. It is the nature of the people’s mandate that forced the adoption of the National Common Minimum Programme by the UPA government. Of course, the Left played a crucial role in ensuring such a course of development. This programme had made important commitments: “Regional imbalances to be redressed through fiscal, administrative, investment and other means, a structured and transparent approach to alleviate the burden of debt on states will be adopted, interest rates on loans to states to be reduced, share of states in the single divisible pool of taxes to be enhanced, special measures for states where credit deposit ratio is lagging, issue of payment of royalties to states in the area of minerals to be reviewed.”

Perhaps, there is no need to state that most of these commitments remain unimplemented during the last three years of UPA governance. Unilateral policy approach is being sought to be implemented by the government in keeping with the requirements of international finance capital which is completely insensitive to the rights and powers of the states.

Therefore, the growing public opinion against the central policy of alignment with globalisation can be a major factor in the struggle to restructure centre-state relations. The fact that the mandate in the 2004 elections was implicit of the popular rejection of globalization inspired policy measures demanded that the NCMP would commit on changes in the centre-state relations.

However, while the central government has not implemented its commitments, it has also not been possible for them to altogether overlook this question. That is why the government has appointed a new commission this year under the chairmanship of former judge Madan Mohan Punchi. But the terms of reference of this commission does not reflect the ongoing discussion on the centre-state relations for the last three decades. Particularly, these terms do not refer to the need for increase in the share of the states of the central taxes, the transfer of centrally sponsored schemes to the states along with funds and lessening the debt burden of the states. Without implementing some of the positive recommendations of the Sarkaria Commission, such a hurried appointment of a new commission appears to be an exercise in public relations, particularly to keep regional parties of the ruling coalition in good humour. This becomes all the more obvious with the non inclusion of experts on the subject in the composition of the commission.

Therefore, today’s struggle has to also direct itself to suitably revise these terms of references. Within a short while, the 13th Finance Commission will be also appointed. The question of fixing its term is also very much there. The issue of ensuring that the views of the states are given due importance in the institutions like Planning Commission, National Development Council and Inter-State Council and the necessary changes in their modus operandi also assumes a great urgency. It is because of all this that the need to develop a struggle on the question of realignment of centre-state relations in a new form commensurate with this new context – has become an important imperative. Obviously, a major direction of this struggle will be against the policies of globalisation; opposed to the uninhibited play of market forces, it will have to be directed for securing the interests of the Indian people whose life and livelihood stands threatened by the contraction of the government’s role. The people of the country are looking up towards the three decade old Left Front government of West Bengal. They would like to see this government leading the people in this struggle.