Modi, don’t bite the hand that feeds you

Garga Chatterjee examines Modi's threat to withhold funds for opposition states

Modi, don’t bite the hand that feeds you
There is a false notion that some Indians believe that the Union government is the boss and the State governments are its underlings. They assume there is a hierarchical relationship but this is constitutionally and politically false. Ever since the inauguration of the Indian Union republic, the Union government (erroneously but popularly called the Centre) has been encroaching on the most sacred aspect of the Constitution of India: the separation of powers between the Union and the States. The encroachment has quickened under Modi. On October 22, in a rally in his native state of Gujarat, Modi described the opposition-ruled States as anti-development and said that the “Central government would not dole out a single penny to such states”. What used to happen through unofficial coercion, payment delays and legal jugglery—after the collapse of the Congress majority system—has now degenerated into an open threat. This is a moment of reckoning.

Cutting off funds

Modi followed this anti-constitutional statement with one that touted the advantages of having the same party govern at the Union and in the States. What Modi has essentially said is that they will cut off funds to opposition-ruled States on the Centre’s own whimsical definition of ‘development’. If the States do not want this to happen, its people should vote in the same party rules at the Centre. Or else.

This barely stops short of calling for a one-party rule in a multi-ethnic, multi-national, multi-lingual polity that is the Indian Union. Only citizens can keep in check such quasi-dictatorial aspirations by voting. Questions are bound to arise, however, on the neutrality of the Election Commission itself given its well-timed delay in declaring the Gujarat assembly election dates. This delay enabled Modi to inaugurate a slew of projects in Gujarat. The current Chief Election Commissioner of India is Achal Kumar Joti, who previously served as the Chief Secretary of Gujarat when Modi was its chief minister. I leave it to my readers to judge what that means.

Siddaramaiah, the chief minister of Karnataka, responded to the threat by sternly reminding Modi, “Where has the Centre got its money from? It’s from the states only—through various kinds of tax.” The Union has no money of its own beyond what it raises in revenue from the States themselves. Thus, to tell a State to behave according to Delhi’s wishes to get money that Delhi got from the State is as dangerous as it is absurd. Thus, Modi’s pretense of doling out cash holds good for only those who have no idea about the Constitution. No wonder Siddaramaiah added that Modi’s statement reflects “a lack of understanding of Constitution”. The Karnataka premier rightly added, “What the Center gives the states is not charity. It is our right.”
No wonder Karnataka CM Siddaramaiah added that Modi's statement reflects "a lack of understanding of Constitution". The premier rightly added, "What the Center gives the states is not charity. It is our right"

In fact, Karnataka and most other major non-Hindi states, most of which are ruled by non-BJP parties, have a reason to be angry with the BJP PM’s statement. Major non-Hindi states are the sources of the so-called “Central funds” which are then channelized by the Union government to subsidize revenue-poor Hindi states, almost all of which are ruled by the BJP.

Here we have a prime minister who owes his majority in the Lok Sabha largely to MPs from Hindi states. But these Hindi states don’t generate enough revenue to pay for themselves. Now the PM is telling most non-Hindi states that their money will be taken by the Centre and will be given to Hindi states. The non-Hindi states themselves will not get any share of the money they contributed to the “Central funds” unless they agree with the political and development vision of a government propped up by MPs from Hindi states.

I stress this Hindi/non-Hindi divide precisely because the BJP’s rallying crying

and its ideological bedrock is captured by its semi-fascist slogan of yore: Hindi-Hindu-Hindustan. About 70% of BJP’s seats in the Lok Sabha come from States where Hindi is the primary official language while these states represent only 40% of the seats in parliament.

Revenue distribution

The separation of powers between the Centre and the State is the most sacred agreement in the constitution of any diverse federal union. The Indian Union is no exception. The fiscal arrangement that enables the Centre and the State to execute their autonomous functions is what makes a federation succeed. Tinkering with this arrangement or making threats about withholding rightful revenue claims, which in any case is stacked against the non-Hindi high-revenue low-population growth States, is an attack on the unity and integrity of the Indian Union itself.

The 14th Finance Commission has already changed the rules of revenue distribution so that a greater funds collected from non-Hindi states go to Hindi states, as the new criteria rewards states which have failed to control their population. This sort of cash transfer via Delhi leads to resentment, which never ends peacefully. Madrid milked Catalonia for decades to subsidize other provinces under a Spanish administration, only to find itself in an explosive situation. Threats to deny funds to the biggest revenue-contributing States don’t help. At some point it could occur to them to refuse to hand over the revenue in the first place.

In addition to making threats, what Union government often does to blackmail a State is to delay rightful payments. It uses its discretionary powers to discriminate as seen recently when it did not give any flood relief funds to West Bengal but paid huge sums to Bihar, Gujarat, Assam and even Nepal. In addition, the Union government has created unelected and extra-constitutional bodies such as the Niti Ayog. It appointed people with no constitutional authority and advised the Union government to give money to States under certain schemes not because it was their right but only if they implemented ‘reforms’. The Centre wants to decide policy with the State becoming just a local implementation agency for Delhi’s whims and wishes in areas under autonomous state powers. This violates State autonomy and hence, the autonomous political expression of the people of a State with regards to the State list and Concurrent list subjects of the Constitution. That is a direct violation of democracy and hence a violation of the sovereignty that resides in the people and is expressed autonomously and separately through Union and State governments.

Right from 1947, Congress used its super-majority to give Delhi the major revenue-grabbing powers. Ambedkar warned against this tendency and had maintained that the States should have adequate revenue and that the Constitution did not allow for it.

The GST has just destroyed that remaining power of the States to independently raise their own revenue by changing tax rates. Thus the Union has shown a tendency to penalize some States for their prosperity so that Delhi can maintain its political base elsewhere by cross-subsidizing Hindi belt laggards. West Bengal was an early victim of this policy. Tamil Nadu and Karnataka are among the major victims now.

The Union government has its own budget. This can be presented as a document for States to consider. Then the States can contribute according to their population proportion. That is the essence of any federal system because the Union government, at the end of the day, has no real business interfering in anything that happens fully within a State. As recently as August 2016, the West Bengal chief minister has reiterated that the Union government should have only four ministries: Defence, External Affairs, Railways and Finance (only monetary policy). This sort of a structure will preclude the repeated assaults on the federal structure of the Indian Union and will ensure its long-term unity and integrity.

Let me end with what we started with: the threat to not give funds to opposition-ruled States. It seems that Delhi is some kind of master or daddy and the States are slaves or children because it has taken advantage of the deliberate misconceptions spread by Union governments over the decades about the nature of the Indian Union and its federal structure. So let’s get things straight. The Centre and State don’t have a parent-child or master-slave relationship but one involving division of responsibility, jurisdiction, revenue and power. The Centre or Delhi is not responsible for the ‘country’. It is only responsible for subjects on the Union list and if its wants, for subjects in the Concurrent list of the constitution. The subjects contained on the State list, which include things as crucial as Land, Law and Order, Public Health, and Agriculture are the State’s business only and none of the Union’s business. That’s precisely why Centre’s pre-conditions and ‘assessments’ on funds to be disbursed for State subjects is so objectionable. It is none of Delhi’s business.

Garga Chatterjee is a Kolkata-based commentator on South Asian politics and culture. He received his PhD from Harvard and is a member of faculty at the Indian Statistical Institute, Kolkata. He blogs at