Competitive Federalism


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.

Competitive federalism can refer to the relationship between the Central and state governments (vertical) or between state governments (horizontal). This idea gained significance in India post the 1990s economic reforms. In a free-market economy, the endowments of states, available resource base and their comparative advantages all foster a spirit of competition. States need to compete among themselves and also with the Centre for benefits. Increasing globalisation, however, made the already existing inequalities and imbalances between states starker. This gave rise to concerns about states’ freedom to formulate their own growth policies.

Union government is responsible only for making rules of this competition. States compete with each other to attract funds and investment, which facilitates efficiency in administration and enhances developmental activities. The investors prefer more developed states for investing their money. Union government devolve funds to the states on the basis of usage of previously allocated funds. Thus, funds and investments flow in greater amount (both from central government and private investors) to those states which have shown optimum use of previously allocated funds. Thus, competitive federalism ensures minimum wastage and maximum use of resources. Healthy competition strives to improve physical and social infrastructure within the state.

 States compete with each other on developmental fronts to attract more money. To facilitate this, states are given more responsibility and autonomy in the matters of policy planning and implementation. This help states to learn from each other and implement the best practices as per their specific needs. It is after six decades of independence, India has recognized that progress of the nation lies in the progress of its states. Competitive federalism is not part of the basic structure of Indian constitution. It is the decision of executives.

 Promoting both cooperative and competitive federalism has been an overarching theme of the government. Political analyst K.C. Wheare, in his book Federal Government, defines “federalism” as “the method of dividing powers so that the general and regional governments are each within a sphere coordinate and independent”. This implies a system of governance in which sovereignty is constitutionally divided between a central governing authority and subnational political entities.


Sunday, 20th Mar 2016, 11:42:10 PM

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