New Delhi, December 19, 2013

“The Planning Commission is the biggest obstacle in the path of federalism. It should be restructured to do perspective planning and implementation without being empowered to micro manage the states’ financing and functioning, which is the task of the Finance Ministry”, said opposition leader, Yashwant Sinha.

Mr Sinha was speaking at the 12th CUTS 30th Anniversary Thought Leadership Lecture on December 18, 2013, in New Delhi, on the topic “Fiscal Federalism: The Unequal Balance”. (

Mr Sinha added that India is a union of states and not a federation, for which several provisions in the Constitution exist, which provides a unitary character. “We are gradually moving towards federalism considering the fact that many regional parties are ruling in states”.

Mr. Pradeep S Mehta, Secretary General, CUTS, welcomed the guests by questioning the premise if the federalism practiced in India was true federalism. He mentioned that the Constitution of India does not refer to the role of Centre/Central Government, but to the Union.

Chairing the lecture event, Mr. N. K. Singh, MP, set the tone by stating that the issue was contemporary as well as complex, and sets up a challenge between economic understanding of scarcity of resources and political realities.

He mentioned that federal practices have not kept pace with changing dynamics and economic realities of the country. There was no credible and viable mechanism at present, for coordination between states and central government. “The Interstate Council is defunct”.

In his speech, Mr. Sinha touched upon the issues of differences between federalism and decentralisation, the changing political scenario with the emergence of regional political parties, role and utility of Planning Commission of India, the pending Goods and Services Tax, and the core issue of centre-state and inter-state relationship which is at the heart of the subject of fiscal federalism.

He noted that the Planning Commission was created by an executive order and has been continuing without any constitutional or statutory backing, but is playing a significant role in devolution of funds to states.

Mr Sinha was critical of the role of the Planning Commission in reviewing the gross budgetary support and the lack of accountability of the Planning Commission to the Parliament.

In addition, he raised concerns about the complex constitutional amendment bill on Goods and Service Tax wherein the potential problems of central government in its implementation, have not been adequately highlighted.

Cooperative federalism is the way forward
Mr. Sinha further mentioned that what India truly needed was cooperative federalism i.e. co-option of state governments in policy making, and need for greater cooperation between central and state governments in critical areas, including security.

The already existing empowered committee of finance ministers of various state governments on GST has been a successful experiment in this regard. The same approach can be taken for other subjects as well, such as a committee of state home ministers to deal with security matters. On the issue of performance on fiscal deficit, he was of the opinion that states have performed much better than the central government.

Dr. Bhal Chandra Mungekar, MP, in his speech, said that India is a natural federation considering the plurality of cultures, language, religion etc. He stressed upon the need to restructure the FRBM Act and the need for more autonomy of the states. He agreed with most of what Mr Sinha said.

Both parliamentarians Dr Mungekar and Mr N. K. Singh, having been members of the Planning Commission, too expressed their reservations about the functioning of the Plan body and suggested that it should be wound up.

The addresses were followed by a lively question and answer session. The audience included parliamentarians, Messrs V.P. Singh and Rangasayee Ramkrishna, amongst other eminent citizens, economists and media personnel. On a query of the steps needed to bring back India to growth trajectory, Mr. Sinha responded that government should create an environment to enable reduction in interest rates and ensure speedy clearances of pending projects, which are currently in the range of Rs. 138,000 crores.

Mr Mehta suggested that as a seed to cooperative federalism, mainstream political parties should also explore a grand coalition in forming a stable government, such as in Delhi State, as practiced in Germany, whereby the legislature can function without going in for fresh elections.

The meeting also issued a fresh call for scrapping the APMC Act, and to establish an empowered committee of state agriculture ministers to review the same.

The panel wholeheartedly echoed the need of cooperative federalism in India, emphasised that the same was feasible, and the need to rechristen the Planning Commission of India, as Department of Planning and Cooperation, as it has outlived its utility in its present form

For further information please contact:
Amol Kulkarni, +9109929642313 ,