Q. Due to coalition politics and economic liberalisation, federalism has become a key feature of the Indian political system. Comment.

Answer: Federalism is a concept applied to a political system characterised by two levels of
government. A province or state may be referred to as the lower level of government, while the
national or central government is the higher level. These two tiers of government exist
independently of one another and both enjoy their power. Federalism has always been our
democratic system’s saving grace.

FEDERAL FEATURES ON THE INDIAN CONSTITUTION

 Dual Polity: The Constitution establishes a dual polity i.e. the Union government and
the state government. Each of them is assigned powers of their own.

 Written Constitution: India has a written constitution which specifies the structure,
organisation, powers and functions of both the Central and state governments and
prescribes the limits within which they must operate.

 Division of Powers: The Constitution divides the powers between the Centre and the
states in terms of the Union List, State List and Concurrent List in the Seventh Schedule.

 Supremacy of the Constitution: The Constitution is the supreme law of the land and
the laws enacted by the Centre and the states must conform to its provisions.

 Independent Judiciary: The Constitution establishes an independent judiciary headed
by the Supreme Court to settle disputes between the Centre and the states or between
the states.

However, the Indian system is not a federal one in the true sense. It is quasi-federalism or
“centralised” federalism with a tilt of power towards the central government. The provisions that
demonstrate this tilt are

 Strong Centre: The division of powers is in favour of the Centre as the Union List has
more subjects than the State List and the laws of the centre prevail over the states in the
concurrent list.
 Redrawing of state boundaries: The Parliament has the power to change the area,
boundaries or name of any state.

 Amendment of the Constitution: The majority of the Constitution can be amended by
the Parliament, either by simple majority or by special majority.

 Emergency Provisions: During an emergency, the Central government becomes allpowerful and the states go into total control of the Centre.

 Veto over state bills: The governor is empowered to reserve certain types of bills
passed by the state legislature for the consideration of the President. The President can
withhold his assent to such bills not only in the first instance but also in the second
instance.

COALITION POLITICS AND FEDERALISM
The term “coalition” is derived from the Latin word ‘coalition’ meaning to go or grow together. A
“coalition government” is one that has been formed by several political parties. In 1977, the
Janata Party, led by Morarji Desai, formed the first coalition government at the national level.
Coalition politics has the potential to promote federalism in the Indian political system. These
methods accomplish this:

 Diverse representation: India is a very diverse country with different cultures,
languages, castes, religious groups etc. Due to such diversity, a single-party rule may
not be able to cater to local aspirations. In such cases, a coalition government can prove
useful as it can act as a channel to meet expectations and redress the grievances of
different groups.
 E:g :-Setting up of the Rail factory at Madhepura(Bihar) was due to the impact of
Coalition partners which in turn strengthened the idea of Federalism by catering the
local(state) demand.

 Consensus-based politics: A coalition government comprises different political parties
having their own ideologies or agendas. All of these members participate in the decision
making and hence it leads to consensus-based politics and promotes federalism. E:g :-
When it comes to Sri Lanka the coalition partner (if it is there) exerts its influence and
aborts the unilateral decision making and thus strengthens the idea of Federalism

 Strengthens regional representation: Coalition politics strengthens the federal fabric
of the Indian political system. This is because a coalition government is more sensitive
and responsive to regional demands as they represent the needs of the different
sections of society.

 Prevents despotic rule: A coalition government reduces the chances of despotic rule
as it eliminates the domination of a single political party in the functioning of the
government. For instance, after independence, the Congress party enjoyed absolute
political hegemony and often interfered in state politics.

 Policy decentralisation: It gets boosted due to coalition politics. Under this policies are
decentralised for better outcome and efficiency. For eg MGNREGA
 Coalition Government offers a chance for supporters of other parties to be represented
in Government. When voters believe smaller parties might form a part of the
Government and might have a chance of political power, they may be more likely to vote
for a party they really feel represents them rather than just choosing between the two
main parties.

ECONOMIC LIBERALISATION AND FEDERALISM

Economic liberalisation in India refers to the opening up of the country’s economic policies with
the intention of enhancing the role of private and foreign investment as well as market and
service orientation. In 1990-1991, India experienced a severe Balance of Payments (BOP)
crisis. India introduced a New Economic Policy based on the LPG (Liberalisation, Privatization,
and Globalization) model in 1991 to address the macroeconomic crisis.
The extensive scope of changes made under the LPG model included:

 Liberalising Industrial Policy: Abolition of industrial licence permit raj, Reduction in
import tariffs, etc.

 Beginning of Privatisation: Deregulation of markets, Banking reforms, etc.

 Globalisation: Exchange rate correction, liberalising foreign direct investment and trade
policies, removing the mandatory convertibility clause, etc.

Our nation’s fiscal federalism was impacted by economic liberalisation. Fiscal federalism is the
division of funding and management responsibilities among the federal government, the states,
and local governments. States and lower tiers of government now have access to more funding
as a result of economic liberalisation, which will enable them to create individualised spending
plans. Some of the major changes in fiscal federalism are as follows:

 Greater Devolution of taxes to states: The 15th Finance Commission has increased
the share of state government in central taxes to 42%.

 NITI Aayog: Erstwhile Planning commission which was responsible for the distribution of
funds has been transformed into NITI Aayog which is more in line with Cooperative
federalism.

 End of central hegemony: Going against ‘one size fits all’ approach states can frame
their policies independent of central hegemony.

 Centre as facilitator: Central government’s role became more of a facilitator or
regulator after the economic liberalisation. As per recommendations of the Finance
Commission, the Centre has devolved more funds to the state governments, promoting
decentralisation in planning and program implementation.

 Minimised role of the central government in deciding FDI limit would help states
to compete among themselves for a better investment. Eg the recent shifting of
TATA plant from Maharashtra to Gujarat.

 End of licence raj: Before economic liberalisation, most industries were controlled by
the government but after then restrictions were relaxed and private sectors were allowed
to establish industries. With this competition among states began to bring manufacturing
to their state which led to competitive federalism among states.

 Goods and Services Tax: The passage of GST ushers in a new era in cooperative
fiscal federalism and a growing political consensus for economic reforms.

CONCLUSION

The coalition politics and economic liberalisation in their own scope promote federalism. The
coalition form of government is a sign of vibrant democracy and has benefited the states by
giving them more representation at the federal level. On the other hand, the changing nature of
fiscal federalism has benefited the states by allowing them to inculcate a culture of fiscal
consolidation and reforms. Strong economic fundamentals boosted by prompt government
efforts would certainly make India a $5 trillion economy.
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