Vital lessons from pandemic for a nation clawing back on to the growth path

While Centre-state cooperation on lockdown and vaccine roll-out are commendable, the fractious GST council meet and states not allowing in CBI could prove to be a spanner

In August last year, a normally unflappable Sushil Kumar Modi had to intervene in a GST Council meeting. Officers from the department of revenue in the union finance ministry had offered two stiff borrowing options to the state governments in response to the Covid-induced revenue crisis. State finance ministers were miffed that the union finance ministry had not sounded them out about the proposals before tabling them at the meeting. The former Bihar finance minister had to mildly tick off the officers and remind them about the need for wider consultations at the GST Council meetings. 

From an often yearly and often more rare frequency of meetings, centre-state cooperation has had to become almost like a daily consultation process with the impact of Covid. It could become even more intense, as the budget this time will have to devote considerable attention to agriculture, education and health—all of them largely state subjects. Some of the political challenges on the three farm laws are also the same. Who will decide about their fate for the future!

The report of the Fifteenth Finance Commission to decide how tax revenues will be divided not only between the Centre and the states, but also among the states, shall also be tabled by finance minister Nirmala Sitharaman along with the budget papers. The report is likely to be contentious, since one of its terms of reference is to define what constitutes populist action by a state government, and should therefore be clamped down.

The lows: 

The GST Council meeting that saw Sushil Modi intervene marked a low for the Centre-state relations in possibly the most difficult year India has faced since Independence. As the Covid created dislocations in the country at an unimaginable level, governments at all levels had to mount hurried responses. Not only was the stop-start nature of responses difficult, it was made more stiff because the governments had to cooperate far more deeply, among themselves, an unusual terrain for the states.

It thus created pressures of the kind that bubbled up at the GST Council meeting. Early this financial year, states found their revenue sources running dry as the lockdown hit economic activity countrywide. The cash-strapped state capitals wanted the Centre to borrow more money from the market to compensate them for their GST revenue shortfall. They were not amused when union revenue secretary Ajay Bhushan Pandey presented them with an option to borrow about Rs 97,000 crore as a soft loan from the market, under a special window to be coordinated by the Centre. The other option was to raise the borrowing ceiling for the states by Rs 2.35 trillion through issue of market debt at commercial rates. Both were stiff asks. 

There was, of course, a political divide between the Centre and some of the states. What rankled the states was that they had not been taken into confidence before the options were tabled and apparently the only question now was which one to choose. Many of them flatly refused to borrow more money on their balance sheets. Finally, after a lot of acrimony, the Centre relented in October and agreed to borrow Rs 1.1 trillion on its balance sheet for the states. 

The high:

At the other end was the cooperation evident in the roll-out of the vaccines to counter the pandemic. There have been consistent rounds of meeting between the Centre and the state governments since December to ensure the world’s largest vaccine programme ran smoothly. It is a difficult exercise. This is the first time when all Indian states will agree to a programme that shall run for several months. Each state will have to negotiate with the private sector vaccine companies to set up more or less identical payment schedules, agree to the the delivery of vaccines and what is more, exercise a common pan-India protocol to inoculate their people. 

Remember, out of India’s total health expenditure, about two-thirds are spent by the states with each most protective about their own format to do so. Bringing in similarity across them is a massive exercise. CAG reports on the health sector of each state governments have repeatedly pointed out to the differences and the problems these create. Yet, this time the states agreed among themselves and with the Centre on plans to mobilise their health staff drilling down to the level of Anganwadis, the village level health platforms.

In a meeting in early January, attended by the state principal secretaries, National Health Mission directors and health ministry officials from the Centre and the states, the officers were more willing to set aside differences instead of airing them, said Ram Sewak Sharma, chairman of the empowered group on technology and data management to combat Covid-19. The mood was totally different from that at the GST Council. 

State and central government relations have become noticeably prickly in recent years. In November 2018, the Andhra Pradesh government decided the Central Bureau of Investigation, or CBI cannot carry out any police work within the state without getting specific permission each time. The order immediately pleased the West Bengal chief minister who praised the move and in a few hours issued a similar order. Those orders stand. Opinion is divided on what the states have done. CBI, despite describing itself as India’s premier investigative agency is often seen as being partisan towards the government in power at the centre. West Bengal has in fact moved the animosity deeper forbidding permission to its officers to pick up a central deputation post. Every year the centre asks for officers from the respective state cadres to be nominated for assignments in the different ministries at New Delhi. This is because the centre has no cadre of its own within the Indian Administrative Service and the Indian Police Service. 

The tense relations have come just when the response to Covid pandemic has forced both of them to cooperate intensely forgetting the scant importance each central government has offered to relations with state governments. 

Missing in action: 

The Inter-State Council was established 30 years ago in May 1990 to provide a forum headed by the Prime Minister with all the state chief ministers for “investigating and discussing” and make recommendations for subjects that concern the Centre and states. It was supposed to meet thrice each year. Since 1990 it has met just eleven times. In ten years between 2006 and 2015, it did not meet even once. Secretaries at the centre consider a posting to the Council as a dead end to their careers.

The Council’s dismal role tells why the Centre-state relations are fraught. It comes to life only when there are emergencies. There is no effort made to keep the lines open in normal times so that communications do not snap in emergencies. 

In the middle of India’s largest mass migration in recent decades when jobless workers trudged back home due to the Covid induced shutdown, they became a political football. When cyclone Amphan tore through West Bengal at the same time last year, the state tersely refused to take back the refugees. Chief secretary of the state, Rajiva Sinha immediately wrote to the railway board chairman asking him to stop those special trains. “As district administration is involved with relief and rehabilitation works, it will not be possible to receive special trains for next few days. It's requested that no train should be sent to the state till May 26.” The connection was hard to establish, but it became an opportunity to deny the centre the right to crow about its humanitarian effort of bringing the workers back. 

The budget this time will have lots to speak on agriculture, on education and health—all of them state subjects plus the report of the Fifteenth Finance Commission. 

While ministries at the centre reach out on a case by case basis with their counterparts in the respective state governments, there are often no agreed upon procedures for the cabinet secretariat or the Prime Minister’s Office to do so. In the early days of the pandemic, as the health ministry identified zones in some states as hot spots, the cabinet secretariat arranged for meetings with the third tier in governments, the municipal and panchayat administrations. In May, Cabinet Secretary Rajiv Gauba met 13 municipal commissioners and district magistrates of the worst-affected cities. It was an unprecedented meeting. In the rank-conscious Indian bureaucracy, these commissioners occupy slots several rungs below Gauba. In the normal course, they are supposed to report only to their respective state leadership where the centre has no role. While the meeting was also attended by chief secretaries of each state government, they were there to answer for the gaps in demands made by the commissioners.

A few days later in June, some of the municipal bosses also met the chairman of the Finance Commission, N K Singh. Going by the releases issued by the commission, many have forcefully put their points of being shortchanged by the states. The state governments would not be happy with such meetings, even though the lack of accountability has impacted the fight against the disease as well. 

About Delhi, Partha Mukhopadhyay, one of India’s foremost analysts of the urban sector says, “On the disease, there has been less effectiveness, largely because the kind of infrastructure needed for doing this is not within the city’s control. Currently, contact tracing is done via a medley of workers in the district magistrates’s office, once the hospital informs (this office).”

If the Centre tries to apportion more power and therefore responsibility to the third tier, the states shall see it as an evidence that their responsibility and flow of finance will be curtailed. OP Agarwal, chief executive officer-India of World Resources Institute said, “the special powers available with the states is unlikely to be willingly shared with the munis, when the crisis blows over, which is a pity.”