Yojana Magazine May 2021: Federal Structure

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NITI Aayog: Redefining Federalism

NITI Aayog:

  • The NITI Aayog (National Institution for Transforming India) is a public policy think tank of the Government of India.
  • It was established to achieve sustainable development goals with cooperative federalism by fostering the involvement of the State Governments of India in the economic policy-making process.
  • The NITI Aayog was established in 2015, to replace the Planning Commission.

Comparison between NITI Aayog and Planning Commission:

  • Planning Commission and NITI Aayog, their mandate and approach of the two institutions, with the same overarching goal of developing India, could not be more different.
  • Planning Commission operated through the lens of Five-Year Plans, using financial resources as the primary lever for guiding development.
  • NITI Aayog, on the other hand, is driven primarily through intellectual firepower as well as the mandate and capability of forging meaningful partnerships with State Governments, civil society organisations, the private sector, and innovators for accelerating the pace of India’s development.
  • While the Planning Commission acted as a fund disburser, NITI Aayog works as a thought partner with all stakeholders, especially the States, which are the principal agents for fostering economic development in the country.
  • While the Planning Commission followed a top-down model, the NITI Aayog is using a bottom-up approach.

Significance of NITI Aayog:

  • While the Planning Commission impinged on the fiscal sovereignty of the States, after the constitution of the NITI Aayog, the states are now empowered to decide how best to use their funds, without being mandated to follow a top-down direction.
  • The NITI Aayog has replaced the Central Government's practice of unilaterally designing the pan-Indian development strategy while working with State Governments to jointly prepare development blueprints that are suited to and take into account the special circumstances of each State.
  • Notably, the Planning Commission adopted a 'one-size-fits-all' approach towards the Indian States. NITI Aayog, on the other hand, is guided by a ‘States-first’ approach. Its founding principles include cooperative federalism (a collaboration between the Central and State Governments) and competitive federalism (spurring healthy competition among States).
  • NITI Aayog has adopted a decentralized and bottom-up strategy, to ensure that Central and State Governments work together as equal partners in Team India.
  • NITI has provided a platform for direct issue-based interaction between State Governments and Central Ministries, thereby helping resolve outstanding issues quickly.

Initiatives of NITI Aayog:

Regional development initiatives:

  • The NITI Forum for North East has been constituted and tangible sectoral proposals are being implemented by the States in partnership with the North East Council.
  • NITI Aayog has designed some major initiatives for island development which are being implemented by relevant authorities under the overall guidance of the Ministry of Home Affairs.

Sectoral indices:

  • NITI promotes competitive federalism by pushing its sectoral indices which are put out in the public domain. The indices on water, education, health, innovation, export preparedness, and Sustainable Development Goals (SDGs) have attracted significant positive attention.
  • The ‘Performance in Health Outcomes’ Index, for instance, captures the overall performance of States in health along with annual improvements in health outcomes, governance, and processes.
  • Similarly, the Composite Water Management Index details how States have progressed on water-related issues over time.
  • The ‘School Education Quality Index’ aims to institutionalize a focus on improving education outcomes (learning, access, equity) in India.

Policy related inputs:

  • NITI Aayog has been continuously engaged in providing fresh policy-related inputs for implementation by relevant Central Government Ministries and State Government agencies.
  • Universal health, agriculture sector modernization, renewable energy, electric mobility, reforms of the mining sector, the campaign against women and child malnutrition are some examples of areas where NITI has made substantive policy inputs during its six-year existence.
  • It has been involved in drafting the National Medical Commission Bill and the bills for reforming the education system pertaining to Indian Systems of Medicine and Homeopathy.
  • Several policy suggestions are contained in NITI’s document ‘Strategy for New India @ 75’. It is a seven-year strategy.

Design and implementation of schemes and programs:

  • NITI Aayog has also been closely involved with the design and monitoring of the Ayushman Bharat programme.
  • NITI has played a similar key role in the POSHAN Abhiyaan which the Government launched to provide an appropriate governance structure that affects the nutritional status of an individual or household.
  • NITI has also implemented the SATH – ‘Sustainable Action for Transforming Human Capital’ program in 3 States.
  • NITI shared a road map for Pradhan Mantri Krishi Sinchayee Yojana with all States and Union Territories.

Monitoring of schemes and initiatives:

  • One of NITI Aayog’s key tasks and important mandates is to develop an output–outcome monitoring framework and rigorously evaluate Central Government schemes and initiatives. The Development Monitoring and Evaluation Office (DMEO) undertake this function of the NITI Aayog.
  • It recently completed the evaluation of 125 Centrally Sponsored Schemes to determine their continuation from the 14th Finance Commission to the 15th Finance Commission period.
  • DMEO also supports the Department of Expenditure for preparing the outcome budget for over 65 ministries and departments.
  • NITI has been closely monitoring the progress of SDGs across all States and engaging with them to set up real-time technology-based monitoring capacities which will help mainstream SDGs in the development process in every State.

Aspirational districts program:

  • NITI Aayog has also introduced a competition element in the ‘Aspirational Districts Program’ which aims to raise the human development indicators in these districts to the national averages by focusing on governance improvement and achieving effective convergence among government agencies and organizations on the ground.
  • These districts have shown significant improvement in indicators pertaining to health and nutrition, education, agriculture, and water management, financial inclusion, skill development, and basic infrastructure which NITI Aayog is monitoring on a real-time basis.

Atal Innovation Mission:

  • NITI Aayog has been focused on nurturing an innovation ecosystem across the country.
  • The Atal Innovation Mission (AIM) is a flagship initiative of NITI for promoting innovation and entrepreneurship across the length and breadth of the country. AIM has adopted a holistic approach towards establishing an integrated ecosystem of innovation and entrepreneurship at school, university, industry levels, linking NGOs, venture capital, and private industries.
  • AIM promotes an innovative mindset in school students through Atal Tinkering Labs (ATLs) which feed into start-ups fostered by the Atal Incubation Centres (AICs).


  • Continued structural reforms are crucial for laying new foundations to ensure sustained and inclusive growth. NITI Aayog has a key role to play in helping India undertake these reforms and implement policy initiatives in a scalable and impactful manner through partnerships with States.
  • NITI Aayog has endeavoured to pursue its twin mandate of promoting cooperative and competitive federalism through partnerships with States for designing and reviewing development plans.
Growth Story of Gujarat

The following is a compilation of exam relevant facts related to the Indian state of Gujarat-

  • The State of Gujarat was established on May 1, 1960.
  • Gujarat has the lowest unemployment rate in India, i.e., 3.5%.
  • Gujarat became the first state to implement 10% reservation for the non-reserved population as per the Central Government guidelines.
  • World’s largest hybrid Renewable Energy Park, coming up at Kachchh, has a 30,000 megawatts capacity.
  • The world’s first CNG Terminal is being set up at Bhavnagar in Gujarat, operating 6 million tonne cargo annually.
  • Gujarat is on the top of the list in the installation of Solar Rooftops.
  • Gujarat, which contributes a significant eight per cent to the country’s GDP, received a substantial amount of Foreign Direct Investments. In 2019-20, Gujarat was considered the Best Destination for Foreign Direct Investment in India.
  • Gujarat accounts for more than 23% of the country’s total exports, and the State ranked first in the ‘Export Preparedness Index 2020’ released by NITI Aayog. Gujarat has also been getting the first position in startup rankings and logistics rankings for two consecutive years.

Tourist destinations:

  • Apart from Gir and Devalia Safari Park, Ambardi Safari Park has been opened in Amreli, which hosts Asiatic Lions.
  • Shivrajpur Beach in Gujarat is being developed as a world-class tourist destination. It is among eight beaches of India, which has been given the Blue Flag Beach tag.
  • The only Dinosaur Fossil Park of India has been constructed in Rayioli village of Balasinor. It is India’s largest and the world’s third-largest dinosaur fossil site.
  • UNESCO has declared Champaner and Rani Ki Vav, Patan as heritage sites, and Ahmedabad has been included as the first heritage city.

Important state schemes/initiatives:

  • As a part of Digital Gujarat, modern facilities were provided in 16,000 classrooms through Gyankunj Project.
  • Gujarat is the first state to establish the State Yoga Board.
  • A water grid has been made in Gujarat’s urban areas to make polluted water useful through the Reuse of Treated Waste Water Policy.
  • Gujarat is second after Tamil Nadu to set up Desalination Plant to make seawater potable.
  • SAUNI Yojana was made operational to make the Saurashtra region green and provide potable water of the Narmada River to 80 lakh people. With SAUNI Yojana, an irrigation facility has been provided to a 1,66,000-hectare area.
  • Under Sujalam Sufalam Jal Abhiyan, works related to water conservation have been done, increasing water storage capacity in the water-scarce state of Gujarat. It has provided employment to a large number of people
  • Gujarat has come out with a new Solar and Hybrid Policy.
  • The renowned Bagayat Mission of Gujarat aims to provide land on lease for horticultural and medicinal plants.
  • The first Ro-Ro ferry service began from Ghogha in Bhavnagar to Dahej in South Gujarat.
  • India’s first smart city is being set up at Dholera. It has been included in the list of six smart cities by the Central Government.
Transformation of a State


  • Gujarat is well known as the manufacturing powerhouse of the country.
  • Gujarat is one of India's preferred states for all domestic and foreign direct investments.
  • The State of Gujarat received the highest FDI worth INR 1.58 lakh crore (USD 21.24 Billion) during Apr-Dec 2020 and during the first six months of 2020-21.
  • In terms of domestic investment, which is reflected by the number of Industrial Entrepreneur Memorandums (IEMs), the State stands first in terms of the number of IEMs filed and actual investment reported for 2019. The State accounted for 51% share (1st Rank) of IEMs filed in India in terms of value with a proposed investment of USD 49 Billion in 2019.
  • The significant increase in investment has enabled the reduction of the unemployment rate. The state has the lowest urban unemployment rate (3.4%) as per the Periodic Labour Force Survey (PLFS) 2018-19.

Factors that are aiding the development process in Gujarat:

  • Robust infrastructure:
  • A robust infrastructure has always been one of Gujarat’s strengths in terms of road connectivity, railway networks, ports, airports, power supply, utility grids, etc.
  • The world’s largest Solar & Wind Hybrid Energy Park with a capacity of 30 GW is coming up in Kutch.

Conducive policies:

Reducing compliance burden on enterprises:

  • The transparent and investor-friendly relations and conducive business policies have played a critical role in incentivizing both domestic as well as foreign investment into the state of Gujarat. It has taken several measures to minimize the compliances burden on businesses.

Timely changes in policy:

  • Initiatives such as exemption from the labour laws have also contributed to restoring normalcy in the post-pandemic phase.

Land policy:

  • The State has a Digitized Land Bank (33,000 hectares) to facilitate and let investors choose the best possible location for their investment in industrial areas of the State.

Sector-specific policies:

  • The State is also finalizing Gujarat’s first Integrated Logistics Policy and Service Sector Policy to promote sectors such as IT, Banking and Financial Services, Tourism, etc. with the objective to support industrial ecosystem development and to enable integrated development of the businesses.

The impetus to novel sectors:

  • 20 policies over the last five years focused predominantly on supporting a conducive industrial ecosystem and promoting green manufacturing, R&D, and innovation.
  • The policy shift from traditional sectors like chemicals, metallurgical industries, transportation, etc. to sectors like telecommunication, automobile, renewable energy, technical textiles, etc. has been a timely policy measure taken by the state government which will help maintain the growth story of Gujarat.

Skilling of human resources:

  • To promote skill enhancement and employment generation, an MoU has been signed for the development of the Gujarat Special Education Region (G-SER) as an education hub in 5,000 acres at Dholera.
  • Gujarat is also setting Anchor Institutes with a view of new emerging sectors to formulate an industry responsive curriculum, need-based training, and relevant skill development for trainers.

Electricity policy:

  • Gujarat Solar Power Policy 2021 aims to reduce the power costs of industrial units by around 50%. This acts as an added incentive for prospective investors.

Proactive governance:

Ease of doing business:

  • Gujarat has been a front runner in implementing several reforms for improving and easing the environment for doing business. It has initiated various reforms such as Ease-of-Doing-Business ranking of states and ease of compliances

Futuristic projects:

  • With geographically balanced development and futuristic projects like DFC, DMIC, Dholera SIR, Mandal Becharaji (MBSIR), Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR), etc. there are tremendous investment opportunities in Gujarat.
  • The recently launched fintech hub at Gujarat International Finance Tec-City (GIFT) International Financial Services Centre (IFSC), Gujarat is set to attract global fintech firms and startups.

MSME related policies:

  • The Government of Gujarat also offers extensive support for developing micro, small and medium enterprises in the State. It is aligned with the vision of ‘First Production, Then Permission’. Accordingly, the State Government passed the Gujarat Micro Small and Medium Enterprises (Facilitation of Establishment and Operation) MSME Act, 2019. MSMEs, under the Act, are exempted from obtaining prior approvals for three years and can put in necessary initial attempts to start the industry successfully.

Strategic location:

  • Located on the western coast of India and endowed with abundant natural resources like crude oil and natural gas reserves, the location of Gujarat along a major marine trade route has aided its development process.


  • Gujarat and its transformational model could work as key contributors towards an ‘Aatmanirbhar Bharat’.
Maharashtra: A Journey of Over Sixty Years

Historical perspective:

Ancient history:

  • Many Chalcolithic sites are located in present-day Maharashtra and some like Inamgaon (1300 BCE to 700 BCE) were extensively excavated.
  • During the historical period, the rule of the Mauryas (4th century BCE to 2nd century BCE) was seen in Maharashtra. Remains of the inscriptions of Ashoka have been found in the state.
  • The Satavahanas ruled in regions belonging to present-day Maharashtra between the 1st century BCE to 3rd century CE.
  • After the decline of the Satavahana rule, many small kingdoms were established in different parts of Maharashtra like the Abhiras, Traikutakas, etc. And in the 4th century CE, the Vakataka rulers came to prominence. They had two branches both ruling in Vidarbha. Some of their rulers had patronized the cave excavation activities at Ajanta in the 5th century CE.
  • Maharashtra was ruled by a few rulers in the 6th – 7th centuries CE like the Kalachuris (Madhya Pradesh) and Western Chalukyas (Karnataka).
  • In the 8th century CE when the Rashtrakutas came to power, they were involved in creating the world-famous caves at Ellora.

Medieval history:

  • The Yadavas (10th century to 13th century CE) were the next rulers in the state. The Shilahara rulers
  • were contemporary to them ruling in western and southern Maharashtra. This period marks the efflorescence of the temple building activity in Maharashtra. Allauddin Khilji of the Delhi Sultanate defeated the Yadavas.
  • Muhammad bin Tughlaq shifted his capital to Daulatabad (Devagiri) from Delhi for some time. After the decline of the Tughlaqs, the Bahmani Sultanate started ruling over Maharashtra in the 14th century CE.
  • After the disintegration of the Bahamani empire, the Nizam Shahi and Adil Shahi ruled over different parts of the state.
  • In the 17th century CE, Chhatrapati Shivaji established his independent rule in Maharashtra. Maratha Empire lasted until the British took over it in 1819.

Modern history:

  • Maharashtra played a major role in the struggle for independence.
  • The year 1885 saw the establishment of the Indian National Congress in Bombay.
  • The establishment of the first Indian newspaper Darpan also happened in the state.
  • Maharashtra has been a pioneer of women’s rights and the Indian feminist movement. From the early 19th century onwards, the state saw a host of thinkers and reformers who campaigned against child marriage and Sati, while simultaneously upholding women’s education and widow remarriage. Prominent names include the late Justice MG Ranade, his wife Ramabai Ranade, Savitribai Phule, and Pandita Ramabai.
  • India’s first female doctor, Late Anandi Bai Joshi comes from the state of Maharashtra.
  • As early as the 1930s, cities like Pune was also known as a prominent educational hub and as the 'Oxford of the East'.

Post-independence history:

  • On 1st May 1960, the separate Marathi speaking state of Maharashtra was created.


Bordering States:

  • The modern state of Maharashtra is bordered by the Arabian Sea to the West, Gujarat and the Union Territory of Dadra and Nagar Haveli to the Northwest, Madhya Pradesh to the North & North East, Chhattisgarh to the East, Karnataka to the South, Andhra Pradesh to the southeast and Goa to the Southwest.

Natural features in the state:

  • The Western Ghats form the source of several major rivers of Maharashtra, notable among them being the Godavari and the Krishna.
  • The Sahyadri Range is the defining geographical feature of Maharashtra. The Konkan, lying between the Arabian Sea and the Sahyadri Range, is a narrow coastal lowland.
  • The Satpuras, hills along the northern border, and the Bhamragad Chiroli-Gaikhuri Ranges on the eastern border form physical barriers.

Natural Resources:

  • Apart from the mainly occurring rock Basalt; other rocks like Laterite are found in the coastal humid and tropical region.
  • Maharashtra is rich in ore deposits. Granite, Granite gneiss, Quartzite, Conglomerates are found in the basement regions of the Konkan Rivers.
  • Kamti of the Nagpur region is famous for coal.
  • The Chandrapur, Gadchiroli, Bhandara, and Nagpur Districts form the main mineral belt, with coal and manganese as the major minerals and iron ore and limestone as minor minerals.

Art and Culture:


  • Over 70% of India’s rock cave art is in the state.
  • Of all these, Ajanta and Ellora, in the vicinity of Aurangabad, are world-famous heritage sites.
  • All these have been carved out of solid rock.
  • Buddhist rock-cut caves like Bhaja, Pitalkhora, Karla and Nasik are also equally famous rock-cut caves in the state.
  • The Elephanta Caves are a network of sculpted caves on Elephanta Island.

Art forms:

  • Musical forms like Powada, a song praising the valour of a great ruler and graceful dance forms like Lavani are popular art forms of the state. The Koli dance form is also famous in the coastal region of the state.


  • The Bhakti movement—a medieval movement spread all over the country between the 13th and 17th centuries found resonance in Maharashtra as well. Famous personalities of the Bhakti movement includes saint poets like Dnyaneshwar, Namdev, Tukaram, and Chokhamela.
  • The Warkari movement every year in June-July sees a plethora of farmers and myriad believers in Vitthoba (an avatar of Lord Vishnu) converge to Pandharpur in an annual pilgrimage.
One Nation – One Election


  • India had concurrent elections for the first two decades. Starting from the first general elections of free India in 1951 and the next three cycles of elections, the country witnessed concurrent Lok Sabha and Legislative Assembly elections barring a few stray cases like Kerala where a mid-term election was held in 1960 on the premature dissolution of the Assembly, and in Nagaland and Pondicherry where the Legislative Assembly was created only after the 1962 general elections.
  • The fourth Lok Sabha constituted in 1967 was dissolved prematurely in 1971 ahead of its normal term resulting in a mid-term Lok Sabha election. This was the beginning of the end of simultaneous elections in India.
  • Extension of the term of Lok Sabha during the National Emergency declared in 1975 and the dissolution of Assemblies of some States after the 1977 Lok Sabha election further disturbed the cycle of concurrent elections.
  • Currently, there are at least two rounds of Assembly general elections every year. This never-ending cycle of elections in India has become a source of concern and there has been a proposal for simultaneous elections in India.

Related provisions:

Legal provisions:

  • Sections 14 and 15 of the Representation of the People Act, 1951, empower the Election Commission to notify elections any time during the last six months of the term of the House and not earlier than that.
  • Therefore, if the terms of the Houses are expiring within a window of three to four months, it would be legally possible to hold elections simultaneously to constitute the new Houses.

Constitutional provisions:

  • Both the Lok Sabha and Legislative Assemblies (ordinarily) have a term of five years.
  • Article 83 of the Constitution provides that “the House of the People, unless sooner dissolved, shall continue for five years from the date appointed for its first meeting and no longer and the expiration of the said period of five years shall operate as a dissolution of the House.” Identical provisions are present in Article 172(1) regarding the term of the Legislative Assemblies
    • Though houses can be dissolved ahead of the scheduled expiry of the term of five years (Articles 85(2)
    • (b) and 174(2) (b)), there is no provision for extension of the term unless a proclamation of Emergency is in operation.

Significance of simultaneous elections-

Reduced time and expenditure:

  • Simultaneous elections reduce labour, time and expenditure in the conduct of elections.

Impact on Governance:

  • Instances of pause in governance due to the Model Code of Conduct (MCC) are addressed if elections are conducted in one go instead of staggered elections.
  • Model Code of Conduct (MCC) is a set of behaviour guidelines for candidates and political parties that comes into operation from the date election is announced by the Election Commission.
  • A crucial part of the MCC is the restrictions on the party in power. MCC prohibits using official resources for electoral activities, announcing financial grants, new schemes, etc. that may influence the voters in favour of the ruling party. 
  • The aim of MCC is to ensure a check on the ruling party against using its position of power to woo the electors on the eve of elections and to provide a level playing turf to all stakeholders. Read more on the Model Code of Conduct.
  • If all elections are held together, the restrictions under MCC will be through in one go.
  • Help reduce campaign expenses:
    • Simultaneous Lok Sabha and Assembly elections can bring considerable savings in the election propaganda campaign expenditure for the political parties. Given that political funding is a major factor in the increasing menace of corruption, the move to reduce campaign expenditure is a welcome initiative.

Incentivize voter turnout:

  • A simultaneous nationwide election could push up the voter turnout since a once-in-five-year event is bound to attract more enthusiastic participation across all sections.
  • Frequent elections can bring in the election-fatigue factor at least among some sections of electors. The simultaneous elections help address the fatigue element and the usually observed urban apathy in voting.
  • Better electors’ participation will further add to the credibility of the election.

Challenges in ensuring simultaneous elections in India-

Synchronising the Terms of the Houses:

  • Bringing the terms of all the Houses to sync with one another necessarily calls for either extending the terms of several of the Houses or curtailing of terms or a combination of both, that too by two to three years in some cases.
  • The relevant Articles of the Constitution will have to be suitably amended.

Chances of midterm dissolution:

  • Even if the terms are synchronised as a one-time measure, we will still need an adequate legal safeguard in place to avoid mid-term dissolution and protect the simultaneous elections cycle.

EVM related expenses:

  • One aspect that could offset the savings would be the doubling of expenses on electronic voting machines (EVMs). Considering that the incidental recurring expense in the storage and security of the EVMs will also be a considerable amount, the overall expenditure in holding elections may not see any substantial dip on account of simultaneous elections.


  • To avoid the threat of midterm dissolutions, legal provisions for a ‘no-confidence motion’ to be brought up against the government in office should also contain a constructive ‘vote of confidence’ in an alternative government with a named leader to head it. This will act as a constructive vote of confidence.
  • This helps to maintain the fixed term of the House.

Local Bodies’ Elections:

  • The local bodies’ elections have not been considered for the analysis here for the reason that the elections to local bodies cannot be clubbed with the proposed simultaneous elections for the Lok Sabha. The reasons for this are as follows:
    • The elections to local bodies are conducted under the superintendence, direction, and control of a different constitutional authority, namely, the respective State Election Commission.
    • Holding local bodies’ elections along with the other elections will require the team of the same polling officials to report to and take instructions from two different authorities simultaneously, even on the same issue, and they may not necessarily get the same direction in all cases.
    • There is a distinct set of polling stations too for local bodies’ elections.
    • Further, the judicial forum before which the local bodies’ election can be challenged is the Court of District Judge and other lower courts whereas an election petition challenging a Parliamentary or Assembly election is to be brought up before the High Court.
The Financial Impact of the Pandemic

  • The Covid-19 pandemic has created the biggest health crisis of this century, upended life globally, wreaked havoc on economies, devastated families, and caused death and disability.
  • In the initial stages, the lockdown and social distancing measures to check the spread of the contagion had led to a near halt in economic activities. Revenues suffered massively while the expenditure obligations soared.

Fiscal federalism:

  • When the States needed fiscal support for their liquidity needs, the Government of India responded in the true spirit of “Fiscal Federalism.”
  • Through the following measures, the Centre has made sufficient resources available to the States to fight the contagion, spur economic activity and maintain the standards of public service delivery.

Enhancement of Borrowing Limit of States:

  • In India, borrowing by States is governed by the provisions of Article 293 of the Constitution of India.
  • To maintain fiscal prudence, the Union Government permitted the State Governments to borrow within the Net Borrowing Ceiling of 3% of their GSDP in a financial year.
  • However, to help ease stress in state finances on account of the plunge in their revenue receipts, avoid a severe cutback in capital expenditure, and prevent a contractionary fiscal impulse, the Government of
  • India enhanced the borrowing limit of States for fiscal 2020-21 by 2% of GSDP. This provided extra headroom of Rs. 4.28 lakh crore to States.
  • Half of the additional borrowing facility was unconditional while the remaining was linked to specified, measurable and feasible reform actions.
  • Four citizen-centric areas – “One Nation One Ration Card”, ease of doing business, power sector and urban local bodies were identified for reforms. Borrowing permission of 0.25% of GSDP was linked to the completion of reforms in each area.

Ways and Means Advances:

  • The Reserve Bank of India (RBI) provides Ways and Means Advances (WMA) to the States banking with it to help them tide over temporary mismatches in the cash flow of their receipts and payments.
  • It is based on multiple factors including total expenditure, revenue deficit and fiscal position of the State.
  • Interest on WMA is charged at the RBI’s repo rate.
  • States are also allowed an overdraft facility, which is the amount drawn over the WMA limit. Overdraft attracts a higher rate of interest.
  • At the request of the Centre and the States, RBI has increased the WMA limit of States by 60%. This made available an additional amount to the States. Increased WMA limit gave immediate liquidity to States to borrow short-term funds from RBI at a lower rate of interest.

Notified Disaster Declaration & Relaxation of SDRF Norms:

  • The State Disaster Response Fund (SDRF) has been constituted under Section 48 (1) (a) of the Disaster Management Act, 2005. This is the primary fund available to State Governments for responses to notified disasters. The Central Government contributes 75% of SDRF allocation for the general category and 90% for the north-eastern and hill States.
  • The Government of India treated Covid-19 as a notified disaster. As a result, state governments could spend SDRF on quarantine related measures, procurement of essential equipment, providing temporary accommodation, food, clothing and medical care for people affected and sheltered in quarantine camps, and for cluster containment operations.
  • The expenditure on this account was limited to 25% of SDRF allocation for the year which was later enhanced to 50%.

Financial Assistance to States:

  • To soften the blow to their balance sheets on account of the fiscal impacts of Covid-19, the States applied
  • brakes on capital expenditure. However, capital expenditure has a higher multiplier effect, enhances the future productive capacity of the economy, and results in a higher economic growth rate.
  • The Finance Minister announced a Scheme of Financial Assistance to States for Capital Expenditure in October 2020 with an amount of Rs. 12,000 crore for the scheme.

Special Window for Borrowings:

  • The subsumption of local taxes in GST and the resultant fear of revenue loss led to the enactment of the GST (Compensation to States) Act, 2017. It was agreed that revenue shortfalls arising because of GST implementation would be made good for an initial period of five years from the GST Compensation Fund.
  • This corpus was to be generated through a levy of cess on selected items.
  • Due to the economic slowdown, a shortfall of Rs. 1.10 lakh crore was estimated in the GST Compensation fund in 2020-21. On request of the States, the Central Government decided to set up a special window to borrow the estimated amount of shortfall on behalf of the States and passed it to them as a loan to be repaid from future accruals in the Compensation Fund.

Maintaining Tax Devolution to States:

  • The Finance Commission constituted under Article 280 of the Constitution of India recommends the percentage of the net proceeds of tax or duty to be distributed among States and how such tax or duty would be distributed.
  • The first quarter of 2020-21 witnessed a sharp decline in Union’s gross tax revenue collection.
  • However, during this period, despite the decline, the Union government continued to devolve taxes to the States on the basis of budget estimates for the year 2020-21 financial year; the Centre devolved an additional amount of Rs. 45,000 crore to the States in the true spirit of fiscal federalism.


  • The fight against the virus is being successfully carried out with the remarkably coordinated efforts of the Centre and the States. In this collective fight, the country has exhibited a new vigour in cooperative federalism and devolved governance.
Challenges of Skill Development


District Skill Committees:

  • Leveraging skill training to bring about socio-economic development is achievable through the decentralization of skills management. It is in this direction that District Skill Committees have been established.
  • Over 700 District Skill Committees (DSC) have been set up across Indian states over the last decade.


  • They play a critical role in the planning, execution, and monitoring of skill training schemes.
  • DSCs play an important role in a decentralized skill management regime by controlling the management of skill development at the district level to ensure optimum resource utilization, fulfilment of local aspirations, and inclusion of all marginalized sections of society.
  • The important functions of DSCs include planning for skill training by looking at, among other things, demand and supply, the socio-economic profile, and the availability of skill infrastructure at the district level. Further, DSC should make resources available for various activities.


  • DSC is composed of all the significant district development departmental officers.
  • The DSC is headed by the District Collector.

Capacity building of DSCs:

  • Given the potential of DSCs in ensuring comprehensive skill development, they need to be equipped and empowered. It is imperative to build up DSCs' capacity to understand, plan and deliver.

Capacity-building architecture for the DSCs should focus upon:

  • Creating and managing knowledge
  • There is a need to institutionalize the process of knowledge creation and dissemination by the DSC to equip DSC members with the ability to use their experience and knowledge for impact-making skill management.
  • Customizing and localizing content
  • Disseminating knowledge through training
  • Providing opportunities for guided practice
  • Evaluation with actionable feedback

Measures needed:

  • There is a scope for entities both private and public to play in the domain of capacity building of DSCs.
  • There are many institutions in the country with expertise in capacity building and they can contribute in this direction.
  • District level skill planners must learn about the potential of leveraging skill development for social justice and economic growth.
  • Capacity-building is also needed in the ability and understanding of the planners to recognize the backward and forward linkages of district skill plans to integrate them with state level and national level planning and opportunities.
  • The empowerment of DSC and their expanding role would necessitate financial resources and the means of raising them, whether they come from state budgetary allocations or innovative revenue generation models developed by DSCs themselves.
  • This would mean the need for training in financial management.
Challenges in Federalism and the Way Forward

Quasi federalism of India:

  • The Indian Constitution laid down a political system that is federal in nature. There are two tiers of government: at the national level and the state level.
  • However, the Indian Constitution has structurally made the Union government more powerful than the states—therefore the paradox of “centralized federalism.”
  • Article 256 of the Constitution obligates the State government to exercise its executive power to ensure compliance with the laws made by Parliament and any existing laws which apply in that State.
  • The President can impose President’s Rule in the States which refuses to enforce the law against the Centre’s directions under Article 356 or take cognizance of Article 365.
  • India’s Constitution lays out a detailed scheme for the separation of powers between the centre and the states, albeit with a unitary bias. India’s Constitution has also been described as “quasi-federal” as the Indian Union is a unitary state with subsidiary federal features rather than a federal state with subsidiary unitary features.

The reasons for having a central tilt in the Indian form of federalism are as follows:

  • It would be injurious to the interests of the country to provide for a weak central authority which would be incapable of ensuring peace, of coordinating vital matters of common concern and of speaking effectively for the whole country in the international sphere.
  • A strong union government is also necessary for India’s survival and political stability, given its vast diversity based on religion, language, caste and ethnicity.
  • The drafting or enacting of any legislation for the entire country requires an extensive consultative process with the State Governments.
  • However, given the diversity in India, it is often very difficult to find a common platform to enact legislation that will find resonance with each state as many times, certain problems and issues may be specific to a particular state and may not meet national consensus.
  • Most times, seeking uniform consensus with all states in a proposed timeframe may become a challenge.

Quasi federalism may have its issues like the opportunity costs of decentralization.

Federal Governance during Covid-19:

Governance during the pandemic:

  • The initial stages of the COVID-19 response highlighted the unitary tilt in the Indian federal structure.
  • The central government implemented a national lockdown using its powers under a central disaster management law. This law empowers the central government to commandeer state and local authorities if necessary. The Ministry of Home Affairs issued extensive guidelines to states for controlling the pandemic.
  • State governments followed the Centre’s orders even though they have independent powers under a more specific law, the Epidemic Diseases Act, 1897. Also, health is a state subject under Schedule 7 of the Indian Constitution.
  • The Union government ceded adequate space and autonomy to the states to strengthen their healthcare facilities, manage the localized lockdowns, and implement social security measures to mitigate the impact of the pandemic.
  • The state governments have played a major role in managing the Covid-19 crisis in India.

Structural reforms:

  • The pandemic has enabled the central government to implement far-reaching reforms traditionally considered the domain of states. This exercise by the central government indicates its willingness to use the levers of federal power to implement significant reforms.
  • The pandemic may have seen the emergence of a new phase of federal relations, where states increasingly accept the reform priorities of the centre in a manner not seen in a generation.

Para-diplomacy by the States:

  • The adoption of the market economy heralded a new era in which States came to occupy a strategic position in India’s market-led economy. The Centre has even gone to the extent of encouraging states to negotiate loans/FDI with overseas banks/institutions directly since the 1990s.
  • Foreign economic policy is no longer a central preserve with the emergence of para-diplomacy by the States. Economic globalization has made it possible for the States to interact with respective investors in foreign countries in a de facto sense, if not in a de jure sense.


  • Such initiatives have helped some states in their economic development and reduced their financial dependence on the Centre.


  • The para-diplomacy by Indian states may raise issues for the sovereignty or security of the country considering that India is largely surrounded by neighbours who are hostile and we face the challenge of reconciling the demands of opening up further in a globalized economy with related security concerns.
  • The Centre has a responsible and complex role to perform in this direction. In granting licenses to an overseas entity, the central government has to examine the proposal from many angles and not just to the business/profit it may bring to the State coffers.


  • A diverse and large country like India requires a proper balance between the six pillars of federalism: autonomy of states, national integration, centralization, decentralization, nationalization, and regionalization.
  • Extreme political centralization or chaotic political decentralization can both lead to the weakening of Indian federalism. Controlling these extremes is a challenge, as federalism must reconcile the need for national unity on the one hand, and on the other, regional autonomy.
Progress in Human Development since Independence

Poverty in India:

  • Eradication of poverty has been a major objective of planned development in India.
  • Poor quality of life, deprivation, malnutrition, illiteracy and low human resource development are characteristics associated with poverty. This has an adverse impact on the growth and development process of the country.

Growth and development:

  • During the 1950s and 1960s, large investments in physical infrastructure were seen as the primary means of development.
  • In fact, until the mid-1960s, the main thrust of development policies all over the world was to accelerate the growth process since the ‘trickle down’ mechanism was supposed to take care of distributional objectives.
  • However, the available evidence points to the limits of mere economic growth leading to human development.
  • The term “human development” is accepted in the development economics literature as an expansion of human capabilities, a widening of choices, an enhancement of freedom and the fulfilment of human rights.

Human Development Reports and Measurement:

  • Annual series of Human Development Reports – the first Human Development Report of UNDP was published in 1990.
  • The Human Development Index (HDI) reflects the average achievements along three dimensions of human development: longevity, educational attainment and command over resources needed for a decent living.
  • However, the HDI does not reflect the deprivation or the distributional aspects of development, particularly inequality. A gender-related development index (GDI) and a gender empowerment measure (GEM) emerged in 1995.
  • The GDI measures achievements in the same dimensions and variables as the HDI but considers inequality in achievements between men and women. The GEM indicates whether women are able to actively take part in economic and political life.
  • In 1997, a composite measure for multi-dimensional poverty, the Human Poverty Index (HPI) was introduced.

India’s ranking in Human Development:

  • Out of 189 countries, India ranks 131 on the Human Development Index 2020. With an HDI value of 0.645, the country falls into the medium human development category.
  • India has registered steady progress in improving its HDI value. Since 1990, the HDI value of India has increased from 0.429 to 0.645, registering an increase of over 50%. While there have been improvements in life expectancy at birth, mean years of schooling and expected years of schooling, the increase in India's GNI per capita has registered a substantial rise.
  • In the South Asian region, India’s HDI is more than the region’s average which stands at 0.641, while India is also above the average value of 0.631 among the medium HDI category countries.

Millennium Development Goals (MDGs)

  • The United Nations Millennium Development Goals (MDGs) are the eight goals set by the 189 UN member states in September 2000 and agreed to be achieved by 2015.

The following are the eight Millennium Development Goals:

  • To eliminate extreme poverty and hunger;
  • To achieve global primary education;
  • To empower women and promote gender equality;
  • To reduce child mortality;
  • To promote maternal health;
  • To fight malaria, HIV/AIDS, and other diseases;
  • To promote environmental sustainability; and
  • To develop a universal partnership for development.
  • Sustainable Development Goals (SDGs):
    • The Sustainable Development Goals (SDGs), otherwise known as the Global Goals, are a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity.

The 17 SDG Goals are as follows:

  • GOAL 1. End poverty in all its forms everywhere
  • GOAL 2. End hunger, achieve food security and improved nutrition and promote sustainable agriculture
  • GOAL 3. Ensure healthy lives and promote well-being for all at all ages
  • GOAL 4. Ensure inclusive and equitable quality education and promote life-long learning opportunities for all
  • GOAL 5. Achieve gender equality and empower all women and girls
  • GOAL 6. Ensure availability and sustainable management of water and sanitation for all
  • GOAL 7. Ensure access to affordable, reliable, sustainable, and modern energy for all
  • GOAL 8. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
  • GOAL 9. Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
  • GOAL 10. Reduce inequality within and among countries
  • GOAL 11. Make cities and human settlements inclusive, safe, resilient and sustainable
  • GOAL 12. Ensure sustainable consumption and production patterns
  • GOAL 13. Take urgent action to combat climate change and its impacts
  • GOAL 14. Conserve and sustainably use the oceans, seas and marine resources for sustainable development
  • GOAL 15. Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss
  • GOAL 16. Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
  • GOAL 17. Strengthen the means of implementation and revitalize the global partnership for sustainable development.

Bare Necessities Index:

  • The first-ever BNI (bare necessities index), released as part of the Economic Survey notes that the availability of “bare necessities” such as housing, water, sanitation, electricity and clean cooking fuel have improved across all states in the country in 2018 compared to 2012.
  • The index summarizes 26 indicators on five dimensions — water, sanitation, housing, microenvironment, and other facilities.
  • The survey reports that improved access to “the bare necessities” has led to improvements in health indicators and correlates with future improvements in education indicators.
Radio Frequency Spectrum Allocation

Significance of radiofrequency spectrum:

  • In an era of cellular communication, the radio frequency spectrum is an important resource that fuels our daily activities related to connectivity as well as entertainment. Whether it is television, cell phone or internet services, all of them exploit the radio frequency spectrum, making it an important resource for revenue generation.
  • The Telecom Sector today is a key infrastructure provider with strong linkages with economic growth, direct and indirect employment generation, and expansion of Digital India. 
  • Auctioning of spectrum bands-
    • Following the exponential rise of demand for mobile communication, the broadcasting licenses to the firms have been made on a competitive price mechanism basis which has been most efficient.
  • India has been following a ‘quasi-property rights’ regime to avoid the subjective administrative management of a market-based mechanism.
  • In addition to the bid amount, successful bidders will also have to pay 3% of the Adjusted Gross Revenue (AGR) excluding wireline services as spectrum usage charges for the spectrum won through this auction.


  • The Government intervention in India has become apparent because of the exponential rise in demand for wireless communication, given radio frequencies being a scarce commodity, the underneath conflicts in spectrum management and their efficiency of use.
  • The auctions reflect two efficiency concerns. Firstly, the best productive suppliers minimize the costs.
  • Secondly, this generates funds through markets rather than rigid taxation.
  • The spectrum auction is a transparent process of spectrum assignment to successful bidders.
  • Sufficient spectrum availability increases the quality of telecom services for consumers. The objective of maximal revenue of a set of spectrum licenses may be too short-sighted and lead to monopolization.

Additional information:

  • The 2020 Nobel Prize in Economics was awarded to two economists–Paul R. Milgrom and Robert B. Wilson– for their auction theory work. Both of them developed several innovative and valuable formats and designs for auctions.

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