Indian federation has moved from cooperative federation to competitive federation. Comment. (2017, 10 Marks)
The two models describe different relationships:
- Cooperative federalism (Granville Austin‘s term for India) rests on consultation and trust. The Union acts as the states’ friend, philosopher and guide.
- Competitive federalism, by contrast, reflects the neo-liberal creed of “minimum government, maximum governance”. Capital is mobile, so states compete for it on policy, infrastructure and governance.
Since NITI Aayog (2015) adopted “cooperative and competitive federalism” as its model, competition has clearly grown. But it has been added to cooperation, not substituted for it.
Why the shift looks real
- Political economy. The 1991 abolition of industrial licensing let firms, not Delhi, decide where to invest. States now court capital directly, through events such as Vibrant Gujarat, Magnetic Maharashtra, the UP Global Investors Summit and Utkarsh Odisha.
- Rankings replaced allocation.
- The Planning Commission once distributed plan funds. NITI Aayog allocates no money.
- Instead it publishes rankings such as the SDG India Index, and runs the Aspirational Districts Programme.
- DPIIT’s Business Reforms Action Plan grades states on the ease of doing business.
- Fiscal incentives.
- The Fourteenth Finance Commission raised untied devolution to 42%.
- The Fifteenth tied extra state borrowing to power-sector reform.
- The Sixteenth (2026) added a “contribution to GDP” criterion (10%), rewarding states that generate output.
Why the claim is overstated
- Cooperation has deepened. The GST Council pooled the states’ indirect-tax powers. This ended the inter-state sales-tax race to the bottom, and GST 2.0 (2025) was a negotiated outcome. The Zonal Councils have also revived.
- Redistribution still dominates. Income distance (42.5%) remains the Sixteenth Finance Commission’s largest criterion, so equity still outweighs performance.
- Competition between unequal states. Balveer Arora warns that coastal, well-endowed states win investment contests regardless of effort, which widens disparities.
- Competition for favour, not for markets. M. P. Singh argues that ending formula-based plan transfers enlarged central discretion, amounting to a “spoils system”. The special packages that Andhra Pradesh and Bihar won in 2024 through coalition leverage confirm the point.
- A third mode: confrontation. Much of today’s federal friction runs through the Governor’s office, central agencies and Art. 131 suits (Kerala on borrowing, Tamil Nadu on NEET). This is neither cooperation nor healthy competition.
Conclusion
India has not moved from cooperation to competition. It now has competition within a cooperative frame, alongside rising confrontation. Competition will stay legitimate only while a redistributive Finance Commission floor keeps weaker states in the race.