While the political decentralization in India has been fairly successful, it faces several hurdles at fiscal and administrative fronts. Comment.

The constitution envisages decentralization through division of fiscal, political and administrative powers between different tiers of government.

Political decentralization:

  • The incursions by the centre, into the legislative domain of the states are quite less.
  • The dismissal of elected state governments using President’s rule has reduced greatly compared to 1980s.
  • NITI Aayog has been introduced to cement cooperative federalism and give the states a larger say in the exercise of political power.

Challenges on the Fiscal front:

  • Centrally Sponsored Schemes have eroded fiscal space of the states.
  • When GST was introduced, the states sacrificed more of their revenue sources, but revenue is shared equally.
  • Voting power in the GST council has been distributed such that the decisions cannot be taken without the consent of the centre. (States have 2/3rd voting power while the centre has 1/3rd, however a 3/4th majority is required for decisions).
  • States have not been allowed to tax personal incomes.
  • Terms of reference of 15th Finance Commission have led to opposition from states, e.g. proposal to review revenue deficit grants.
  • Cesses are not included in the taxable pool.
  • Local Self governing bodies are not devolved with sufficient funds.

Challenges on Administrative front:

  • Local self governing bodies have not devolved functions.
  • Presence of parastatal bodies, e.g urban development authorities hinders urban local bodies.
  • Panchayati Raj Institutions lack control over the non-elected staff tasked with performing administrative duties.

Way forward:

The centre and states must be magnanimous in devolving fiscal and administrative powers.


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