Is a ‘double engine government’ crucial for growth?

Does the discourse around a double-engine government imply an inherent bias against non-BJP/non-NDA governments in the States?

Louise Tillin: In a literal sense, yes. It suggests that political alignment between the Union and State governments is better for voters than the lack of it. However, this is different from asking whether the Union government actually governs in a way that is biased against non-NDA States.

At one level, we see that States that are not ruled by the NDA do not receive special treatment. We saw in last year’s Budget, for instance, that coalition partners of the BJP at the Centre received special fiscal packages that non-NDA States did not receive. But can we say therefore that NDA-ruled States receive other forms of preferential treatment?

We can think about this in fiscal and political terms. A large quantity of Centre-State transfers take place through formulas set by the Finance Commission. And these are not inherently biased against Opposition-ruled States. Even if a number of States currently ruled by Opposition parties contribute more to the Central kitty than they receive in return, that is because of the way fiscal redistribution works in India. So, we can’t say that the Finance Commission is partisan in the way it manages Centre-State transfers.

But there is more room for discretion in other types of transfers. Opposition-ruled States complain about delays or non-payment of matching funds for Centrally Sponsored Schemes (CSS). Because these transfers allow for more discretion, they create more scope for potential partisan bias compared to transfers governed by the Finance Commission. At the same time, all States, regardless of political alignment, are operating within a broader context of increasing fiscal centralisation.

The other way to think about this question is politically. States which are politically aligned with the Centre are likely to experience a lower degree of interference by Union agencies.

It is difficult to say that we can detect partisan bias in some of the more rule-bound operations of the Government of India. But there is noise around it, which is politically driven, which suggests that there is partisan bias going on.

Yamini Aiyar: A principal problem with the idea of ‘double engine’ is in its framing. It undermines the core principle of federal accommodation. Federalism allows for multiple political identities to cohere within the framework of the nation state. Thus, a truly federal India, with its diverse identities, is going to have different types of political parties. The idea of ‘double engine’ invokes a challenge to this principle of accommodation. It is presented to voters as a means by which efficiency can be entrenched within Centre-State relations.

Constitutionally, India’s federal structure is dependent on cooperation between the Centre and States. What the framework of ‘double engine’ posits is the idea that different political parties across States and the Centre make cooperation harder and therefore require more symmetry. In that sense, it pits efficiency against democracy. So, the idea of ‘double engine’ undermines the fundamental principle of federalism and pits Opposition parties against the political party at the Centre.

It is important to say that even in a world where the framework of ‘double engine’ was not invoked, in moments of political dominance, national parties have misused their constitutional powers in ways that have politicised the dynamic of Centre-State relations. However, the framing of ‘double engine’ seeks to legitimise this form of political control.

Is the absence of a ‘double engine’ setup hindering the financial autonomy of States, particularly regarding the timely release of Central funds?

Louise Tillin: We have to think about the discourse of ‘double-engine’ government within the wider context of an ideological assault on the idea of federalism in India. Under the weight of a dominant national party, we are seeing the steady erosion of what I would describe as a culture of federal restraint in which the Centre and States mutually respect each other’s spheres of autonomy. But the shrinking of the fiscal autonomy of States is not simply a ‘double engine’ question. All States are seeing their fiscal autonomy shrink for a number of reasons, including the introduction of GST and the introduction of new cesses and surcharges.

Yamini Aiyar: Since 2008-09, at the Accountability Initiative at the Center for Policy Research, we began tracking the flow of funds for CSS released by the Centre which go into the State treasury and then through layers of administration to the last mile where there is expenditure. We began to notice expenditure units spend a significant part of the financial year awaiting funds, and then rush to spend it before March 31 to show utilisation certificates so that next year’s money gets released. This was largely on account of a complete administrative failure caused by rules and conditionalities imposed on the flow and use of CSS.

States have long demanded greater fiscal devolution from the Centre. The 14th Finance Commission pushed for enhanced devolution of the divisible pool of taxes to States, and said CSS conditionalities that make fund flows difficult and create inefficiencies must be addressed. The Modi government dismantled the Planning Commission, claiming that allocation of funds was centralising. It replaced it with NITI Aayog, which established a Chief Ministers’ subcommittee tasked with examining the restructuring of CSS to address inefficiencies in fund flows. But its recommendations were ignored.

Thus India has had a history of administrative failure when it comes to fund flows and these have affected all States. The big shift now is that discretionary channels of CSS are being used, and administrative failures are being leveraged more politically. So we are no longer merely in the arena of administrative failures creating inefficiencies; those inefficiencies are being deployed politically to create deeper problems.

Does the claim that double-engine governments benefit States hold up against the reality of the south, where several States with better socioeconomic indicators are ruled by non-BJP/non-NDA governments?

Louise Tillin: The notion that there is a consistent pattern of what double-engine governance does for economic outcomes or fiscal redistribution is fiction. It is fiction that India can achieve greater efficiency and economic growth by negating its pluralism. The southern States are good examples of that. Tamil Nadu has seen a high pace of economic growth over the last few decades. Why is that the case? It is not only a question of the party in power. Historically, changes in land ownership patterns and political mobilisation around social justice for lower caste communities took place in the south much earlier than in the north. Those have been important preconditions for the economic dynamism we see in the south today. We also have to acknowledge that India has a skewed pattern of development, where industrial development is heavily concentrated in the south. Tamil Nadu’s growth rate is also a result of investments from other parts of India; it is built on the back of internal labour migration from poorer regions, often with exploitative wage levels.

Yamini Aiyar: If you look at patterns of growth in India, there is an aggregate national picture. But a closer look reveals that individual States have followed distinct trajectories of economic growth and human development. These variations reflect their own historical and political path dependencies, many of which predate Independence. Kerala’s growth comes from remittances, which is different from Tamil Nadu’s attempt at trying to hasten its growth via manufacturing. All this points to the fact that deeper federalism plays a role in shaping growth. It is only through a deeper and more effective federalism that we will arrive at a cooperative federal bargain.

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