States of the Union

The pitfalls of India’s fiscal-federalism project

01 May 2019
Members of the fifteenth Finance Commission, led by the chairman NS SIngh, during their visit to the president in February 2018.
Members of the fifteenth Finance Commission, led by the chairman NS SIngh, during their visit to the president in February 2018.

IN 1860, CHARLES TREVELYAN, the governor of the Madras Presidency at the time, orchestrated what came to be known as the Madras rebellion. He claimed that the budget of the colonial administration leaned too far towards financial centralisation, and was therefore unfair to the provinces in general, and the Madras Presidency in particular. He questioned the legitimacy of British control of finances, given that there was no representation of tax-paying Indians in the decision-making process.

The colonial administration had centralised power structures for the ease of its own bureaucracy. Trevelyan thought the Madras Presidency, which had not seen much unrest in the revolt of 1857, should not have to pay for the ballooning deficits that were largely caused by the war. While Trevelyan was a complicated man, who is now remembered primarily as being responsible for exacerbating the Irish potato famine, the question he raised during his time in Madras is an important one: how does a country with a large and diverse population, such as India, govern itself?

Two recent books attempt to grapple with the issue of how India manages the fiscal aspects of its federalism project. They conclude that the centre is both unfair and incompetent in its management of public funds.

Nilakantan RS lives in Chennai and works as a data scientist.

Keywords: federalism unions Ambedkar BR Ambedkar
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