Is ‘double engine government’ important for development?

Does the discussion around the double engine government reflect an inherent bias towards non-BJP/non-NDA governments in the states?

louise tilin: In the literal sense, yes. This shows that the lack of political coordination between the central and state governments is better for the voters. However, this is different from asking whether the central government actually rules in a biased manner towards non-NDA states.

At one level, we see that states which are not ruled by the NDA do not get special treatment. For example, we saw in last year’s budget that BJP’s alliance partners at the Center got special financial packages which non-NDA states did not get. But can we say that NDA ruled states receive other types of preferential treatment?

We can think about this from fiscal and political points of view. Large amounts of centre-state transfers are through formulas set by the Finance Commission. And these are not inherently biased towards opposition-ruled states. Even though many states currently ruled by opposition parties contribute more to the central treasury than they receive in return, this is because of the way fiscal redistribution works in India. Therefore, we cannot say that the way the Finance Commission manages Centre-State transfers is biased.

But there is more scope for discretion in other types of transfers. Opposition-ruled states complain of non-payment or delay in matching funds for Centrally Sponsored Schemes (CSS). Because these transfers allow more discretion, they create more scope for potential partisan bias than 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 centralization.

Another way to think about this question is political. States that are politically aligned with the center are likely to experience lower levels of interference by central agencies.

It is difficult to say whether we can detect partisan bias in some of the more rule-bound actions of the Indian government. But there is noise around it, politically motivated, that suggests there is partisan bias going on.

Yamini Iyer: A major problem with the ‘double engine’ idea lies in its formulation. This undermines the basic principle of federal adjustment. Federalism allows multiple political identities to be united within the framework of the nation state. Thus, a true federal India would have a variety of political parties, with their diverse identities. The idea of ​​’double engine’ challenges this principle of adjustment. It is presented to the voters as a means by which efficiency can be established in Centre-State relations.

Constitutionally, India’s federal structure depends on cooperation between the Center and the states. The ‘double engine’ framework presents the idea that different political parties in the states and the Center make cooperation difficult and hence require greater homogeneity. In this sense, it pits efficiency against democracy. Therefore, the idea of ​​’double engine’ weakens the basic principle of federalism and pits the opposition parties against the political party at the centre.

It is important to say that even in a world where the ‘double engine’ framework was not implemented, in moments of political dominance, national parties have abused their constitutional powers in a way that has politicized the dynamics of Centre-State relations. However, the ‘double engine’ framework attempts to legitimize this form of political control.

Is the absence of a ‘double engine’ setup hindering the financial autonomy of the states, especially with regard to timely release of central funds?

louise tilin: We have to think about the discourse of ‘double engine’ government in the broader context of an ideological attack on the idea of ​​federalism in India. Under pressure from a dominant national party, we are witnessing a steady erosion of what I would describe as a culture of federal restraint in which the Center and states mutually respect each other’s areas of autonomy. But the shrinking of the financial autonomy of the states is not just a question of ‘double engine’. All states are seeing a reduction in their fiscal autonomy due to several reasons, including the introduction of GST and new cesses and surcharges.

Yamini Iyer: From 2008-09, in the Accountability Initiative at the Center for Policy Research, we started tracking the flow of funds for CSS issued by the Centre, which goes to the state treasury and then through layers of administration to the last mile where expenditure occurs. We started seeing that spending units spend a significant part of the financial year waiting for the money, and then rush to spend it before March 31 to show the utilization certificate so that the next year’s money can be released. This was largely due to the complete administrative failure caused by the terms and conditions imposed on the flow and use of CSS.

States have been demanding more fiscal transfers from the Center for a long time. The 14th Finance Commission stressed on greater devolution of divisible pool of taxes to the states and said that CSS conditions that make fund flow difficult and create inefficiencies should be addressed. The Modi government abolished the Planning Commission claiming that the allocation of funds was centralized. It was replaced by NITI Aayog, which set up a subcommittee of Chief Ministers tasked with examining the restructuring of the CSS to remove inefficiencies in fund flow. But its recommendations were ignored.

Thus, India has a history of administrative failure when it comes to money flow and this has affected all states. The major change now is that discretionary channels of CSS are being used, and greater political leverage is being taken of administrative failures. So we are no longer just in an area of ​​administrative failures that are creating inefficiencies; Those inefficiencies are being deployed politically to create deeper problems.

Is the claim that states benefit from double engine governments contrary to the reality in the South, where many states with better socio-economic indicators are ruled by non-BJP/non-NDA governments?

louise tilin: The notion that there is a consistent pattern of what double-engine governance does to economic outcomes or fiscal redistribution is speculative. It is imagined that India can achieve greater efficiency and economic growth by denying its pluralism. Southern states are good examples of this. Tamil Nadu has witnessed a high pace of economic growth over the past few decades. Why is that the case? It is not just a question of the party in power. Historically, political mobilization around changes in land ownership patterns and social justice for lower caste communities occurred much earlier in the South than in the North. These are important prerequisites 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 growth is heavily concentrated in the South. Tamil Nadu’s growth rate is also a result of investment from other parts of India; It is built on internal labor migration from poor areas, which often have exploitative wage levels.

Yamini Iyer: If you look at the pattern of development in India, an overall national picture emerges. But a closer look reveals that different states have followed different 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 effort to accelerate its growth through manufacturing. All this points to the fact that deep federalism plays a role in shaping development. Only through a deeper and more effective federalism will we arrive at a cooperative federal bargain.

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