Cooperative Federalism Centre’s Guiding Light During COVID: PM Modi’s Blog Analysed

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Prime Minister Narendra Modi on Tuesday took to his Linkedin account and explained in elaborate detail about the various reforms introduced by the government during the COVID-19 pandemic helping the country steer in the direction of progress during challenging times. In his blog titled ‘Reforms by Conviction and Incentives’, PM Modi laid down the aspects of incentivisation of schemes and policies that led to their faster implementation in states leading to quicker results.

India has been no exception to the catastrophic impact of the COVID-19 pandemic which has caused excessive strain on the health infrastructures and financial systems of economies across the world. It has been a challenge for economies across the world to raise enough resources for public welfare while ensuring sustainability.

Cooperative Federalism as guiding light of Centre during pandemic

Amid the financial crunch, PM Modi highlighted that Indian states were able to borrow significantly more in 2020-21 i.e. an extra Rs 1.06 lakh crore during 2020-21. PM Modi credited this significant increase in the availability of resources to the “approach of Centre-State bhagidari”. For a country having a continental dimension and a federal structure, the Government of India wanted to come up with dynamic solutions and not a one-size-fits-all model while formulating the economic response to the COVID-19 pandemic. It is this spirit of Co-operative Federalism a.k.a Centre-State Bhagidari that led the country to implement schemes faster amid the pandemic.READ | Well done India!: PM Modi hails frontline warriors as vaccination numbers cross 28-cr mark

Centre’s incentives fast-tracked economic reforms

Schemes and reforms remain un-operational often for years due to various reasons, however, PM Modi highlighted that the Centre and States came together to implement these reforms in a short span of time. This was possible due to the new model of incentivising the implementation of reforms instead of the age-old model of ‘reforms by stealth and compulsion’.READ | World realising benefits, uniting potential of yoga: PM Narendra Modi

In May 2020, as part of the Aatmanirbhar Bharat package, the Centre announced that State Governments would be allowed enhanced borrowing for 2020-21. An extra 2% of GSDP was allowed, of which 1% was made conditional on the implementation of certain economic reforms. This was a nudge, incentivising the states to adopt progressive policies to avail additional funds. This has resulted in the implementation of progressive policies at a faster pace than the conventional medium of implementation of reforms.READ | mYoga app launch: PM Modi unveils the yoga training app on International Yoga Day 2021

Reforms linked loans worth Rs 1.06 lakh crores given to states during the pandemic

The four reforms to which additional borrowings were linked (with 0.25% of GDP tied to each one) had two characteristics. Firstly, each of the reforms was linked to improving the Ease of Living for the public and particularly the poor and the middle class. Secondly, they also promoted fiscal sustainability. Following are the four reforms:READ | Anti-Modi Group meet LIVE Updates: ‘India needs alternate vision,’ says Rashtra Manch

1. One Nation One Ration Card

Under the ‘One Nation One Ration Card’ reform, state governments were asked to ensure that all ration cards in the State under the National Food Security Act (NFSA) were linked with the Aadhaar number of all family members and that all Fair Price Shops had Electronic Point of Sale devices. Due to this, migrant workers could draw their food ration from anywhere in the country. Apart from facilitating the migrants and other citizens, this system would also eliminate the bogus cards and duplicate members. 17 States who completed this reform were granted additional borrowings amounting to Rs. 37,600 crores.READ | PM Modi pens LinkedIn blog titled ‘Reforms by Convictions & Incentives’; Read it here

2. Ease of doing business

To rid the micro and small enterprises who suffer from the burden of ‘inspector raj’, 19 laws were asked to be implemented by the state governments, under this reform of Ease of Doing Business. States were required to ensure that renewal of business-related licences under 7 Acts is made automatic, online and non-discretionary on mere payment of fees. Another 12 Acts required the implementation of a computerized random inspection system and prior notice of inspection to reduce harassment and corruption. This was done to promote an improved investment climate, greater investment and faster growth. 20 states completed this reform and were allowed additional borrowing of Rs. 39,521 crores. 

3. Sound Property Taxation

The third reform would enable a better quality of services to the urban poor and middle class, support better infrastructure and stimulate growth. Property tax is also progressive in its incidence and thus the poor in urban areas would benefit the most. This reform also benefits municipal staff who often face delay in the payment of wages. The third reform required states to notify floor rates of property tax and of water & sewerage charges, in consonance with stamp duty guideline values for property transactions and current costs respectively, in urban areas. 11 states completed this reform and were granted additional borrowing of Rs. 15,957 crores. 

4. Direct Benefit Transfer (DBT) to farmers

The requirement was for the formulation of a state-wide scheme with actual implementation in one district on a pilot basis by year-end. A component of this scheme was also provided for the reduction in technical and commercial losses and another for reducing the gap between revenues and costs. This improves the finances of distribution companies, promotes conservation of water and energy and improves service quality through better financial and technical performance. 13 states implemented at least one component, while 6 states implemented the DBT component. As a result, Rs. 13,201 crores of additional borrowings were permitted to states.

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