Federalism for development

Federalism in development planning is necessary for maintaining should depend on its competence and effectiveness more vigorous growth and a higher degree of political harmony on these issues rather than the amount it is willing to dole out to farmers, poverty-stricken families and so on. This latter challenge varies from state to state and

In every large and diverse country, federalism matters not just for political stability but also for economic development. The decentralisation of authority to provincial and sub-provincial levels for designing development policies and programmes can take local conditions into account and may be more effective than centrally designed and enforced development goals and methods in a country as diverse as India.

The rapid growth of China over the past three decades provides an example. Ronald Coase, a Nobel Prize-winning economist, and his collaborator Ning Wang, have argued in a paper written a decade ago that the explanation for this growth acceleration can be found in the dilution of central authority on development matters.

According to them, the emergence of decentralisation came later, after 1992 when China's provinces, municipalities, counties, and even towns threw themselves into open competition for investment and for strategies for developing the local economy.

"China became a gigantic laboratory where many different economic experiments were tried simultaneously...Regional competition became the main transformative force in the second decade, turning China into a market economy at the end of the century." Coase and Wang also emphasised the importance of the reform measures that created a common national market, which is a precondition for regional competition to work for national development rather than as a divisive force.

The enormous success of this decentralisation orientation in China has an important lesson that we need to consider in India where development planning and programming has been tightly controlled by the Union government for over seven decades. There is, of course, one big difference. China is a totalitarian state, and all its provinces, sub-provinces and cities are under the control of the same political party. The plus point of decentralisation is entirely economic.