a) For many decades there was considerable homogeneity in the political parties in office both at the Centre and the states. This has undergone a major shifting in an era of coalition politics where parties in power in states are different than the configuration of power at the Centre. So how can national politics be made less sensitive to pressures from regional groups? The fact that small regional parties can have a disproportionate influence on policies that affect the nation is not healthy for any democratic set-up. While it might have benefit in protecting minority bases and regional factors, it could make national decisions a hostage to minority blackmail.

b) How can we keep national political rivalries from adversely affecting Centre-state relationships? Perhaps the most important goal here would be to insulate transfers from politics. This is currently not the case in India, and allows the Centre to unduly influence local politics, and to play unfairly.

c) Looking at the devolution system, it seems possible to achieve several improvements—not only in governance and fairness of Centre-state relations, but also efficiency by integrating the myriad forms of transfers that exist today. Right now we have the Finance Commission, which has a general reputation for independence and transparent allocation of funds, but this is a part of the overall amounts transferred. Also, the Finance Commission has to adjust for the funds transferred through the Planning Commission and through the ministries’ Central Sector Schemes, which are less transparent. There is no way to check the overall allocation of funds across states, to consider the allocations for capital and current expenditures and to look at the conditions under which these funds are given. Increasing transparency and coordination would not only protect these funds from the winds of politics but also improve efficiency.

... contd.