d) Are we satisfied with the present structure of consultations between the Centre and the state? The National Development Council has largely become ceremonial; they meet at best once a year to approve the Plan or its mid-term review. The Centre-State Council has also become dysfunctional. Yet the Centre takes important decisions like setting up the recent Pay Commission, which has serious long-term consequences for the states. What can we do to strengthen, restructure or create a more meaningful framework on Centre-state consultations?

e) Competitive federalism spurs improvement in investment climate and financial management. Competitive populism can be however self-defeating. Political parties in office often pursue populist policies in the belief that these would enable them to get re-elected. Electorates have however become smart and see through these false promises. The parties in opposition generally are willing to accept sensible economic policies, even though they may posture otherwise. Combining the virtue of sensible economics with sensible politics is not easy.

The discussions which followed did not have a coherent pattern. Almost all chief ministers agreed that decisions by the Centre which affect the states must be preceded by prior consultations. While some believe that this requires constitutional amendment, others felt this could be achieved through improved administration and political management. Everyone seemed to agree that the National Development Council had become ceremonial and the Centre-state Council had not met the expectations contained in the Sarkaria Commission report. States have usually felt that the present percentage of devolution from taxes was inadequate and at any rate royalties on minerals should be based on a more transparent formula.

... contd.