• Fourth, since planning in the conventional sense has outlived its utility while public investment hasn’t, reconstitute the Planning Commission as a fund for public investment with both the Centre and the state as stakeholders. They may borrow funds to provide resources for long-term finance.

There is no doubt that at present Centre-state consultations have ceased to be meaningful. The Inter-State Council hasn’t served its original objectives; the National Development Council has become a ceremonial body.

To create functional institutional entities is now a contextual necessity.

Important decisions by the Centre that impact the states fiscally rarely follow consultations with them. For instance fiscal concessions in tax policies, both direct and indirect, or various exemptions, take away a large corpus (as much as half of the collected revenues according to the 2007-08 budget) of funds that would otherwise form part of the common divisible pool to be shared with the states. The states have legitimate reasons to ask questions and worry about this.

The consultations suggested are not meant to take away the budget-making powers of the Centre, but to ensure meaningful consultation between the Centre and states, which are common stakeholders.

If states are expected to behave in a fiscally responsible way, is it fair that the Centre’s own policies should remain above discussion or reproach? Why can’t the states discuss the Centre’s fiscal policies?

The present structure of inherent biases, political predilection and differential criteria make the present structure of Centre-state relations an unequal one. The political appetite in coalition governments for constitutional changes may be low. A lot of things can be done within the existing framework and through administrative action to create a new and a more meaningful mechanism for Centre-state dialogue. But who will take the lead?

... contd.