Answer:

In a country as diverse as India, the States play an important role in achieving the objectives of inclusive and sustainable growth, which call for equitable growth opportunities to all stakeholders.

The essence of Co-operative federalism in this regard is that the Centre and the State Governments should be guided by the broader national concerns. It encourages the Government at different levels to take advantage of a large national market, diverse and rich natural resources and the potential of human capabilities in all parts of the country. A case in point could be GST where manufacturing states are giving up their tax earnings for equal sharing with consuming states for the sake of uniform tax laws.

While a harmonious relationship and co-operative spirit between the Centre and the states and among the States themselves is welcome, a healthy competition among the States for evolving efficient and socially inclined policies and programmes is also desirable. This calls for the need to have competitive federalism. Under the concept of Competitive federalism, States would vie with each other to attract investments and also hopefully provide better public goods and services.

It requires States to reform their programmes and provide goods and services that they can self-fund. States compete with each other to attract funds and investment, which facilitates efficiency in administration and enhances developmental activities. Recent initiatives like Vibrant Gujrat and Resurgent Rajasthan are some of the examples of competitive federalism. Healthy competition strives to improve physical and social infrastructure within the state. Recent 14th Finance Commission recommendation also followed competitive federalism idea. Now States should be allowed to chalk out their programmes and schemes with greater financial strength and autonomy, while observing financial prudence and discipline.

Even as it is important for states to compete at a certain level, there is greater need to take the disparity among the States into consideration. Some States may have specialized factor conditions such as skilled labour, capital and infrastructure which others may not be endowed with.

Therefore, to expect all States to catch up uniformly in the process of growth and development would be a fallacy. Many States still need the help of the Centre and

require extra funding before they can imagine competing. Hence purely relying on the spirit of competitive federalism may not work in our country as some traditionally disadvantaged states like north-eastern states may not be able to compete on their own. Therefore both the systems of Competitive and Cooperative Federalism are not mutually exclusive and a balance between the two is needed for inclusive and sustainable growth.