During the recent State Assembly elections, the ruling Bharatiya Janata Party (BJP) won convincingly in Uttar Pradesh, winning 326 out of 403 seats and Uttarakhand (58 out of 70 seats). The BJP also managed to form a government in the states of Goa and Manipur, with the support of independents and local parties. The only state where the opposition Congress was able to form government was Punjab. The BJP-led National Democratic Alliance (NDA) is now in power in 16 states, accounting for 61 percent India’s total population and 55 percent of India’s GDP. The Congress Party, along with its allies, rules over six states, covering 8.9 percent of the population and around 12 percent of GDP.
A recent McKinsey & Company report, titled “India’s Economic Geography in 2025: States, Clusters, and Cities,” forecasts that India’s growth will be driven by eight states; Gujarat, Haryana, Maharashtra, Andhra Pradesh, Telangana, Tamil Nadu, Himachal Pradesh, and Uttarakhand. Out of these, only Himachal is under Congress’ rule, while Telangana and Tamil Nadu are run by regional parties. Andhra Pradesh is controlled by a BJP ally, Telugu Desam; the BJP is in power in the other four states.
Ease of Doing Business and Foreign Direct Investment
In spite of the increasing influence of the BJP, Prime Minsiter Narendra Modi realizes the importance of working closely with states, both in the context of bolstering support for important economic policies but also to improve India’s overall position in the global “Ease of Doing Business” rankings. Modi aims to bring India to number 50, up from its current ranking at 130th.
A number of important states in eastern India, which could play an important role in contributing toward improved rankings, are run by non-BJP governments. Examples include Odisha (governed by Biju Janata Dal), West Bengal (governed by All India Trinamool Congress), and Bihar (governed by Janata Dal-United). Modi realizes the importance of growth in eastern India, and has often stated, that if the India growth story is to truly pick up it is essential for eastern Indian states to progress. That will mean working closely with non-BJP politicians.
The Department for Industrial Policy and Promotion, Government of India, and World Bank have come up with a state-wide ranking system, which judges the ease of doing business in each state based on a specific set of reforms (there were 340 such reforms for the year 2016). Interestingly, two of the non-BJP ruled eastern states — Odisha (ranked 11th) and Bihar (16th) — did not find a slot in the top 10 states, but both these states had achieved an over 75 percent success rate in implementing reforms (Odisha 92.73 and Bihar 75.82 percent). Jharkhand, an eastern Indian state run by the BJP, was number seven in these rankings. Modi will need to continue to engage with non-BJP state leaders if India’s national economy is truly to prosper.
Foreign Policy and Security
It is not just the economic context — the prime minister also needs to work closely with state governments on foreign policy. In the India-Bangladesh relationship for instance, West Bengal will play a very important role. Without the support of West Bengal, the Teesta River agreement can not go ahead. In 2011, it was West Bengal Chief Minister Mamata Banerjee who scuttled the agreement. Banerjee was an ally of the Congress-led UPA alliance and threatened to walk out of the bloc if India went ahead with the agreement. Then-Prime Minister Manmohan Singh faced considerable embarrassment, and the treaty had to be scuttled. It remains to be seen whether progress can be made during Bangladeshi Prime Minister Sheikh Hasina’s India visit in April 2017.
Another border state, Punjab, which has a Congress government, is important from a security point of view. Punjab shares a border with Pakistan, and two terror attacks took place in 2015 and 2016 in the state. The central and state government will have to work closely to ensure to ward off any terror threats. Similarly, if there is some sort of thaw between India and Pakistan, Punjab could be a key player. Punjab’s recently elected chief minister, Captain Amarinder Singh, has sought the central government’s support for bringing the state’s economic situation back on track.
Modi’s Relationships With States Run by Other Parties
Modi’s economic and foreign policy agenda will both depend, to some extent, on his ability to work together with non-BJP state leaders. On this front, he has a mixed record.
The prime minster currently has a cordial relationship with Bihar Chief Minister Nitish Kumar, who supported his demonetization move. However, prior to this, Nitish and Modi had strained ties. In fact, Nitish had walked out of the BJP-led alliance when Modi was declared the candidate for prime minister. Then, during the Bihar state election campaign in 2015, both Nitish and Modi did not pull any punches. After the election, however, ties have improved. Nitish supported the move to demonetize; Modi has in turn praised Nitish’s prohibition policy.
Of late, ties have been sour with Naveen Patnaik, chief minister of Odisha, and it remains to be seen how relations pan out over the next two years. One of the main reasons for the tensions, many observers argue, is the increasing presence of the BJP in Odisha. In recent local elections, it emerged as the main opposition in the eastern Indian state. Modi’s ties with West Bengal Chief Minister Banerjee, too, have not been particularly cordial. While they began on a good note, with Finance Minister Arun Jaitley attending West Bengal Investor’s Summit in 2015, over the last year ties between New Delhi and West Bengal have been strained. The finance minister did not attend the Bengal Global Business Summit in January 2017.
It remains to be seen whether Modi will be able to establish a reasonable relationship with the newly elected Congress government in Punjab. Singh has already met with the prime minister and finance minister. During his meeting, Modi assured the Punjab chief minister of full support from the center.
Competitive Federalism
Apart from batting for a harmonious center-state relationship, Modi has also repeatedly argued in favor of healthy competition between different states. This competition is referred to as “competitive federalism.”
It would be fair to mention that even in the 1990s, south Indian states, such as Karnataka and Andhra Pradesh, competed with each other to attract investment in IT. This competitive spirit has increased, and state governments that previously gave very little priority to seeking foreign direct investment have been holding not just investors’ summits, but also events in conjunction with the center to boost schemes like “Make in India.”
This competition between states is not restricted to drawing investment. In the aftermath of demonetization, the two south Indian states of Andhra Pradesh and Telangana have been encouraging digitalization, and sought to compete with each other on that front.
Looking beyond the center-state relationship and the spirit of competition, it is also essential for states to learn from each other’s best practices. Milan Vaishnav made this argument in an article titled “A More Equal Union,” written for Caravan. Vaishnav writes:
Mid-day meals in Tamil Nadu, rural employment guarantee in Maharashtra, the right-to-information acts in Delhi and elsewhere were all successful state experiments which later received nationwide acceptance. Yet in many of these instances, it was the center that picked up an idea and then legislated it from the top-down. Organic, bottom-up diffusion seems less common. Quite often, successful policy experiments at the state-level don’t spread laterally (from state to state) at all.
States do borrow ideas at times — only recently, for instance, in Karnataka the government included funding for new Namma canteens in the state’s 2017-2018 budget. Just under 200 such government canteens will be set up in the state capital of Bengaluru and will serve breakfast for Rs. 5 and lunch for Rs. 10. This idea was clearly borrowed from the neighboring state of Tamil Nadu, where “Amma” canteens were set up in 2011 by the government headed by the late J. Jayalalitha. Initially these outlets were set up in Chennai; later on they were expanded to other parts of Tamil Nadu. The recent decision by Karnataka to replicate the “Amma canteens” has been dismissed as a mere political gimmick with an eye on next year’s state elections.
Also recently, Kerala Chief Minister Pinarayi Vijayan visited Hyderabad (the state capital of Telangana) to learn about initiatives taken in the areas of digitalization and ease of doing business by the state. Vijayan met with his counterpart, K. Chandrasekhar Rao, and learned about the key policy measures adopted by the state in the above areas. Telangana held the number one position, along with Andhra Pradesh, in the 2016 state-wise ease of doing business rankings.
Modi, who has been a chief minister himself, should seek to ensure that New Delhi and state governments have cordial ties. This should not just be a mere slogan. Similarly, Modi should facilitate a platform where states can learn from each other’s successes. The Inter State Council could be one such useful platform where states discuss and debate key policy issues.
While there will be a number of elections in the next two years of Modi’s tenure it is important that politics not obstruct his efforts to work closely with states and also encourage states to learn from each other’s best practices. Both New Delhi as well as states need to play a constructive role for genuine federalism to become a reality.
Tridivesh Singh Maini (@tridiveshsingh) is Assistant Professor with The Jindal School of International Affairs, O.P. Jindal Global University.