Federalism in India

Evolution

 It would be useful to dwell for a while on the evolution of Fiscal Federalism in India. Many of its features are intertwined with the history of East India Company and the British Crown.

 The East India Company was granted a Charter of incorporation by Queen Elizabeth in 1600 CE, which gave the Company exclusive right of trading with India.

 East India Company set up a number of factories and trading centres at different places in India. Bombay, Madras, and Calcutta became the main settlements and were declared as presidencies.

 Under the Act of 1773, the Calcutta Presidency was given full powers over the other two presidencies of Madras and Bombay, which for the first time resembled setting up of a Government. However, only in the Charter Act of 1833, did a central fiscal authority with Presidencies as constituents was formed, which vested the financial and legislature powers in India solely in the Governor-General of Bengal, who was designated the Governor-General of India making the entire administration centralized.

 The current system of the financial year ending on 31st March along with the principles of the English budget system were adopted with crown taking direct control in 1858.

 Union, State and Concurrent Lists in the current Indian Constitution has its genesis from the first budget, which was presented in 1860-61 under the new system.

 A system of diarchy, dividing the administrative subjects into two categories – Central and Provincial was a result of the Montague-Chelmsford reforms enacted in the Government of India Act, 1919. Under the Act, provinces got power by way of delegation and the Central Legislative retained the power to legislate for the entire country relating to any subject. The sources of revenue were also divided between the Centre and Provinces.

 In 1927, to review the working of the Act of 1919, the Simon Commission was appointed. The commission favoured the formation of Indian Princely States and Provinces, which were the administrative divisions of British Government.

 The Government of India Act, 1935 established a federal system with Provinces and Indian States as two distinct units. Under the act, legislative powers were distributed under three lists - Federal List, Provincial List, and the Concurrent List. The Act made the revenues and finances of the Provincial Government distinct from those of the Federal Government. The act provided for collection and retention of levies by the Federal Government and spelled out details of the distribution of financial resources and grants-in-aids to provinces.

 As per the Act, such sums as prescribed by his majesty in Council were to be charged on the revenues of the federation. The Government of India Act, 1935 established the basic structure of fiscal federalism in India, one that survives even today.

 Constituent Assembly was constituted in 1946, which adopted a unitary form of government. The federal framework evolved, however, indigenously over a period. The final shape to the federal form of government and federal finance was incorporated in the Government of India Act, 1935. It also had some features of a parliamentary system. However, the nature of the relationship between the proposed federal Government and the Provinces of British India relative to that of the Princely States was resolved only after independence, but before the Constitution was adopted.

Post-Independence

 At the time of Independence, India had nine Provinces and over 500 Princely States. The Princely States accounted for 40 per cent of the territory and 30 per cent of the population, and were diverse in size, character, systems, and in the nature of their relations with British India. They were integrated with India after Independence, and the Union of States came into existence on 26th January 1950.

 The evolution of fiscal federalism in India thus has a long genesis. It primarily dates back to the government of India Act of 1919 and 1935. While the Act of 1919 provided for a separation of revenue heads between the Centre and the provinces, the 1935 Act allowed for the sharing of Centre’s revenues and for the provision of grants-in-aid to provinces.

. Article 1 of our Constitution describes India, that is, “Bharat as a ‘Union of States’ rather than a ‘Federation of States”.

 There was no unanimity in the Constituent Assembly with regard to the name of the country. Some members suggested the traditional name (Bharat) while other advocated the modern name (India). Hence, the Constituent Assembly had to adopt a mix of both (‘India, that is, Bharat’)

 Secondly, the country is described as ‘Union’ although its Constitution is federal in structure. On November 4, 1948, while moving the Draft Constitution in the Constituent Assembly, B.R. Ambedkar responded to the question as to why India is a “Union” and not a “Federation of States”:

“The Drafting Committee wanted to make it clear that though India was to be a federation, the federation was not the result of an agreement by the States to join in a federation and that the federation not being the result of an agreement no State has the right to secede from it. The Federation is a Union because it is indestructible.”

Material Ethics Paper

(1) Every Government servant shall at all times-- (i) maintain absolute integrity; (ii) maintain devotion to duty; and (iii) 44(IV) do nothing which is unbecoming of a Government servant. commit himself to and uphold the supremacy of the Constitution and democratic values; (v) defend and uphold the sovereignty and integrity of India, the security of the State, public order, decency and morality; (vi) maintain high ethical standards and honesty; (vii) maintain political neutrality; (viii) promote the principles of merit, fairness and impartiality in the discharge of duties; (ix) maintain accountability and transparency; (x) maintain responsiveness to the public, particularly to the weaker section; (xi) maintain courtesy and good behaviour with the public; (xii) take decisions solely in public interest and use or cause to use public resources efficiently, effectively and economically;


(xiii) declare any private interests relating to his public duties and take steps to resolve any conflicts in a way that protects the public interest; (xiv) not place himself under any financial or other obligations to any individual or organisation which may influence him in the performance of his official duties; (xv) not misuse his position as civil servant and not take decisions in order to derive financial or material benefits for himself, his family or his friends; (xvi) make choices, take decisions and make recommendations on merit alone; (xvii) act with fairness and impartiality and not discriminate against anyone, particularly the poor and the under-privileged sections of society; (xviii) refrain from doing anything which is or may be contrary to any law, rules, regulations and established practices; (xix) maintain discipline in the discharge of his duties and be liable to implement the lawful orders duly communicated to him; (xx) maintain confidentiality in the performance of his official duties as required by any laws for the time being in force, particularly with regard to information, disclosure of which may prejudicially affect the sovereignty and integrity of India, the security of the State, strategic, scientific or economic interests of the State, friendly relation with foreign countries or lead to incitement of an offence or illegal or unlawful gain to any person; (xxi) perform and discharge his duties  with the highest degree of professionalism and dedication to the best of his abilities

(2) (i) Every Government servant holding a supervisory post shall take all possible steps to ensure the integrity and devotion to duty of all Government servants for the time being under his control and authority; 23(ii) No Government servant shall, in the performance of his official duties, or in the exercise of powers conferred on him, act otherwise than in his best judgement except when he is acting under the direction of his official superior; (iii) The direction of the official superior shall ordinarily be in writing. Oral direction to subordinates shall be avoided, as far as possible. Where the issue of oral direction becomes unavoidable, the official superior shall confirm it in writing immediately thereafter; (iv) A Government servant who has received oral direction from his official superior shall seek confirmation of the same in writing as early as possible, whereupon it shall be the duty of the official superior to confirm the direction in writing. 26Explanation I.- A Government servant who habitually fails to perform the task assigned to him within the time set for the purpose and with the quality of performance expected to him shall be deemed to be lacking in devotion to duty within the meaning the cause (ii) of sub-rule (1). Explanation II.- Nothing in clause (ii) of sub-rule (2) shall be construed as empowering a Government servant to evade his responsibilities by seeking instructions from, or approval of, a superior officer or authority when such instructions are not necessary under the scheme of distribution of powers and responsibilities.



343A. Promptness and Courtesy No Government servant shall (a) in the performance of his official duties, act in a discourteous manner; (b) in his official dealings with the public or otherwise adopt dilatory tactics or wilfully cause delays in disposal of the work assigned to him. 343B. Observance of Government's policies Every Government servant shall, at all times- (i) act in accordance with the Government's policies regarding age of marriage, preservation of environment, protection of wildlife and cultural heritage; (ii) observe the Government's policies regarding prevention of crime against women.