States Of The Union

The pitfalls of India’s fiscal-federalism project

- Nilakantan RS

In 1860, Charles Trevelyan, the governor of the Madras Presidency at the time, orchestrated what came to be known as the Madras rebellion. He claimed that the budget of the colonial administration leaned too far towards financial centralisation, and was therefore unfair to the provinces in general, and the Madras Presidency in particular. He questioned the legitimacy of British control of finances, given that there was no representation of tax-paying Indians in the decision-making process.

The colonial administration had centralised power structures for the ease of its own bureaucracy. Trevelyan thought the Madras Presidency, which had not seen much unrest in the revolt of 1857, should not have to pay for the ballooning deficits that were largely caused by the war. While Trevelyan was a complicated man, who is now remembered primarily as being responsible for exacerbating the Irish potato famine, the question he raised during his time in Madras is an important one: how does a country with a large and diverse population, such as India, govern itself?

Independent India has accelerated the accumulation of power at the centre. The periodic demands for political autonomy in varying degrees—in Kashmir, Nagaland, Manipur, Punjab, Tamil Nadu, among others—have been dealt with as problems that need to be subdued, rather than as ones that raise genuine questions about the structure of governance. And over a century and a half after Trevelyan’s revolt, the 2019 general election poses similar questions about India’s management of fiscal federalism, or the division of public expenditure and taxes across the different levels of government.