Case for special package: One-off package needed to reduce burden

  • Pritam Singh
  • Updated: Jun 15, 2015 09:49 IST

To assess the case for a special package for Punjab, understanding the structural dimensions of India’s Centre-state relations and their implications for Punjab is of key importance. Three aspects of that structure are most significant.

One, the Indian Constitution is highly centralist in character and the word “federalism” was introduced in it ironically during the Indira Gandhi’s authoritarian Emergency rule. Two, the trend towards centralisation has been growing even beyond the parameters of the Constitution, and three, both the constitutional and extra-constitutional dimensions of centralisation are closely linked with the idea of India as a nation. What has happeneda in Punjab economically and politically since 1947, where it stands now, what it should expect from the Centre and what likely course the Punjabis can follow in the future are related very closely to the constitutional design of the country and the contesting perspectives on Indian nationhood.


The first crucial step towards centralisation was taken by Jawaharlal Nehru- Vallabhbhai Patel leadership when it rejected the Cabinet Mission Plan proposed by the British for postindependent India. The plan’s provision for a confederal structure with considerable autonomy for Muslim majority provinces, including Punjab, was acceptable to Muslim leader Muhammad Ali Jinnah.

It is a severe indictment of India’s political leadership that its rigidity on centralisation pushed Jinnah towards Partition and failed to win the consent of the third important religious community, the Sikhs, to the Constitution. Hukam Singh and Bhupinder Singh Maan, the Sikh representatives in the Constituent Assembly, refused to approve India’s Constitution due to its over-centralising character.

Hukam Singh did not mince his words: “I wish to record an emphatic protest here. My community cannot subscribe its assent to this historic document…In our Constitution, each article tends to sap the local autonomy and make the provinces irresponsible… The minorities, particularly the Sikhs, have been ignored and completely neglected. The provincial units have been reduced to municipal boards…there is enough provision in our Constitution… to facilitate the development of administration into a fascist state.” (Constituent Assembly debates 1949, p.753).


In the pre-Independence period, the Congress had respected the distinctive identities of the states when each state party unit was called pradesh Congress indicating almost the national status to each state.

However, in the post-Independence period, it merely kept the name, but in reality swung towards centralisation under the Nehruvian leadership. Nehru’s vision of moulding India into one nation led to disrespecting the distinctive identities of the states. He accepted the reorganisation of states on linguistic lines only after massive protests and unrest in South India and opposed until his death the creation of a Punjabi-speaking state.

The Planning Commission for economic governance of India was seen by Nehru not merely as an economic instrument, but also as a political tool to provide muscle to the project of centralisation. He was influenced by the Stalinist model in Soviet Union where Russian identity was prioritised over non-Russian minority identities, and the Titoist model in Yugoslavia where Serbian identity was privileged over non-Serbian minority identities. The utter collapse of these models has important lessons for India and other multi-national federations.


Nehru’s daughter Indira Gandhi also viewed centralisation as linked to the project of creating a singular Indian nationhood. Her first nationalist challenge after coming to power was the food crisis. She considered India’s food dependence on the USA through the PL-480 mode as national humiliation and launched the so-called Green Revolution to meet the national objective of food self-reliance. The whole of Punjab but only selected districts of other states were chosen for the Green Revolution experiment. This had contradictory implications on the Punjab economy. Punjab’s agriculture flourished but the industry was neglected.

During the colonial rule too, the British had developed Punjab agriculture through canal colonies for their economic, military and political objectives. The direct colonial and the post 1947 federal colonial ordering of Punjab agriculture had the same implication on the industry.

My study of the Punjab economy (Federalism, Nationalism and Development — India and the Punjab Economy) demonstrates that by 1991, Punjab had become the least industrialised state in India in terms of secondary sector’s share in the state domestic product.

Punjab’s industrial backwardness led to savings generated in Punjab’s rural economy being transferred to more industrially advanced states for loans through the national banking network. My study of bank credit-deposit ratios shows that in just one year (1990), to take an example, a drain of Rs 4,725 crore took place from Punjab to the other states. Industrial backwardness also contributes to weakening the revenue base of Punjab. Punjab’s financial dependence on the Centre increases.

This financial dependence is further intensified by two other processes: Vertical imbalance between the Centre and the states in terms of division of revenue sources (the Centre has revenue elastic departments under its control with revenue inelastic sources relegated to state’s share) and the horizontal imbalance between the states where those with relatively lower per capita income are given more generous transfers from the Centre through Finance Commission transfers, planned transfers and ministerial transfers. The argument that Punjab’s financial indebtedness is due to subsidies is seriously flawed because the Centre has even more generous subsidies and is still so flush with revenue that many times, the central departments do not know how to spend the money.


The most unjust aspect is that the burden of expenditure on security forces during the Punjab-Centre conflict in the 1980s and 1990s has been substantially put on Punjab’s shoulders. It amounts to saying that we had to beat you but we also have to charge you for the expenses incurred in beating you. Punjab lost a large number of young men who were in the prime of their productive potential. The economic cost to any society of the loss of its youth is long lasting. No study has been done to estimate this human and economic loss. The social, psychological and emotional costs can last for generations.

The increase in suicides, especially in rural areas which were the epicentre of the armed conflict, the growing drug menace and the escapist ventures to go abroad are all symptoms of the manydimensional trauma Punjab is still dealing with. High stakes are involved in the availability or denial of a central financial package. A continuously discontented state in a federation is a federal risk of high order. My study of global federal conflicts identifies two main patterns: One where the less developed regions feel dissatisfied and the other where the better developed regions feel dissatisfied such as the Baltic States in the Soviet Union, Slovenia in Yugoslavia and Catalonia in Spain. Punjab has both the features. It is characterised as rich but not developed.

Punjab’s political leaders, both in the government and in the opposition, intellectuals, civil servants and other opinion makers need to unite to put pressure on the Centre for one-off financial package to lessen Punjab’s debt burden. If a package does mature, no one should try to take a sole credit for that. The Punjabis also need to build alliances with other states to restructure the existing over centralised system of governance towards decentralisation and federal devolution. This may eventually need a new constitutional arrangement and rethinking on visualising India as a territorial space for many nationalities.

(The writer is professor of economics, Oxford Brookes University, Oxford, UK)

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