Reconsider the Seventh Schedule
The sharing of financial resources between the Union and states, and inter se, among states, is key in any federal democracy. The Constitution, through Article 280 to 281, provides for a unique mechanism in the form of finance commissions for devolution of resources. The final report of the 15th Finance Commission (2021-26) is now public. The first thing most states, for whom the finance commission award is a lifeline, look to is the devolution formula. This has been maintained at 41%, which is a slight downward adjustment because of the creation of two new Union Territories.
Each successive finance commission has offered unique recommendations. The 10th Finance Commission, for instance, suggested all central taxes be shared with the states. The 14th Finance Commission was a watershed, having increased the share of states in net proceeds of Union tax revenues to 42% from 32%. There are many forward-looking recommendations of the 15th Finance Commission too. But beyond the report, there is one suggestion articulated by its chairman, NK Singh, that stands out. In an interview, he somewhat provocatively asked if the Seventh Schedule has outlived its utility. This newspaper, like Mr Singh, believes it has.
The Seventh Schedule divides subjects under the exclusive domain of the Union, states and common Centre-state jurisdiction, classifying them into the Union, State and Concurrent List. Over time, the Union has transgressed into subjects assigned to states for various reasons, including the fact some of these are national priorities and the Centre has obligations going beyond the Schedule. Subjects such as employment and education, for instance, are under the domain of states. Yet, India has justiciable legislation on employment (the Mahatma Gandhi National Rural Employment Guarantee Scheme) and education (the Right to Education Act), to name a few. The advent of centrally sponsored schemes has necessitated central outlays in other areas, falling within the State List such as agriculture. A thorough legislative appraisal of the Seventh Schedule to keep pace with changing fiscal priorities is overdue. An expansion of the Concurrent List, for instance, could be considered. But this must be managed democratically and consultatively, while keeping the spirit of federalism intact. It must not become an exercise in greater power-accumulation by the Centre, but an exercise in greater burden-sharing. States will be more willing to come on board only if financial obligations are more evenly shouldered.