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At first sight, it looks as though panchayati raj, the lower layer of federalism in our polity, is as firmly entrenched in our system as is the older and higher layer comprising the Union Government and the States. Like the democratic institutions at the higher level, those at the panchayat level, the panchayati raj institutions (PRIs), are written into and protected by the Constitution. All the essential features, which distinguish a unitary system from a federal one, are as much enshrined at the lower as at the upper level of our federal system. But look closely and you will discover a fatal flaw. The letter of the Constitution as well as the spirit of the present polity have exposed the intra-State level of our federal system to a dilemma of which the inter-State and Union-State layers are free. The flaw has many causes. But all of them are rooted in an historical anomaly, that while the dynamics of federalism and democracy have given added strength to the rights given to the States in the Constitution, they have worked against the rights of panchayats.

At both levels of our federal system there is the same tussle between those who have certain rights and those who try to encroach upon them if they believe they can. Thus the Union Government was able to encroach upon certain rights given to the States by the Constitution. It got away with that because the single dominant party system, which characterised Centre-State relations for close upon two decades, gave the party in power at the Union level many extra-constitutional political levers. Second, the Supreme Court had not yet begun to extend the limits of its power. But all that has changed in recent times. The spurt given to a multi-party democracy by the overthrow of the Emergency in $1977$ became a long-term trend later on because of the ways in which a vigorously democratic multi-party system works in a political society which is as assertively pluralistic as Indian society is. It gives political clout to all the various segments which constitute that society. Secondly, because of the linguistic reorganisation of States in the $1950$s, many of the most assertive segments have found their most assertive expression as States. Thirdly, with single-party dominance becoming a thing of the past at the Union level, governments can be formed at that level only by multi-party coalitions in which State-level parties are major players. This has made it impossible for the Union Government to do much about anything unless it also carries a sufficient number of State-level parties with it. Indian federalism is now more real than it used to be, but an unfortunate side-effect is that India's panchayati raj system, inaugurated with such fanfare in the early $1980$s, has become less real.

By the time the PRIs came on the scene, most of the political space in our federal system had been occupied by the Centre in the first $30$ years of Independence, and most of what was still left after that was occupied by the States in the next $20.$ PRIs might have hoped to wrest some space from their immediate neighbour, the States, just as the States had wrested some from the Centre. But having at last managed to checkmate the Centre's encroachments on their rights, the States were not about to allow the PRIs to do some encroaching of their own.

By the $1980$s and early $1990$s, the only national party left, the Congress, had gone deeper into a siege mentality. Finding itself surrounded by State-level parties, it had built walls against them instead of winning them over. Next, the States retaliated by blocking Congress proposals for panchayati raj in Parliament, suspecting that the Centre would try to use panchayats to bypass State Governments. The suspicion fed on the fact that the powers proposed by the Congress for panchayats were very similar to many of the more lucrative powers of State Governments. State-level leaders also feared, perhaps, that if panchayat-level leaders captured some of the larger PRIs, such as district-level panchayats, they would exert pressure on State-level leaders through intra-State multi-party federalism.

It soon became obvious to Congress leaders that there was no way the panchayati raj amendments they wanted to write into the Constitution would pass muster unless State-level parties were given their pound of flesh. The amendments were allowed only after it was agreed that the powers of panchayats could be listed in the Constitution. Illustratively, they would be defined and endowed on PRIs by the State Legislature acting at its discretion.

This left the door wide open for the States to exert the power of the new political fact that while the Union and State Governments could afford to ignore panchayats as long as the MLAs were happy, the Union Government had to be sensitive to the demands of State-level parties. This has given State-level actors strong beachheads on the shores of both inter-State and intra-State federalism. By using various administrative devices and nonelected parallel structures, State Governments have subordinated their PRIs to the State administration and given the upper hand to State Government officials against the elected heads of PRIs. Panchayats have become local agencies for implementing schemes drawn up in distant State capitals. And their own volition has been further circumscribed by a plethora of “Centrally-sponsored schemes”. These are drawn up by even more distant Central authorities but at the same time tie up local staff and resources on pain of the schemes being switched off in the absence of matching local contribution. The "foreign aid" syndrome can be clearly seen at work behind this kind of "grass roots development".

Which of the following best captures the current state of Indian federalism as described in the passage?

  1. The Supreme Court has not begun to extend the limits of its power.
  2. The multi-party system has replaced the single party system.
  3. The Union, state and panchayati raj levels have become real.
  4. There is real distribution of power between the Union and State level parties.
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