How Federal Drift Is Starving Strategic Priorities

Extraordinary challenges call for extraordinary action, and extraordinary action calls for extraordinary courage. The disruption of the world order wrought by President Donald Trump places extraordinary demands on India, if it is to persist with its goal of defending and enlarging strategic autonomy. India will have to increase its expenditure on defence procurement and research and development, both on new types of hardware, to be deployed on land and water, and in air, space and cyberspace. Additional R&D and kit would be required to use artificial intelligence—of course, with humans in the loop—to integrate these disparate elements into coherent capability for offence and defence. That calls for additional funds, from the Union exchequer, apart from by the states and private players.

One way for the Centre to find additional funds for urgent, essential spending on securing and expanding strategic autonomy, within the existing constraints of taxation and borrowing, is to refocus central government spending on the subjects that are specifically its responsibility, while discontinuing the vast expenditure it undertakes in sectors that are rightfully the responsibility of the states. Refocusing federal finance in the constitutionally mandated areas of social, economic and political life would free up resources and policymaking energy for both the Centre and the states.

An important reform in this context would be to undo what should rightfully be called an excess of the Emergency of 1975. The 42nd Amendment to the Constitution transferred Education from the States List to the Concurrent List. On subjects listed in the Concurrent List, both the Centre and the States can legislate, with the Centre having overriding primacy, in case there is a conflict between laws adopted by the different tiers of the polity. While several other acts of central overreach were undone once the Emergency was over and the Janata Party took office, Education continued on the Concurrent List.

List I of the Constitution’s Seventh Schedule enumerates the Centre’s responsibilities, starting with defence of the nation. Items 63 and 64 specifically mentioned some central universities and other institutions for scientific and technical education and declared by Parliament to be of national importance. Inclusion of Education in the Concurrent List brought the Centre to primary education as well, apart from to all of higher education in the states. This has had two effects. One is diversion of central funds to areas of governance and service provision best left to the States. The other is use of these central funds as levers to influence and control state level policy in education. Both are undesirable. States should be left free to use the quality of human capital they create as a competitive edge when it comes to attracting investment. Diversity of policy at the state level would lead to greater experimentation in pedagogic innovation, leading to better outcomes for everyone, including those who learn from the better results achieved by other states.

Health is a state subject. Employment does not find mention anywhere. Originally, food for work programmes evolved as state government initiatives to alleviate distress during droughts — Maharashtra innovated this, to begin with. There is no call for the Centre to be involved with housing. When Kerala came up with the 100,000-houses programme to shelter the state’s homeless, it was conceived of and funded as a state government programme.

If we look at the table of the key Budget document, Budget at a Glance for 2025-26 on Expenditure of Major Items (Page 11 of the document), some of the heaviest expenditure is on subjects that rightfully belong to the States: rural development, food, fertiliser, agriculture, housing. There are largish outlays on school education and healthcare, as well.

Why should the Centre intrude on to the States’ turf and interfere with the Constitution’s division of responsibilities, and, as a result of central resources being spent on discharging state responsibilities, starve essential central functions, such as defence and scientific research and development, of the funds these need?

Of course, such trespass on the states’ turf gives branding and bragging opportunities to the party ruling at the Centre, but such a partisan concern should not be allowed to vitiate national security or thwart India realising its potential to be a world-leading power in science and technology, instead of being a weak also-ran, which spends 0.65% of GDP on R&D, even as countries like South Korea and Israel spend more than 5% of GDP on R&D. Israel has elevated itself to an appendage of Silicon Valley for defence tech. South Korea is one of the world’s largest ship-builders and fastest growing exporters of sophisticated arms. Israel’s population is 10 million, South Korea’s population is smaller than Tamil Nadu’s.

As the Centre takes care of essential responsibilities assigned to the states, the States spend their funds on unaffordable government salaries and populist schemes that distribute largess to the people without increasing their human capital or productive capacity. If the Centre stopped the business of having any number of central schemes and centrally-sponsored schemes in areas the Constitution has reserved for the States, the States would have to conserve their resources and make optimal spending priorities.

Of course, if the Centre abandoned all State subjects at one go, there would be chaos and extreme distress. The refocusing of central and state expenditure to their own legitimate, constitutionally mandated areas of governance and responsibility can only be gradual. But the process is vital, for India to survive and thrive in the changed geopolitical situation in which a country that is unwilling to kowtow to some big power or the other has to build considerable military and technology muscle, apart from deploying deft diplomacy.

Let the forthcoming Budget make a beginning, by cutting back, say, ₹500 billion of central indulgence on state subjects, and spending that money on things that would fortify India’s strategic autonomy. Yes, this would call for political courage, and effective communication of the rationale to the public at large. That is the stuff of leadership.