(a) As a constitutionally mandated body the Finance Commission stands at the centre of fiscal federalism. Evaluate the role of…

(a) The Finance Commission and Fiscal Federalism

Article 280 mandates the Finance Commission (FC) as an independent constitutional arbiter to correct vertical fiscal imbalances between the Union and States, and horizontal disparities across regions. Over its evolution from the 1st to the 15th FC, the institution has progressively refined its criteria to balance equity with efficiency. In vertical transfers, the 14th and 15th FCs structurally enhanced state fiscal autonomy by recommending 42% and 41% tax devolution respectively. Horizontally, the 15th FC reconciled equity—primarily through the fiscal capacity/income distance model (45%)—with performance incentives, including demographic performance (12.5%), forest cover, and tax effort (2.5%).

However, the FC's role in ensuring just resource sharing faces structural constraints:

The equity-efficiency trade-off remains contested. The adoption of the 2011 Census population data drew sharp criticism from demographically prudent southern states, who perceived it as an efficiency penalty despite demographic performance weightages.

The proliferation of non-shareable cesses and surcharges by the Union has compressed the divisible pool, resulting in actual devolution falling significantly below the headline 41%.

The post-Planning Commission era and the cessation of Special Category Status have strained the FC’s grant mechanism, compelling heavier reliance on post-devolution revenue deficit grants.

The structural rigidities of the Goods and Services Tax (GST) regime and anxieties surrounding the end of the GST compensation mechanism have amplified inter-state revenue volatility, testing cooperative federalism.

While the Finance Commission has successfully maintained its credibility through formulaic and transparent transfers, its capacity to guarantee equitable federal outcomes is increasingly undermined by Union-level fiscal centralization. A binding constitutional ceiling on cesses and surcharges is essential to restore genuine fiscal equity.

(b) Market Approaches versus Public Service Values

The integration of New Public Management (NPM) and Public Choice Theory into Indian administration has challenged traditional Weberian and constitutional public service values—such as equity, universal access, neutrality, and procedural accountability—by prioritizing managerial efficiency, cost recovery, and market competition.

In the Indian context, this shift is manifested across key sectors:

In public infrastructure and utilities, Public-Private Partnerships (PPPs) in metro rail projects and discom privatization models have prioritized commercial viability. This has led to disputes over tariff hikes, cherry-picking of lucrative urban zones, and viability gap funding pressures, often compromising equitable access for vulnerable sections.

In social provisioning, market instruments such as publicly funded health insurance (Ayushman Bharat-PMJAY) and education vouchers shift the state’s role from a direct provider to a purchaser of services. While enhancing consumer choice, this approach often diverts public funds to private healthcare and education providers, leaving primary public infrastructure under-resourced.

Citizen's Charters risk dilution when converted into commercial service-level agreements, reducing citizens to "customers" and weakening grievance redressal for non-remunerative public goods.

Outsourcing and privatization have increased the risk of regulatory capture across sectors like power and telecom, where independent regulators struggle to balance private investor returns with public interest.

Market approaches have brought technological modernism and execution efficiency to Indian governance. However, they cannot substitute for the state’s constitutional obligation to ensure social justice. A calibrated model is required where market efficiencies are bound by strong regulatory governance and a resilient public delivery backbone.

(c) Criminalization of Politics and Democratic Fabric

The criminalization of politics corrodes democratic legitimacy, rule of law, and administrative neutrality. Data from the Association for Democratic Reforms (ADR) reveals an alarming trajectory: MPs with declared criminal cases in the Lok Sabha rose from 24% in 2004 to over 43% in 2019, with a substantial portion facing serious charges.

This crisis is sustained by an electoral ecosystem where illicit money power and candidate "winnability" override public probity, eroding public trust in legislative institutions and institutionalizing rent-seeking in governance.

The Supreme Court, in Public Interest Foundation v. Union of India (2018) and subsequent rulings, mandated the public disclosure of candidates' criminal antecedents by political parties and the establishment of designated fast-track courts for trial of MPs and MLAs. Earlier, the Justice J.S. Verma Committee and the Law Commission’s 244th Report emphasized the urgency of disqualifying candidates against whom courts have framed charges for heinous crimes.

Containing this decay requires comprehensive structural reforms: amending Section 8 of the Representation of the People Act, 1951 to debar individuals facing serious charges upon judicial framing; legally institutionalizing inner-party democracy; introducing state funding of elections; and enhancing the autonomy and regulatory powers of the Election Commission of India under Article 324.