Amartya Sen has remarked that before demonetising the high-value currency notes of Rs.500 and Rs.1000, the Union Government should have discussed the matter with the States (29 in all), and preferably obtained their concurrence. A similar sentiment has been echoed, rather vehemently, by one of the crusaders against the decision. Participatory governance may be a statutory requirement or else, a conventional imperative based on ethical considerations in certain circumstances. But for the former, there has to be a legal provision. He has not pointed out any such procedure laid down in law. As for the latter, it is, always and entirely, a normative issue and would be contingent on the political inclinations of the ruling party.

Further, if the Centre wanted the matter to be discussed and agreed to by the State Governments, it would have been impossible to achieve the objective. Consider the history of the enactment of the goods and services law. The Centre has been struggling to sew up the frayed ends of the proposed law for almost a decade and yet, there is no silver lining in the immediate future, despite the constitutional imprimatur of 1 September having been fixed as the time-limit. It is apparently proving to be a huge task; no one knows when it will be completed.

If the Centre had decided to embark on such an adventure, the demonetisation would never have materialised. There is another aspect which was highlighted by the Prime Minister on 8 November in course of his address to the nation. This relates to confidentiality. In the process of consultation with the state governments, confidentiality would have been the immediate and first casualty and the purpose of the entire exercise would have been defeated. As it is, there have been allegations that despite the cloak of secrecy maintained and the fact that just four civil servants were taken on board, certain vested sections of the political spectrum, allegedly, got wind of the imminent action to enable them to take precaution. Of course, nothing concrete by way of credible evidence has surfaced till date and the allegations of prior leakage, as is customary in such matters, remain in the realm of speculation.

It is also interesting to note that the word “federal” is not mentioned in the Constitution. This word has been interpreted in a subjective manner. It reminds us of the childhood story of six blind men trying to define the appearance of an elephant. Equally interesting is the fact that federalism continues to be the buzzword of those who are disgruntled because of the policies of the Union Government. In terms of Schedule VII of the Constitution, item No. 36, currency, coinage and legal tender are in the exclusive domain of the Union Government. There is, thus, no legal requirement for consultation and approbation of the state governments in matters connected with these items. Further, instead of issuing the currency or bank notes, the government has entrusted such tasks to the Reserve Bank of India. This again is subject to the conditions laid down in Chapter III, Schedule 22 of the same Act. It also needs to be mentioned that the law that established the Reserve Bank of India is a pre-independence legislation. Of course, there have been several amendments to the RBI Act since independence, but the delegation of the power to issue and manage the bank notes have not been materially changed. The decision to make changes in the bank notes as per this provision rests with the Union Government, which asks RBI to call the meeting of its Central Board, deliberate on the advice of the government, and send its recommendation to the Centre which in turn announces the decision to the people of the country. The person who can make the announcement is not mentioned in the law. The manner of announcement is entirely at the discretion of the government and cannot be questioned or be subject to judicial review.

We also need to consider if India meets the classical definition of a federal state. The state, as mentioned in the Preamble to the Constitution, did not volunteer to join the Union as happened in the historical federal polity of the United States of America. It has been the case of one sovereign transferring the reins of the country to another sovereign under a law passed in the legislature of the former. The states did not federate into a Union. It was to a lesser extent, the subsequent merger of the Princely States by separate legislative instruments. The economic and political relations between the Union and the States are well-defined in the Constitution. The specious argument that the subject of law and order comes within the domain of the states as per list II of Schedule VII has been used, almost indiscriminately, to criticise the decisions taken by the Union Ministries as being against the federal spirit of the Constitution. However, there can be any number of situations when such consultations may not be feasible or possible. The spirit of federalism cannot impede the Centre to move in the best interests of the country. In the case of a natural calamity or for security reasons, it is necessary to take immediate steps by the Union. If the Centre has to obtain prior permission of the affected State and the state government does not give the permission, then should the Union Government remain paralysed?

 It seems odd that Prof Sen should advocate that the Union Government should have consulted with the states or at least obtained their concurrence. This leads us to the main issue sought to be discussed, namely, the redefinition of the concept of Federalism in the Indian context. Those who framed the Constitution did not invent the philosophy out of the blue. They were definitely inspired by the development of the theory to a large extent from the American experience. If one goes through the historical background of federalism in the United States of America, it will be noticed that it is not a strategy among the diverse contending political forces of the newly-set up states seeking ways to put in place a binding and permanent establishment of a strong, unified and progresive polity.

It acknowledged the competing and often, conflicting interests of the federating states and looked for an amicable and acceptable resolution of such claims and counter-claims. One needs to examine the Federalist Papers (85 in number) which three eminent constitutional experts and political leaders of the day, namely, Alexander Hamilton, John Jay and James Madison wrote and published in three newspapers, addressed, apparently, to the people of New York state under the common pseudonym ~ Publius. Charting the whole gamut of the constitutional structure and the philosophical underpinning of the new nation, they laid extra emphasis on the most controversial issues. These included Centre-state relations, inter-state relations and government formation. Surely, it would not be incorrect to assume that our Constitution framers were heavily indebted to them.

(To be concluded)

The writer is a retired officer of the Indian Revenue Service