My guest today is Abhishek Chautagunta. He is a political economist with a PhD in economics from the University of Hamburg and was earlier an emergent India fellow at the Mercated Centre. Abhishek is one of the sharpest thinkers on India's political institutional design. His research focuses on how India's federal structure works in practice, including his work on what he calls "Central People Federalism". He has published papers on how federal design affected India's response during COVID and on tools like "President's Rule", showing how federal institutions can be used to consolidate power rather than distribute it. Abhishek believes that federalism is a good idea and that the centralization of power leads to bad outcomes. Oh, as an aside, this episode is a bit of an experiment. Instead of recording it in a studio with my guest like I usually do, I host this conversation as a live event in front of a small audience. The first 90 minutes or so covers my conversation with Abhishek and the last 30 minutes are a list of questions that the audience had for him. I am trying to see if hosting these conversations as live events improves the quality of conversation and the depth of engagement. So as you listen, I'd love your feedback. You can always write to me at Deepak
[email protected]. As always, I hope you enjoy listening. Hi Abhishek, welcome to the podcast and also the first live event for Deepak Disegrees. Thank you very much Deepak. I am looking forward to it actually. What is federalism and then maybe as an extension, why is that a good idea? I would say is where you have hierarchal layers of government, each with its own defined sphere of authority. I think that's the most simplest way in which one could put it. And there again, you can keep it up. It can get more and more complicated depending on how you want to go about it, how you want to conditionize this whole thing. But yeah, that's awesome. So the definition we're going to take off with is federalism is some structure of government where there are multiple government tiers and each have their own authority of some sort of conversation. There's a sphere of authority should be very defined. Yes. Okay. And as an extension, you sure that is federalism. Why is federalism good? As opposed to let's say a unitary government where you just have one level of government, why would this be a better idea? So government essentially solves collective action problems. Right? A bunch of people have to come together, agree. Now you keep adding numbers to it and you keep adding there is a spatial element to it first. And then there is also like a cultural historical element to it. And people sort of have buckets of preferences, different groups of people will have different buckets of preferences. And those buckets can sort of solve collective action problems. But then as a whole, if you were to put them all in one bucket, it's not likely going to happen very easily. So then you come up with federalism. So now you do this on different tiers, you end up with something like federalism. Go ahead. I'm wondering the way you describe it is you're saying we have one big population of people that are various collective action problems. Some of these problems are better solved at some developed level at a state level or a district level. And so we use federalism as a way to solve collective action problems more efficiently at an appropriate level for that particular public action problem. I wouldn't just say efficient. So I mean, it's also sorted with, I mean, there is also a degree of optimality to it. This is what they would want. Not just that this was very efficient. For example, you would need better footpaths in some places than better roads. And it's efficient to bend better roads, but you would not get a footpath. So you know, there is the preference that it is also cater to when it comes to essentially, subsidiarity is what I'm kind of get at. Like there are knowledge problems that exist and those knowledge problems get better. So it's better when you have the representative of the government, you could just reach out to five streets down your lane, something like that. So you know, knowledge problems get solved better. People in Delhi won't know what's happening in Alangwadi. Very simple. Yeah, it's the problem. And give me an example of a country that you think has done a decent job. It's a bit hard. So I would say, I think Jeremy has done a decent job at it. But again, America has done a decent job at it. Again, all of these have like, you know, their conditional answers. Their decent job is decent job. I don't think they've done a great job at it. I don't think the reason why I don't think one is able to do a great job at it is very simply because of how governments operate and governments are structured. Like there's always a top downism to any government and that Switzerland has done a good job at it. But again, all of these Germany's, they've come to be that way because of very different reasons and they also have a lot of money. India is not like that. But in that's given all of those conditions and there's not done pretty well for 70 something years of feralism we've done. Yeah, so we have a half way decent federal system in India. Yeah, I mean, see, if you read the literature, India is not quite called federal. India is quasi-federal. Given how quasi-federal we are, we are okay. I'd say, okay, I think there's a lot to do what we are okay at what given our level of income and number of years we've had this setup for probably okay. Got it. How I'd look. Usually, first and fifteen minutes of any podcast, I'm laying definitions just getting a sense of what the belief is. If I draw a spectrum on one side, I pick a unitary government, right? So completely top down single level of government and on the other side, we do like a confederation, some thinking early USA, right, which is just a collection of states. Those states are a confederation of states as opposed to a federation. They're not of, it's not part of the federalist structure. That did fall apart. So you had a confederation and then that fell apart and led to the feralist papers and then feralism. You've given a good sense of why the first one fails. Why evenly fails? Okay, I have another standing up. Why do confederation fail? So many federations in the world, I mean federally organized countries come together as federally organized countries mostly due to crises. Now crises of usually, how do you deviate power after crises is the reason why feralism is sort of there, right? In India, it's the same in America, it's the same Germany, it's the same. Germany, pre war and post war, honestly, like 1871 plus and 1949, Kronengäzets is the same reasons why they became federally organized. In America, so there's also, again, this is one one one. I think we have to think about two things here. One is we have to think about things in giving a bit, giving a power politically and economically. In America, economic interests sort of led to the collapse. In other places, political interests sort of lead to the collapses. So I think, I mean, again, political and economic interests separating them is also a bit hard. I think Yugoslavia, Czechoslovakia, they're also, they wear federations, right? They also split, they failed because of both political and economic reasons. So it's not very easy to say why a confederacy, again, confederacy again is a loose form of federalism if you think about it, right? I don't think there is a separate, here's a confederate state that still is the way it was conceived in America in the 1780s and in Switzerland and around the same time. It's not like that. So why would they fail is they would, they never had well-defined spheres of authority, devied up properly for them to manage both political and economic interests, how I would answer your question if you wanted a one-line. Yeah. Sounds like the positive thing I'm making is that there are some legitimate functions that are only best performed at a federal level and so a confederation would fail because those legitimate functions that are supposed to happen at a center level, do not exist at that center level or didn't happen at a very local level, which I mean like militia is, yeah. So what are those things? What are the things that are legitimately supposed to take place at a federal level? I mean, commonly, commonly, defense is always one, foreign policy is always one. I mean, defense in some countries in Europe is like, licked in the style. It's a very small country where it's defense policy is not there. It's the neighboring countries' defense policy that basically they follow. So these are massive collective action problems that need to be solved at scale, right? And those are legitimately government federally better organized. I can think of trade policy being one reason. Again, the answer, if we were to dive into all of these topics, the answer would be depends because it really depends on how you design that policy.
rather than just say defense. Yes, defense is possibly one of the best examples. But there are others like in India, we have, let's say, trade policies, one for in policies, another one, then if I have more answers, I'll come up with you. But I don't see much others which are very well controlled at a federal level. Trade policy, internal trade also, to a certain extent has to be state, sort of brought to the floor by the state and not the center. Even though right now it's not that in India. So we'll talk about it at some point. Few more questions, okay. So in a good federalist structure, I'm assuming then every state, whatever that, let's say you have the national level, then you have a state level for example, which is a second tier. That state level would have its own parliament, is that right? Its own lawmaking, its own ability to collect revenue and tax its citizens. So in parallel, are these things also allowed at a federal level, that is at a federal level, you do have a parliament, you do have the ability to collect taxes, all of those things are true. So you have both these tiers of government operating in parallel. The first example that I think I want to go into is civil rights in the US. So you have the North, South divide in the 1860s. The southern states are pro-slavery and broadly would like to categorize people as property that you can have and own if slaves ran off to the North, then they wanted the slaves to be shipped back to the South. This was part of a large disagreement that took place north to South. And at the time the federalist position was that this is something that the state worries about. So southern states will decide what their policy is on slave ownership. Northern states will decide what their policies on slave ownership. This is not something that at a federal level, we discuss abortion today is in a similar place in the US. One may argue that this is not a good idea. That is when we think about things that are fundamentally in this domain of human rights or human decency or individual liberty, sovereignty, autonomy, any of these things, some things are non-negotiable. It is non-negotiable that you cannot own another person because liberty is sacrosanct. Do you think at those levels there's some supremacy that then we say the federal government rules and then at a state level we simply abolish this? So I do not know much about how this has sort of kind of turned out in the US, but I will offer you a way to think about this, I would say. Now my question is, had it been at a federal level and had they, let's say abolished slave ownership, would the institutional structure of that day survive it? Is the question I have? Because there's, I mean, both formal and informal institutions are, I mean formal institutions you've said, Bankaru, informal institutions will, would they persist? My answer would have been yes. Okay, I don't know if, would I think my answer would be yes? Because informal institutions allowed for such practices to continue. So even if you did have a federal level, they thought, what does it matter? So if there are, if there are, if formal and informal institutions don't map a line properly, you'll have tension. And that tension will supersede whatever you're a legislation you bring in and say no. So, is centralization then a good thing? Is a question I will sort of throw back at you and say, what do you think? Yeah. Give me an example of informal institutions that would have survived despite regulatory changes. I mean trust usually, right? Like I trust you not to report to me to somebody else. Trust is the best indicator of informal institutions in any place like I trust you. So if you look at surveys usually it is mapped as, it's mapped, it's measured as generalized trust in society and generalized trusted, and et cetera. If you have low trust in government, high trust in society, you have very high, league strong informal institutions, and people won't report whatever is unlawful because they trust that the person to do the same. And then you have a informal system thriving. Okay. There's a little bit of a deviation, but I like this because it's come up in previous conversations also. When we think, okay, so we first have to agree that there is something we're putting under this bucket of a social evil, okay? This is a some broad bucket of a problem we need to solve. The Indian problem may be casteism. The American problem may be slave ownership, right? You have to, in a way, an informal institution that still thrives in India, isn't it? So the libertarian position will be something like, yeah, you cannot kill a mind-writers. You may so pass regulation at a, even you could do it at a state level, right? You may, I mean, by your argument, if you say, even at the level of the state, that parliament were to outlaw slavery by being some sort of an enlightened, you know, like a beacon state, it still doesn't change the fact that at a actual society level, you may have the same trust between individuals and so the informal, you're still able to practice this. And the argument against that sort of view would be something like, that is the role of the state by definition. That is, if we continue to not pass these regulations, then we continue to control this behavior. And if we control the behavior, like you would be radically radically, it is just significantly longer. Yes, yes, yes, but the reason, okay, I completely agree with you, but the reason why I post this counterfactual is to ask you whether, is this supposed to be done at a central level or at a state level? That is what I got at. I am not trying to say, hey, we should not pass law. We should pass law because what it does, it weakens informal institutions. It, there is, informal institutions persist unless you sort of have some sort of, you know, you build, try building walls over walls over walls until, you know, it sort of stops. Who does that is a question I don't, I would say people should be having, you know, like local government should be having a role to play in that, not a central government. I mean, that's all I'm trying to say. I'm not trying to say that we shouldn't do this. I think we should do this. Where we should do this is a question. Like, is it local government or is it state government? Is another question one would have to ask. I would, again, I will at that point agree to a certain level of centralization because, you know, you are still looking at more homogenous groups than in the eyes of whole, but, but I'm not saying that we shouldn't do it. We should think about who should do it. That's all. Yeah, of course, I hear the argument. But the only pushback is pragmatically in the real world. We've seen that the most likely way for us to accomplish these social goods, once you agree that it's a social good, right? Which is the hard problem. But the way I would try and think of it is to start with first principles. So for you in specific, I would say Abishek, you are broadly classic liberal, right? Like, you agree with general liberal principles that we have the right to self ownership, we have the right to liberty. These broad general classic liberal positions, you think are true. If you start there and then you work your way to agreeing that, yeah, this is in the category of things that we call social levels and need to be eradicated. My argument is that once you reach that conclusion, the only place to appropriately solve this is the federal level. You know, I think how you solve it really matters. These one size fit all sort of solutions. Now you've agreed that something is bad. Let's just go ahead and then bring out a paper which is this bad. You shouldn't do it from some, I don't know, some sort of ivory tower government, it's not gonna work. Like, will you solve this problem in the same way in Kerala as you would in Mizoram? Is a question I have. - Let's dig into that. So when you say solve this problem, - Call any problem. - I'm not a lecture abstract there. - And I mean, to start with, I'm just thinking of problems that are regulatory nature, right? That you need to pass law or regulation in order to resolve that as a problem. - Yeah. Step one is to get the legalies in place. Is to get the legal text in place. What you're proposing means, you have, let's say you have 28 states in a country, means you have 28 copies of the same legal text, attempting to accomplish the same end goal. You have 28 copies of that text. 28 parliament, 28 judiciary schools to legislate this in less than 28, but yes. - Sure. And if you have to move, let's say as a citizen, I have to move from one place to another. My rights change as I cross borders, that is, if what you're trying to do is work on caste is a problem. And I'm somebody who is part of a depressed class, caste for example, and whatever, it is a problem as part of this hypothetical, then when I cross state borders, the treatment of me as a person and my problem as a problem changes. - No, not really, in the sense, so. - Okay. - So the government in India, he has thought about this problem and they do exactly what he just said. Well, let's look at, like, I mean, since I'm now looking at it, local government laws, right? 1992, we bought in a law, said we should all have panchads in India. Now, the basis, had it already, some basis, had it, it was not working, the middle did have it. But now you're like, should have constitutionally ensured. Which means that states cannot go against the constitution. - That's in our constitution. - Yeah. - So then the states have to come up with some solution of how to solve for this provision in the constitution. And that's how you bring in the law. You are, there is a certain amount of centrality, there is a certain instrument of centrality to it. But that doesn't mean that I say this is bad. Now you have, like, this is how you have to fall. When you say this is how you have to solve a problem to a country which is that this big is India, people are not gonna be able to solve that problem just because somebody said it from the top. They are going to have to devise
their own waste-solved problems. And that requires their own legal instruments that fit their own institutional contexts. And every state in India has a different institutional code. And that doesn't mean now that just because you move across border, your situation, if it is a very, very legalistic one, might change. But on a fundamental basis, I don't see that being a problem. OK, my example would be either the slavery example, or the abortion example. Yeah, that doesn't change. Because then if there is a certain article in the constitution that is violated, then there is a certain act that is illegal. Whose constitution? Is it the state constitution or the central constitution? In India, we have an Indian constitution. But in the US, we have state constitutions. Yes. And in your view of a federalist world, would states have constitutions? This is a very good question. I don't know. It's the answer right now. And I would say because I don't know, answer would be different. If you have a country like India, I think an Indian constitution works very well to make sure that a lot of interests are represented. And if you wrote it with proper, well-defined division of powers across different layers of governments, you would not technically need different constitutions in different states. You would not need it. But again, if there is a case for it, if you have extremely asymmetric state, you have extremely rich states and extremely poor states, and there is a certain, what do you say? When they're all part of a physical union, then you would have a bit of resentment. I am earning money and trying to pay off another person's debt. That resentment will be there. So if you want to, then you may do it. But then again, what is the long run consequence of it? And what are you fatalizing for in the first place? You're fatalizing such that as a group of nation, as a group of people, you get to a better place than you are right now, 100 years from now, whatever. You are trying to have gains from scale. And if you have asymmetric setups, which are completely valid, you may take away some gains from that scale. I don't know. It really depends on what that asymmetry is. So should every unit of government have its own constitution? It should have its own well-defined sphere of authority. Should it have its own constitution? I don't know. Does a well-defined sphere of authority mean a constitution in your view? We should have probably covered a little bit of this in the definitions part. So I'm thinking about-- OK, I give an example. Let's say that in Karnataka, the Karnataka government so believes that 30% of all jobs should be reserved for Canada-speaking individuals or individuals who have bound the state of Karnataka or Maharashtra and Maharashtra, what happened. And let's work backwards here. So the first question would be, should the legislative assembly in Karnataka be allowed to do such a thing? They are allowed to do such a thing. And therefore, they are doing such a thing. Should they be allowed? What are the consequences of it? Are you creating opportunities? Is that leading to welfare outcomes that are desirable? So this is why the definitions are part. So I'll try and phrase the question now. In what is federalism for, in the sense? Imagine China. Now, we could possibly-- the China's a highly co-associated that is single party rule. There is not a true democracy. Federalism in China has been great for China. China has multiple tiers of government. They're all delegated meaningful authority, clear definitions of what they're supposed to do. If you disagree with the China example, I will go on. But imagine a hypothetical country that is totalitarian by constitutional design. But use as federalism as a way to get work done. That is, they have multiple levels of authority, clear rules about who can do what, what the responsibility is at that devolved level are. And so they use federalism in order to effectively enact whatever they want to enact. The question is federalism, a tool of efficiency. That is, it's the best way to do what needs to be done. Or is it a moral tool? That is, is it the best way to represent the will of the people? Is it a tool of democracy or is it just a tool for governance? Uh-huh. OK. So I'm sorry. I have to unpack this. That's why I'm writing this. First, I think we have to unpack what decentralization means versus what federalism means. Yes. China is a decentralized country, not a truly federal country. India has more decentralization than China and has more authority given out to local governments than China. It's just that the way we have done it is a bit messy. And now the reason why I think-- so decentralization does not mean fatalism. OK. So I would not go with China as a federal country example, at all. One. You can have decentralization. But if you can take away those powers by fear, then you don't have a federalism. It's a-- so there's a nice paper by Yuseppi and Wagner. It says, "Genuine and spurious federalisms." China is way closer to spurious federalism than we are closer to spurious federalism. That's how I would put this. True federalism is when all governments-- you cannot take away these powers and then call yourself-- that is decentralization. That's not federalism. So if you have to evolve in India, the way we think about it is we have to devolve functions and the three F's. Functions, functionaries, and finances. So you need to have effective functions, clear functions. You cannot have overlapping functions. You cannot have-- yeah, state government does X. Local government does X. Central government does X. Then who does X? Everybody does X. Should everybody do X? Maybe not the best idea. So that's one. So you need to have clearly delineated functions. You need to ensure that these functions are vested with functionalities that can effectively carry this work forward. So you need to have consular. You need to have-- what members you need to have-- MLAs, you need to have MLCs. In some cases, like, an article you need to have, MPs and lower, lower, whatever. So all of these functionaries need to be vested with very different functions. And then they need to be given effective money to do what they are supposed to do or what they are being delinated to do. So if you can take away all of this in one stroke, it's not fetalism. That's the-- that is a good that you brought up this whole definitional thing. This is what I think needs to be caught about first. Then is fetalism a tool of efficiency or is this like a more normal-- so you're asking whether this is like a positive argument or a norm or whatever. I would say it's both. Now in India, we came up with fetalism very simply because we had way too many people and way too many people who also had power. So we had princely states, some big, some small, some really tiny. We needed to do something about the power that they had. You wanted democracy. You also had the British leaving. So you needed to somehow consolidate all of this into a governmental system. That is one. Then we had very different people across the country. They all needed their interest taken care of. And therefore, they was both a positive and a normative argument that is sort of at play. You need sub-seviarity. You also need efficiency. And therefore, we came up with a fetalism. So I don't think the answer is that straightforward. It's a bit blurry than it's a bit gray. Yeah. I like the first answer. That makes sense to me. That China or the Unitarian countries who decentralize are not the same as federal countries. And this is because those individual levels, the state level or the district level, whatever, have no autonomy per second. They're not autonomous. That may have autonomy revenue, autonomy. They may have some sort of functional autonomy. Are they truly autonomous? How autonomous do you need to be? There is a nice index of regional autonomy index. So if you look up, that's a nice measure for federalism in the world. There are people who develop it every year and change it. But yeah, in that sense, there is very little regional autonomy if you think about China at all. And what's wrong, instead, with the Unitary system? So you have a single government that you elect. But that government appoints somebody at the same level. So it's still a democratic country. It's not autocratic like China or other countries still get a vote. But in fact, what's happening is that you're having somebody from your population. So for example, the region of Karnataka has a lack of a better word, a governor, who is appointed by the central government, who comes from the land who understands contextually the region and does a great job for Karnataka. If they don't do a good job, I won't vote for them the next time. You mean the chief minister, not the governor? Because we do have a governor. No, but the chief minister's part of the devolved level of the state. Yes. I'm saying that there is no level of the state. I'm trying to understand. Yeah, in the instance that we don't have that state level. Why not simply-- so what do we lose here? What do we lose if you simply have the central government appoint somebody who governs? But then they intelligently pick somebody who is from the land itself. OK.
So, we have at least, we have 543 MPs or something like that. I may have more right now. Is that enough representation for you is the first question. Do you want it even lesser is the next question? Do we just want 28 governors? We have elected these 4, 5, and 43 people, and then they appoint 28 people, and then we don't with any sort of governance. That's how knocked into the question I would ask. Great. How do you want your representation to look like? Right? You are doing this in order to build safeguards around overreach, correct? You don't want already my proportion went to the very high. I mean, you don't have enough legislators for the people we have. Right? First, and then you're saying that let them do everything. Then what is the will of the people? I'm not saying that your suggestion is wrong. I am suggesting if you think about the design consequences of it, is that the kind of representation you seek out of your government? Is that democracy? Is the question then one would have to ask? That's why you need different levels of governments and you need elections at every layer of governments. I don't know the answer to this, but think about the last ten years, the BJP has been pushing the story of a double engine surcharge. Right? BJP at the center of BJP at the state. And that to me seems like my proposal in that what they are saying is that the state government is an extended arm of the federal government and you have higher efficiency outcomes, that is the claim. You have higher efficiency outcomes, better outcomes for those states which are part of the double engine because that state level representative is an extension of the federal level as opposed to completely independent and so not part of whoever is governing federally. I don't know the data, but do double engines states do better than non-double-double-double states? Doing better is a very. Yeah, we force the metric. Okay, so first, I think we have to distinguish between political sort of symmetry versus design, right? Even if BJP is in one state and BJP is in the center as well, doesn't mean that the governance system is compressed into one. The federal setup still remains and it remains in order to have safeguards against the village. That's one of the first reasons why I would think federalism is good. And then the second reason is BJP in Delhi does not know if somebody in Kerala wants more football or road. I'm sorry, I'm just. I keep going back to some. I mean, sort of a falcom example. This one. Having said that. Is there some argument for this symmetric power structure, political representation in states? There is evidence which suggests that strategic transfers happen better if you have political affiliation, which is symmetric. So there's a paper, I think it's 2013 paper by Vijayalum Palam-Metal, which so that if you're allied, you end up getting more funds from the center. What does that fund do? No, else. But there is. the better funding is happening because of political allegiance, not because. You know, it's easier. Okay, so there is strategic design which is happening. I have my people there, so I give them more money than not my people. That's there. But is that doing A? Is that doing a good job? Is it providing welfare outcomes that people desire more relative to the not my people? That's one. And second, is this happening? I give money to my people. That is a function of allegiance, not a function of design just got compressed. Right? So I don't know about that. I think there has to be representation of people in the way we initially thought about. I mean, whatever. We think about representation to work. So if people want to elect CPM in one state and CPM in the center, they should. Right? All I'm trying to say is I don't think that should somehow make it more efficient for governments to communicate. Governments to communicate even if there are opposite. I have done some work and in political behavior, allegiance doesn't really play as much. For like, president's rule and all. President rule just doesn't get more or less just because states are allied. State and center are one. There's no. But there is something to be said about strategic transfers, but not in the way you are thinking about it is how I put it. Fair. And if I were to make the case from your side, then effectively that's an argument for why states should be able to generate their own revenue. Yeah. Because then you remove the need for strategic transfers. There's no grants from a federal level. At which point then it doesn't matter who's at a state government because physically or not connected. The revenue or telemetry is a very important part of federalism. That's why physical federalism is in itself a topic which is separate from federalism and separate from political economy. Because it is a very important part of. If you want governments to survive they need money. How you get the money is very important. Yeah. The reason I'm trying not to differentiate them is that don't think they are separate. I think when you design a federal system, if you do. Separating fiscal and political federalism is almost impossible. They are so closely intertwined that in effect when you discuss one, the other way will come up. I agree. We also have to differentiate then. I think. At least if you're not doing that differentiation, then we then have to differentiate from party politics, like you said, and political design and political behavior. They are two very different things. Party politics is a temporal thing. Political design is a persistent thing. So how does that play in federalism is a way to look at it? If you don't want to separate these two things. You have to separate it. Some level where you separate is your choice. The way most federal countries that you've given examples of so far have come about is other union states. So, India, union states, the US, the union states, very frequently it seems to be that you already have existing political units. There is some attempt to bring these units together. The US went Confederation Federation, but inevitably at some point, that's why you fatalize. And then the state level becomes that previous political unit. My question is something like, is this legitimate? Imagine you have to start a fresh. You're building a new country and scratch. What is a reasonable basis on which to break a country down into smaller units? Is it revenue generation? Is it number of people? Is it language and culture? So for example, the Indian. I think you're answering the question. It's all those things? Yeah. Because tell me, how would you think about a new country from start? Who would those people be? Right. Fair. So you answered the question. Is what after that? No fair. Then maybe, let me do a little bit. Is there. Some of these reasons more legitimate than other reasons. As an example, would reasons like a common history or revenue be better or worse than something that's totally governance driven? So as an example, I would say that if I divide India into X number of equal parts, just by land area, that seems like a worse off solution to me because you don't know the population density in that region. So you may have some parts that are really dense, some parts which are not as dense. And so it doesn't really make sense to be equal parts. What's the formula here? Or is it just that at the time of constitution forming, you have some collection of people in the room. They are really smart. We trust them with making it and they will never revisit this question again. Yeah. So I think there is. So there is that temporal salience of a certain topic, seeming to lead to a certain decision that is there. But your question of what is the optimal division, delimitation strategy is a very good one. I don't think there is a good answer to it. In a sense, every time the reasons for delimitation can change. And where you delimit and how you delimit can change. In India, we have delimited for mostly cultural and linguistic reasons. Okay. At the state level. But at the sub-state level, we have done all kinds of things. We have done all kinds. And even at the sub-sub-state level, we put in even more things. So. So what level you are looking at really matters as to whether what is the effective delimitation strategy? It could also just be like geographic, right? Like certain ridges there between Madhya Buradesh and Rajasthan, border. Right? It could be that the same kind of people live on both sides. The border, but there was a ridge. Or you could Jari Mandar, right? It could be purely political, I am a state government. I'm Jari Mandar, in my districts to make sure that I am. Yeah, I could. I'm voting. And this is what. But you could, again, Jari Mandar is a temporal sort of thing. How persistent is Jari Mandar is a question which I don't have good answers to in India? So in India, there's not a lot of. There's a lot of switching, right? And we have many parties that play, especially at regional politics. So it is effectively a very one-time-their-it strategy if you think about Jari Mandar. Yeah, but what I'm getting to is that. I think about things that we put into political issues.
design, what we put in our constitution, what we agree on as basic first principles. They seem to be arrived at by some, for example, like, all people are equal, seems to be a deeply emotional belief that comes from some philosophical first principles, and then you build a constitution around that. How you set up laws, judiciary, separation of powers, these are all things that seem to have really solid building blocks. But if I ask the question like, how do you fertilize a country? That doesn't seem to be a good answer. Instead, the answer seems to be that we ought to fertilize a country. Here's the theory on why we ought to do it. But what is a reasonable basis to fertilize? At what level in what size just seems to be perpetual compromise? That is, you do one, you do it in one way, you may gain something and lose something, another way you gain something and lose something. Yes and no. Yes, you're right on the politically equilibrium. There's a bargain which happens. No, because we have thought about it. I mean, like, schedule seven is a list which tells this is your union list, this is your state list, this is your concurrent list. So we have thought about how we are going to be a power. And then if you look at schedule 11, we have also thought about how we want to develop local bodies. So there is a certain design. Are we sticking to that design? Like there are problems with the design, right? Like labor should it be on the concurrent list? Good question. But you're discussing what to fertilize, not how you fertilize. Yeah, so, okay. I mean, how you fertilize and what to fertilize are fairly interconnected in the sense. There are a bunch of powers that I will have as a government. I know that I'll have these powers and that is why I want to be in this position. And that is why I want to give another set of powers to a more subsidiary government that sort of has a hierarchy lower position. So there are topics already. I mean, see the way the reason why India is India is the way our government structure works is because we've had a bunch of acts, 1990, 1995, that led to the constitution. And that is why it is so centralized. I mean, the counterfactual is what would happen if that didn't exist. Then British control would have been diluted. So that was the reason why the way India, Indian constitution centralized the way it did is that. And why we kept it that way in the constitution is because we had a lot of threat of session. We were genuinely scared of session. You had either one that is that rich. You had many different people who wanted their own thing. So you didn't want them all to run away. So we did what we did. So how you federalize is a very, it depends on what powers you have and what leverages you want. Like what do you want to pull if you want to use that power? And then you go away go go to how many layers you want and what kind of layers you want. How do you be like linguist, cultural, geographic many places in America is geographic. Yeah. I put you on my liberty in hat here. Okay. Why your answer is not sitting well with me is if you if you think about the individual as a starting point, right? Like the one person is the unit on which political philosophy is built. It's not at the level of its district or city or state, for nation. Those all abstracted levels. The level that truly matters because the only experiential level is the individual human being. Okay. Then an answer like the reason we have Karnataka as a state is simply a consequence of historical accident. Right? It's not a good enough answer because I will say something like yes, we've ended up in a reasonably good country. India is at a peak as opposed to you could be in Myanmar or you could be in North Korea or we could have worse outcome. So there are many more values around us. We're on a peak. But then with my liberty and hat on, I would say there are many more peaks. There are taller peaks and if what you say is true, Abhishek, that we could have a much brighter world as a consequence of fatalism. In what direction should we move India further federalize it? Such that we end up on a higher that higher peak. And part of that question in that question is baked the assumption that there is some way to federalize. That is if we had to if we had the right dispensation at the center and all the states and we could get parliament to come back and revisit this question because they all agree with you that federalism is a good idea. They would re-fetalize India in some more meaningful way. And what is that? I mean, I know if I realized a certain amount of this in when we did the 73rd and 74th amendment and had local governments, we haven't empowered them properly yet, but we should. That would be by the federal. That could be higher peaks or whatever. But we don't know how to. I mean, kind of know how to. There are lots of problems associated with with devolving power. All right. See state governments or state governments because the central government acts in a certain way with state governments and now that you have created a local government, now the state governments act the way the central government acts. Yes. With them. So it's dramatic in that sense. That is one of the biggest red gardens, having better federalism at this point. We do not know. So in the GP, grampant, like in the panchayati raj system, we do not know which layer of panchayati raj is also pierred. So we have three tiers that like we have the Zilla block and gramp. We do not know which show the levels have what powers. We do not know. We do not know why those powers are there. If you look at some of the items in article, sorry, schedule 11, you'll be like, why are these items there? So we do not know why we put in those powers. We do not know why we've given some people some powers, but we have created these said. We've done the right thing of creating governments. We have to now do the right thing of giving them powers and one that's the way it will hire peak is how I would. Let me look at Germany. Power is at the communal level. There is Anton's in Switzerland. Same thing. America. Same thing. You look at Canada. Canada is a bit weird, but it's also the same thing. You have made sure that you have given powers and functions and the localist government possible. Whatever it is, it may be. I just want to see if I'm right about this. When you say give them money, what you mean is allow them to generate revenues. Sorry. Yeah. I might say it is also very Indian in the sense that they give them money, but they should be allowed to tax properly. Yeah. And I guess taxing at scale is a argument we can have. There is a fiscal fetish, more argument of where should this tax. I mean the incidence of tax fund we always at the local level. Maybe I don't know. Some taxes may be best at the local level. Some taxes may be best at the state level. Some taxes may be best at the percent level. Two associated questions. One, given this, how do you feel about GST versus previous tax norms? For example, the fact that India has a planning commission. And so there is a pattern. Yes. So we had a planning commission. We have no who decides on it. I will just replace the planning commission. We have a finance commission. How do you feel about this? Is this reasonable that there has to be a commission that then set figures out who has to get how much money? We have state finance commissions as well. Yeah. So it's reasonable that they exist because somebody has to figure out how to cut the pie. Should the pie be very different pies everywhere, I also think yes, because the problem is we are a bit weird when it comes to fatalism and most other fatalism that are really well designed and functioning are very, very rich. We are right. We have our own fatalism. Our style is good. East at GST is a good thing. It has made a lot of things more efficient. Has it sort of watered down state autonomy kind of? Because it is better than the previous system, but it is not in any way improving fiscal autonomy of states. I'm not in any way. It is not meaningfully improving the fiscal autonomy of states. Correct. And I think that is where we need to think about state should be borrowing however they want. State should be spending however they want. They should create their own budget rules. You may have an overarching cover. You may have that. And then when that happens, you can have that. See, you need to design instruments which have effective compliance, built into them. There has to be self-enforcing. These rules have to be self-enforcing to a certain extent. But we don't do all that. We have to think about the design will get better. But I think we are at a better state than having, I don't know how many taxes to pay on. If you look at a bill that you get with like a menu, cost item of taxes. So I want to push back on this. One as somebody who is an entrepreneur, running business, a business across India. Big five different cities and five different states and want to run a business used to be extremely complicated because of the way the tax structure was earlier. And a federalized tax structure has made that easier. There are lots of gripes with the GST. But compared to what we had before, hasn't made it more difficult. If we follow through on your way of designing the world, each state would have their own system of taxation. No, each state would have revenue authority, revenue autonomy. I'm not saying that they should have different. We can have it.
They can have similar designs, the same design, but they should have a say on how these rates work and how I can lower and increase rates. I don't think, I am not proposing something like everybody's special and therefore everybody needs to have their own thing, state governments. I am proposing more of a, I need to have some agency as a government. You made me a government, give me agency. That's all I'm trying to say. So GST by itself is a very, very good thing in the sense. There is a lot of efficiency which is come in post, the introduction, but there is still, like you said, there are better peaks to climb, you have to climb them, right? That's it. Okay, in your proposed model, in a more idealistic federalist India, would Karna Takao, Maharashtra or some state be allowed to charge higher tax, for example, on particular goods or particular services? Yeah, then my argument holds because then as a business, what you have to deal with is multiple jurisdictions, each jurisdiction having their own higher rates doesn't mean, look compliance framework cannot be compared to a, compliance framework. Can there be a company? See, you have a lot of compliance frameworks which can be put together. See, in America, you have different taxes that you're paying. Are you telling me that the tax system of America, like a state can effectively enforce different rates in different taxes? It's not like compliance is broken in America, is it? All I'm trying to say is you can have an effective accounting strategy which sort of accounts for you, you know, the guards and the guards, which sort of make compliance easier. Your just, your grip is compliance, not the design or not the rate. I think that's how I've been doing it. I think two reasons, like, it's done compliance, you're right. Like I remember, the used to be a world where, every time a truck had to cross a border. That's all the madness. You agree? That's all compliance madness. It's not the design madness. Can a state have separate compliance? So, for example, filing norms. Can a state say that these are my filing norms because I am the one imposing the tax? I can decide the filing norms to be separate for my state versus another state? It is like that right now. I mean, if you look at state, how it states collect their taxes, yeah, it's like that right now. It's not great. There has to be some rationalization of these things. I agree. There has to be a standardization metric and how you report these taxes have to be rationalized. But that doesn't take away from the fact that these taxes should exist or not. Like that is a completely state government thing. Whatever, the government's thing. Local or not. Then a slightly different question. You want to fertilize fiscal policy? Yeah, to sum to something. To evolve. People, I say, yes. Why not monetary policy? We are a more, yeah. So there is after trade, defense, foreign policy, I'm at monetary policy. I'm there. I think monetary unions work very well. I think India is a-- I don't think that that is a coordination problem which will lead to a lot of different-- every state-- it's a-- I have to start thinking a little bit more. It have to be a bit more dreamy, I guess. But maybe I'll let me think about it a little bit and come back because I-- don't think coordination problems get better to solve if you have separate currencies within a country, which is as poor as India. I don't think that would be a good thing. I mean, some places monetary policy has not worked out as great if you have a monetary union. Like the CFA, for example, is not-- it's not doing that great, but monetary unions, many places have worked. I mean, euro being a very good example. So I don't think just because you have a single currency, I think India has coordination issues, which can be effectively solved with a singular monetary policy. The answer I can give you. But let me think about what would happen if you have 28 different currencies, for example. Yeah, or interest rate setting or whatever. The weird thing about this is the subject. The more thing that I've been looking at inflation in India is this. A lot of difference in the way inflation behaves in many different states. Why is it this different after you account for trade-- generally-- so if you take away-- if you control for trade differences, trade costs, then you should have effectively similar inflation rates, but you don't think India. Why is that the case is I don't have answers to. OK, so the thing with this is a subject. To use a federalism, I went digging to try and figure out how I rebut you on the idea of federalism. It's that there are almost no serious thinkers in the world, who have problem federalism. The number of people, especially in 2026, who are writing, publishing, anti-fetalist positions are very, very small. And so what I'm trying to do, I think, is just to find some first principles that are breaking. So here, what I would try and do is why do you think that monetary policy should be federalized? And what about-- so it should be at a federal level. And what about those first principles? Can I not carry forward to fiscal policy? That's sort of what I'm trying to get at. So I think, OK, maybe if I were to have some time to-- but OK, you can come back on this. Yeah, we can come back on it. But I think, yeah, we could have different currencies. But then the thing is that we should be having effective capacity at every state, the think about monetary policy and control policy properly. And in a way that could happen if we are a lot richer. That's how I'm thinking about it. But I don't know if I-- yeah, let me think about it. Slide shift in gears. This got me thinking, as an extension of my last podcast with Pranay. I don't know if you listen to it. What does it mean to be your citizen? Now, for the longest time, until I thought about this, I just said, yeah, I'm an Indian. I'm an Indian, right? That's my citizenship. I am an Indian. But it's also like, as a nationalist, I would say that a nationalistically Indian, whatever that means, people have strong feelings about belonging to a subgroup. And that subgroup typically is the nation, right? It is at the centralized level. Americans will say that American, Germans will say that German. Very few Indians would start with I am a Maharashtra. Or rather, the identity that I am an Indian seems to be a larger umbrella over the I'm a Maharashtra in a umbrella. OK? Now, if I start there, and then I say, OK, so I'm part of this nation, India. And my relationship, my contract with the Indian state, is that it guarantees me some things, right? In your example, it will be defense. I have a single government negotiating foreign policy for me. I have a centralized monetary policy, right? These are all things that are given to me as a concept of my culture. So my culture, pardon? I have a stable currency. A stable currency. Yeah, fantastic. OK. But because there exists this second level, a state level, there are also some things that I only get if I stick around in Karnataka. But then if I hop over to Maharashtra, I don't have those things anymore, or I have different things. It could also be, for example, like a variability of toilets, existence of footpaths, right? These are all things that because they're happening at the most local level possible, it's not really guaranteed to me as a citizen. That is, as a citizen, I have access to collective defense. Like that public good is available to me. But the public good of, for example, footpaths are public good, but OK, they are for that community. That public good is not guaranteed to be available to me. Am I making sense? If you could tell me again, if I have the identity of being an Indian, I have a contact with the state of India. I'm presuming part of those contacts to get a bunch of things, right? Like that's the given take here. Some of those things are certain. I'm certainly having my borders defended. I'm certainly having a standing army that is going to defend me in the instance that a neighboring state were to attempt to inflict war on us here. But there are some things that are not guaranteed. It's heterogeneous when you look at it. The state level. Correct. What are you getting at? And it's homogenous if you are just in there. Correct. OK. So the further question would be something like, I would argue, as is a way to push back on your idea, that that is not OK. My identity as me being an Indian should guarantee me the same things that somebody in Punjab gets, somebody in Bihar gets the-- that's the whole point of the contract. The whole part of the contract is that somebody somewhere else is not getting a better deal than I am. Simply because they have an additional level of governance. The state level that is giving them stuff that I'm not getting. Whatever that is, whatever the public vote is. Interesting. Maybe I ask you a question in response. Then-- so you're looking at specific public votes. They are not the general gamut of public votes. Correct. Why not? Because the heterogeneity is might just even out. There might be something there. It's not here. There might be something here. That's not there. Even out. Why aren't you looking at it that way? You could. And I don't know if there's a right or wrong way to look at it. But I think it matters that in the sense that for somebody who lives in an impoverished state, a state where per capita GDP is lower, the resources available to that particular state government are lower, whatever the reason is. For those people, it matters a lot. Because they are looking across at other Indian citizens. OK. So then-- That's just-- There are lots of differences just generally endowments based across India. And I'm not talking like resource endowments. Governments try to fill the gap of resource endowments by providing goods. You Punjabi governments would concentrate on how to make the rate production better. And Tamil Nadu will try to make rice production better. Do you want both governments to do a worse job at both things so that it's standardized? Is that what would happen?
happen if because they are trying to solve a knowledge for this. And there is a specialized knowledge for Lungu there. Here it's different. And therefore this difference agrees and exists. It's not because governments want to give you something better. And therefore I don't think I don't think government are thinking about it. And that how do you say it? Very I don't think so. I think each state government is worried about their own populace and their own lesion. Yeah. But this leads to discipline. Yes. Outcomes across geographies. I don't think yes. I don't think that's bad. I don't think as long as you have welfare outcomes that you're hitting, that's not bad. Because you're solving specialized problems to get welfare outcomes. It would be bad for a wheat farmer and Tamil Nadu. Is that why yes. I agree. I agree. There is that is the problem with like there is no best solution to this. We are at end best solution words. What is the end best solution rather than what is the first? You cannot have. We cannot have equal focus on both things. And therefore what do we do to ensure we cater to a set of problems that leads to better welfare outcomes as an government, right? Not I want the same sort of benefits to both farmers sitting in. I don't know. I think it is solving for knowledge problems rather than giving out standardised public goods in a unitary system. What would they would still be disparities there? Between a farmer and Tamil Nadu and a farmer and a job, what would account for this? Geography. Sure. Sure. Like that I understand. I'm talking about at least from a regular standpoint. Just they have the same access to welfare schemes, same access to the law. There are some things need to be a little more for certain. It's the same kind of outcomes. Do you want same outcomes as the question? Then if you want same outcomes, then you need to provide unequal inputs. Right. But this is for the socialists, no? I don't know if it's socialist, but think about it. If I give the same amount of gas water electricity to two different farmers, one person is trying to grow rice at 43 degrees and other persons trying to grow at 25 degrees, who will have better yield? Do you want them to have different yield or do you want them to have same yield? Is the question that, right? That's why I'm not trying to be socialist here. I'm not also saying that the government should provide this. They should provide access to this. How you afford it is a very different thing. I'm not trying to be socialist in that sense. I'm not dictating how much fertilizer you should consume to get how much yield. I'm not telling you to have four and a half cows. No. Just in your particular example, the Unitary government would have a formula that took into account. Temperature differences between two regions. I mean, that seems like a trivial thing that a good central planner would. Yes, but should they be doing this? Should why would you want to do this if you have better problems to worry about? Why don't you delegate this to a more local government is what my argument is there? That's all. Sorry, I want to go back to China because it's a decentralized. Okay. A unitary decentralized government would they be able to accomplish this? Yeah. Well, right. So, but they can also not like take this away in one go. That's not really. Of course. So actually, what this is boiling down to sorry is you don't you're not saying that federalism is the is a it seems like it's solving a political problem more than a solving of physical problem in the sense that if you're able to decentralize as well as you're able to evolve under a federal structure, then outcomes will be about the same. Yeah. Yeah. Yeah. Fetalism outcomes are not easily trackable. That's the problem. Right? Like, you don't know if federally organized countries are more corrupt than non federally organized countries. There's no clean evidence that shows this. There is no nothing that shows that they have better growth rates than others. There's nothing that shows they achieve better mortality. It is all contextually dependent. How you're designing your institutions is how you get outcomes and you and feldism is a nice structure to design your institutions around. Yeah. That's all. But just to some being frantic, but the because on one side, what you can have is a unitary government who decentralizes. Really well. Okay. So China would be my example. And on the other hand, you have a federal structure. The difference between these two systems seems not to be efficiency in ultimate execution or outcome because in theory, it is possible to imagine that in China, a farmer in one part of China could have a contextual solution to them. And a farmer in other part of China could have a contextual solution to them. And so they're accomplished without a federal setup, but with a decentralized setup. Uh-huh. And hence, it seems like the real value of feldism in your claim is the ability to have political representation that is representation. I'm not being coerced by some federal government sitting in Delhi. I'm instead being coerced by a federal government by a state level government sitting in, you know, Bangalore or I am electing a local government who is sitting in my village. Yeah. I can make sure that not in power the next time around. Yeah. That's all right. And so this is not an efficiency problem. That is the real flame is not that unitary governments result in worse outcomes because they can decentralize. They can follow the principle of decentralization and still accomplish the same outcomes. This is actually a case in something like individual rights and autonomy. You're saying that it's better for for liberty that we we federalize. On. Yeah. I mean, there are, there are a bunch of nice things that would come out of having federally structured countries and this is one. Yes. Yeah. Sorry. The only thing that comes out of it is that is this because decentralization accomplishes the rest. See, initial conditions really matter. Right. Like why you became federally organized really matters. Can't be that I can be dictating the same thing for Macau or for, I don't know, thinking of a small country or Singapore or whatever. I don't know. See, like, I don't know. I don't see. I don't see this as a, here, you should all become federal. You have federalism. You make federalism better if you have it is what I'm trying to get at. It is not the only thing is not representation. You have federalism because they were initial conditions that led to it. And now what do you do with it is the question. Understood. Okay. Under this whole citizenship bucket, the next part of this is secession. So broadly, you would say that people have the right to self representation. I should be able to have my own government of choice. And if I so choose not to be part of the union, I should be able to sit from the union. That's the advantage of federalism. Right. That when we feel like we no longer belong with the union, we get to take a step away and be part of our own country. We get to sit from the union. I'll pause you if I'm miscalculating. I, it depends on the design, how you design your federal set up. Right. Like, how you do secessionism is also something you could design. And why you do it is also something what could design. I, I can't think of better responses than that. In the sense, I think it really depends on why and how and what you want to do. Once you do this because it also creates, I mean, like, it also creates a bunch of problems once you see it, right? So one has to, like, I don't think our institutional set up allows for that. I don't know if any countries in institutional set up a lot. So I look this up. I think the United States also now doesn't allow it. At one point, they did like when the confrontation was cool. But it's not cool anymore exactly in an ideal federal set up. What do you think? I could question. I really don't know. I really don't know because there are games to scale. Right. And now you're taking away the gains to scale then should you be taking away gains to scale? So should the whole country exist in the way this is a question that it becomes a, the setup makes sense. It's a part make up the whole. Now we'll take away a part. Does it ease it the whole? I don't know. Yeah. So I really have to think of you've done the work on president's role, but also think about instances like, I don't know, Kushnery is an example. I don't know. So we spoke about whether the state should have their own constitutions, but, Kushnery did, if I'm not wrong, or they had special provisions in an additional constitution that had some, and then of course with the obligation of three seventy, we've removed that or at least it's a completely hollowed out constitution. Now of those two directions, that is, we, we bring Kushnery to the level of all the other states that we have in India, or we bring all the states in India to a level of Kushnery, that is, we give each of them a constitution, and we allow for them to have more autonomy, etc. When that happened, when three seventy two plays, did you have strong feelings about this? See, as long as, no, as long as you have a good representation, I'm okay. There was no representation at that point in time. It was under President's rule for a very, very long time. So I think, of course, I wanted an elected government was, and that is something I have feelings for. What if it was a elected government, but they had succeeded from the Indian union? Because I've been going back to the, it's like you said, it's a social contract, right? Like now, people have entered into contract. And what are you doing to those people who don't think this contract should be broken? Is the question I'm trying to pose, and that's why I don't know the answer. Yeah. Because, yeah, cool, you can have a, there's an instrument for a session. And then what, what, what happens to the people who disagree with that break of contract? As I'm on a disagrees, I can't release. But it's both sides in rubbish. So you also have on the other side, people who act, when you say social contract, nobody in that state or any state that wants to succeed has actually lifted a pen and signed an agreement. They have, by their parents, they just, like, human life. We've been forced into being in NINTS in that sense.
And so when we say that we were free to the social contract, we're just saying a collection of words that places on your burden that you didn't really consent to. So in that state, presumably there exists people who do not want to be part of the larger Indian union. Yeah. Okay. And for them, the argument would be the session should be allowed. It should be okay to exit the union. Yeah. I agree. I see there is a problem here. See, unless I don't know how to design effective, I don't know if anybody has thought about an effective session design into a union of state's framework. I don't know. I mean, I have no answers to this in that sense. Then a slightly deeper question would be. Is it because that why you need to be better is a question I'm thinking. I don't know. I also don't know there. Right? Like, what if somebody doesn't want to be a citizen of a certain country and then what? Like, they don't know. I don't know if you can just become state. You again have to make designs happen where the individual skin, succeed or the fronties and that still also doesn't quite exist in the way. Yeah. So this problem exists even if it's you. It is what I've get to get. I know, but my feeling on why this doesn't exist. Why there's no standard way to succeed from any union anywhere is simply because the federal government doesn't want it. It's not a design problem. If in principle, we have to design a solution to this. In principle, you could design one. It doesn't exist because at a federal level, we simply don't want for this to happen. Yeah. Yeah. The question is then what? Right? Like, that's the problem. I don't know what happens once. We have moved from states to individuals and it's the same problem just micro. Right? I don't have answers for this. My point is being something like, if we want to maximize individual liberty autonomy, then we should allow for it. We should allow for people to be able to vote their small geography out of a larger union because they're no longer going to be part of that larger union. Because it is coercive in some way. They want to set up their own self-government, etc. Yeah. There are people who have done that also. And that hasn't really worked out to have that. I also probably is one of the reasons why people don't, governments don't want to allow people to just. It hasn't worked out well for whom. The people don't be called votes. But that's their, they're got given right. To end up in a country that doesn't work well is their. Yeah, I agree. I do agree. There is that, there is a certain personalistic angle to it. I will concede that I think governments in that sense, you are giving a part of your liberty to a government so that you can have collective welfare. Yeah. And then as an extension to this, let's say that you have a state, okay? And the way to elect representatives in that state, that is your state level government or your local representatives, is non-democratic, right? Sense. In the sense that it's either a poor democracy. So, election, elective rights to vote are given to very small numbers of people. So for example, we exclude, let's say women from voting, right? Now, one way to look at this would be to say, yeah, cool, that's a state problem. That is, the state can figure out who they want voting or not voting for them. This is not something at a federal level, central level, we worry about. All the second way to do this is to say, no, no, we have an election commission and we have rules about this. And the elective process that every sub-tier follows is something that is centrally decided. I'm not discussing India or the US or any special. I'm just asking from a, if you were to design, if you think about meaningful design, is this something that we want to federally guarantee that here at a central level, we're very clear that- I think the right to vote is a federally guarantee and states have to follow it. Okay. When we started, I spoke about slavery, okay? And you said, on a slavery level, states have to decide because this is normative. We shouldn't centrally start outlawing slavery state. Yeah. See, that's the thing, right? But the right to vote is then at the same level of right, you know? So yeah, then see, usually, federalism also entails free movement of people. If there is that kind of a problem. Yeah. So yeah, sure. I mean, do it, but expect consequences is what I'm trying to say. Yeah, that power is like that, then yeah. I don't think there is any, yeah, sure. I mean, if you want to exclude people from, you know, if you want to disenchant and franchise people, you may do so. But since the federalism setup will allow for movement of people, you expect consequences of disenchantment. Yeah. That's how I would look at it then. Uh, this is the vote with your feet argument, right? Like that. If you don't like it, just move to another state. Yeah. My only struggle here, okay, is in principle that sounds right, in principle it sounds, but you ask me what it will take for me to leave Karnataka, where I live, where my family lives, where my dearest friends live, I know the people across the road, what will take for me to leave Karnataka and go somewhere else? So very high bar. Yeah. Yeah. And so what you're balancing is not actually the freedoms of one state versus the freedoms of another state. What you're balancing is the unfree dames of my state and my own personal choices and what is the threshold for me to break away from that? Like as an example, let's say abortion rights in the US, right? They're quite varied. This single state has different rights on abortions, timeline for abortions where you can get one, what the legalies, etc. And it's not like women have en masse moved out of state. Women who very strongly believe that for them shopping still exists. Which is like people will still move to get abortions. Yeah. And so, uh, two things there, one, it's expensive. Like that there's a cost involved to having something that some people may presume is a basic human right, but on the second level is, uh, it's at least temporary in the sense that I can pop out, have an abortion and come back in, uh, at some point versus more permanent things like if I own land and if you're talking about farm laws or whatever, then I can't take my land and go to another, uh, or if you have, you have land use regulation. Yeah. There is a real risk with governments. There's a real risk with any social contract. Yeah. Right? And trust is therefore a very important part of how a government functions. If they lose trust, then they're not going to be in government or not just a party. I'm just going to say that your argument is that they get voted out at a state level. Because what does pushback on was saying something like, no, no, uh, that's why it's easy to solve it at a federal level. That's my point. It's easy to solve because you have to convince one party right at the center that he, this is in the category of social evils and we want to ban it or this is a good and we wanted to be across the country. And the way to arrive at a good solution is much easier. Okay. Federally. Of course, the pushback, of course, the way to arrive at bads or evil things is also just as easy. But I don't know, when I was reading through, I've tried to find like arguments to really sort of annoy you with this felt like the deepest. Yeah. But again, that's the thing when you have governments that are democratically elected, you have ways out even if you listen Frances, people is the solution there. Yeah. But that dichotomy is still of like, oh, you force a democratic representation. Any problem with any, any social contract is that there is always a real risk of them doing you dirty work. Right? It's a, it's a, it's an individualist as a state and that's an uneven, it's an uneven play already. That's what laws are trying to even out and once that's the balance and there's always a real risk of imbalance. Yeah. I think that is what you're getting at. Not that federalism is the problem here. Yeah. Yeah. The way to, yeah, the way to even out the scale is like, for example, corruption is easier to solve at a central level than across so many individual states. The transaction costs is your at a central level than across so many states. I'm saying if I have to fight the fight, it's easy to fight the fight at a central level than across individual states across so many states. I don't think so. I mean, I'm going with corruption. Sorry, it's stuck as a, yeah. I think corruption is just, see, corruption exists because of a lot of reasons. Corruption reduces because of generally better monitor devices and the will to monitor. Now how you cultivate those two things is up to you as a state. On the corruption, yeah, at the central level, it can be at a state level. Now I think at the state level, it's easier because you have institutional context. How corruption works in Conrad Akka may be very different from how corruption works in Tamil Nadu. And therefore, you need localized solutions to localized corruption. So the fact that you have to focus on corruption may come from a federal level. But how will you solve it has to be bottom up, not top down. A recent example that my co-founder and I have been through and so is coming to my mind, okay? We imported something from another country that I arrived by ship at the Bombay port. Bombay is not in Conrad Akka. I am a citizen of Conrad Akka. I live here, I vote here as part of the federal structure in theory, my local representative is the Conrad Akka government. Yet I have to deal with the bureaucrat who is sitting in the, because there's no way for this good to arrive in Bangalore if by ship it has to arrive at the Bombay port. And so I do have a corruption problem because there's a piece of shit there who wants a bride and nothing I do with my local government will help me solve that. I have not enough in an incentive to travel borders, go to Maharashtra and then lobby them to try and solve this problem. But what level, I'm saying that if corruption, we will agree it is a social evil, we want to put this in a bucket of bad things. Once you've agreed that this is in a bucket of things that are good, things that are bad, why are we trying to solve this at a state level? So who gets to knock at their door of
of what government is, I think that is the problem. This is a jurisdictional problem, but you are getting at it, right? I think it is again a legal design issue rather than a, do I solve it at a, Maharashtra could solve it at a Maharashtrian level and Conradika solves it at the Mah, Conradika level and then you have no problems because then as a person domiciled in Bangalore, I can go knock at somebody who solves these issues in Maharashtra, right? It's not a I want us, there has to be a central nodal officer for corruption, that's not really the solution. - Okay, I think I'll do one final line of questions and then we can break post which we'll open up for audience Q&A. What is the incentive to be a politician? So think about the people who represent us, right? Could be at the municipal level, state level, central level. These are all people just like you and me, they're common citizens, they get paid out of a common pool, they're clearly not gonna become billionaires representing us in various parliaments or whatever. So unless they are corrupt, it's not really money. If you want to devolve power and you want to say everybody has very small buckets of things that are responsible for and we want to split, then it's not power. What is the incentive for people to become powerful? It's just lesser powers across every country. - Yeah, you know, good political set up. - So I think Ferdinand is a very nice pipeline to look at politics as a carrier 'cause you will not be a ranks properly. Rather than I want to become an MP today, that's how it works in India right now. It will not work if you had seriously devolved ferdinism with proper local elections in the country. You would then have to move up the ranks so to say, right? I think there is an incentive to become a politician because then it's just looked at as another job and another profession. Rather than I'm in it for making money. - I want to disagree, premise. The moving up the rank argument seems more likely in a unitary system than in a federal system. - I mean a decentralized unitary system. - Yeah, a decentralized unitary system because usually in a good federal system, you have a lot of local representation. I have a local party who's very unlikely to be a national party. - Yeah. - So it's good. - No, so I'm saying that-- - People want to cap at, so I'm not even thinking about national politics as the peak of everything that is political success. I'm looking at possibly becoming the finance minister of a very, very well-entered state. - A well-entered state, yeah. - The. - The government's a financial-- - I'm gonna post it here. That we want the brightest possible minds walking into politics because when they do our lives become better. Right? This I think makes sense. And it's a wide competitive field. You could rather become an entrepreneur, you could go into working for a large corporation, leave the country and go work somewhere else, there's so many other possible options. And if you build a federal system and you have to represent your community at the most localized level possible, the very best you could do is be part of the state government. Again, because it's very likely that you have local representation, but those political parties that are locally representative don't really scale up to the national level. They could be part of broad coalitions but moving parties is really hard. And knowing that, knowing that my path to representing the country at the national level is difficult, that's point number one, but point number two, also that any role I'm given anywhere is super limited. That is, there are only so many things I can do with that role. It means I'm less incentivized, I think, to even get into politics. So there are some studies in America which show how competitiveness and local elections are what are the determinants of it. One of the competitive, like what influences turn out A and what influences number of people filing nominations and what influences competitiveness between us. It's financial incentives. You have, you up to salaries, give them power, ensure that they have a decent budget. You will have people competing. That's the incentive. It's very simple in that sense. We can't, it's a very hard solution, but it's a very simple way to think about it, very hard to implement is what I'm getting at. It's just trying to have power local government and give them better money, that's all. Yeah. We have 260,000 local governments in this country. Going into polls should be going into polls every four years, five years, whatever. The problem with financial incentives is that automatically the gateway to corruption. In India today, the political incentive beyond some degree of power is financial incentive. It's not that you get paid by the state. It's more likely that as a consequence, I think the position of power they would imagine a world without corruption, that's the problem. See, I think if you incentivize, so you're saying there is always going to be corruption. No, no, I'm saying that, okay, in today's world, a lot of politicians get into politics because corruption is an easy fact, which means I'm going to make money. So underpinning the incentive for corruption is financial upside, right? Right now. Yeah, okay. But that's the flywheel. So as an example, I. But then what? Yeah, so let me finish. For example, I try to get a driver's license, okay? And if I go and follow all the rules in Cardatoca, at least in Bangalore, you can't get a driver's license. It's not possible. The way you get it is you have to bribe the guy. Okay, now what's happening here is there's a whole chain of the rights right from the dude has been appointed at the top of the RTO to the local peon. Everybody gets a cut and so everybody is in on the system. When you have strong financial incentives, there are incentives to gain the system to be able to reap those financial rewards. As of this morning in India, it's corruption. But if you up the financial incentive to become a representative, for example, instead of earning, I don't know, 50,000 rupees a month, I'm going to earn five lakh rupees a month, it increases the odds that I will be corrupt in some way to be able to accomplish that or to win that position or post. Because I still don't, I can't make enough payments now. Of the five lakh I receive, I can still spend one or two lakh rupees to pay other people who help me come into this position. Yeah. And so I don't know. corruption. It depends on what. I don't know who's current be corruption. So for example, if I have to buy, sorry, and liquor for a population, then I'm making an investment for an hour. Just saying that I am. So essentially, then the problem is the incentive. If money, the incentive is. There is an optimal incentive that we need to scale to. And if we scale beyond that, then it's going to lead to rent, like rent seeking sort of. We just need to find what the threshold is and then we make that as the incentive. So then we have the effective level of competition such that people actually want to get into politics and actually compete. I. Again, you see, the imagination is still that there will be corruption. Yeah. We have to take that into a certain extent to imagine how competition can exist. I think local politics in India is really broken. We need to fix it. If we want better outcomes, which essentially also mean lesser corruption. Yeah, I can buy that. It's a very easy. That may fix, but it's very hard to implement. Yeah, because there are countries where corruption is not a fact of politics. And so we could see ourselves emulating that. As a final question on this arc, what about cronism? So usually, business interests get muddied with political interests. It's part of donations, etc. The more local you go, the more likely it is that the local business. Who's not in Ambani and Adani, but still quite a large local business. may play an active role in the. election of a localised politician. Is this something that we want to be concerned about? I've been right now in India, except two states. Local politics is partiness. Should be partiness. So, are you local politics is partiness? Partiness, okay? You don't compete on a party ticket in the local elections. You don't have party-based IMCPM. I mean, in Kerala, there is, in Vispengal, there is, because of historical reasons. But in no other state is that the case. So cronism is very diluted, but it will exist. So, the guardrails there have to be some sort of a monitoring agent, which is empowered at a higher tire than. See, we are essentially trying to devise monitoring agents, such that there is effective functioning of governance. We cannot make the monitoring agents, the people who implement policy also. That's what happens in India. Yeah. Okay, we can't do that. If we want effective democracy and representation, we have to separate the administrative implementation apparatus, which also is usually the monitoring apparatus from the political apparatus. Political apparatus tells these people what to do, they do. Right now, what is happening is they do because they get transcendental wisdom. And the monitoring apparatus is at a state level or at a federal level. Both. Okay. The reason I'm asking you is something. I say, what I imagine would happen, okay? Is a political party comes into power with the backing of some private entity who has financed the party or is a financial person or the party? Once they are in power, rules and regulations change to further benefit set private institution. Set private institution then further finances party. So, there is a large mismatch in funds, and so you've built a flybeam. Okay. And where is the citizen in all this? The citizen is. So, what's the bullet answer this? If there is enough suppression of other political voices, it becomes really hard for the citizen to even know that there are other meaningful alternatives, or that there is. option taking place. All that a lot of this. So there's never, I mean, then you're essentially saying there's never discontent. Right. Discontent leads to anti-income. Maybe instead I would say something like there is no belief that there's a metro option. There is discontent. But I'm saying this is the best that I have. And by the way, this is the Indian status quo for a lot of people. I mean, you talked to anybody who is driving an auto and mangler. This is what their answer would be. I don't care for who the politician is. Everybody is corrupt. Yeah. Everybody is whatever. I mean, one of things. So I will. It doesn't matter who I vote to, but it seems like then we as citizens are just powerless, right? That doesn't seem to square with how we have built elections, how we have having anti-income and see how we are having changes in governments and how we are able to deliver welfare outcomes. So all of that doesn't square with this one. Everybody's everybody may be corrupt, but it seems that something else is also going on. Right. So, yes, there will be communism. I agree. But I also think that there will be effective representation if you give it the room for it. That's the problem. I mean, we have 20, 25% seeds going on contested or with unanimous voters in mispling or the Lengana on the Madesh. We are incentivizing on competition in places like the Mada Badesh, Chittisgard, Telangana to a certain extent. We are giving money to local governments. So that they don't have elections. Is that corrupt? On that opposite note, we're going to take a quick break. And when we're back, I'll ask you questions that they have for you that I made. Yes. That sounds good. There are more questions than that people in this room. Bad. One person. We have succeeded. You're feeling all double-cum. Looking at all the people. Okay. Hi, Abhishek. Welcome back. I am now reading questions from the audience. Here's a bunch. Some of them are really interesting and most of them I haven't thought of myself. So I'm glad we're doing it in this format. Okay. So the first question is, I'm reading and then I'll try and paraphrase if it gets too long. There was an interesting discussion about competition towards the end. I wanted to pitch off from that point. Generally, in the organization of the state, there are institutions outside of elected government, which act as checks and balances on the power of the elected government. For example, the judiciary or the CBI or FBI in India or the US. If the goal is to maximize social welfare outcomes for citizens, the functioning of these institutions is critical. Is it the case that a more unitary government will be more or less susceptible to such checks and balances? I can phrase this question with a better example. The FBI opened an investigation against the sitting US resident. However, it seems unthinkable that the CBI would do the same in the Indian context. Would a higher degree of federalism lead to a different outcome? I have not thought about policing as much, I guess, but there are institutions, of course, outside the elected government that do the job of monitoring. Some institutions monitor at the state level, some do it at the central level. Why is it like that? It's because of jurisdictional reasons. Having a monitoring device, which has, which is at the central level, essentially allows for cross state jurisdictions to be handleable easily. Whereas within state, once controlled within state issues, quite well, whatever monitor them quite well. So having more federalism, essentially means you can have better monitoring devices lower and lower down. But do you need so many also becomes a question because you have by electing the light, having introducing a representation at the lowest, lowest, obviously, a sensible level created some sort of accountability, which is self enforcing. So I, yes, if the answer question to is a question about engagement with politics. So I'm going to paraphrase what this person's asking, but the question is that in a highly federal system, what we anticipate is that people will have deep engagement at their local level. They will turn out to those elections in larger numbers and with more veracity, because they care more about the outcomes of those elections. However, in practice, that does not seem to be the case. That is, the clean is that it does not seem to be the case that people turn out in overwhelming numbers for local elections. Does this not break the hypothesis that the reason we do federal structures is because people care at a local level, but clearly the evidence is not showing that. I'm assuming this is contextualized to India. Yeah. Yeah. Then I think the answer, yes, I agree. But that is because at the local level, we have disincentivized being in politics so much that there's no interest for the local electorate to even go and show up and vote somebody. That's how I vote. In other countries, it is better. Is it better? Yeah. Much better. Okay. Again, I don't have the numbers for this. You know, it's open-factor. Yeah. It's me. Yeah. Okay. Question three. How far to federalize? That's the question. So, for example, how to decide? Why not federalize to the individual level? That is, someone to represent that particular weed farmer in Tamil Nadu. How do you decide how many levels of government have to be there in the federal setup? And why not go all the way out there? So, in India, we have three. In some countries, you have two. In some countries, you have four. I think collective action problems become a problem if you essentially become an arctic. That's what this question is getting at. So there are gains to scale for providing public goods. And that is, wherever the gains are maximal and the costs are the lowest, that intersection is where I would start. That's a very hard measurement problem. It's a very easy theoretical answer. Just so I understand what this graph looks like. You're saying at the completely unitary side of the graph, the costs are too high. Then the costs start to drop as you continue to introduce more levels of hierarchy. However, there is such a point at which adding more levels again begins to increase the cost of having this sort of a equal. Yeah. Question four. This is jumping off to my example about a ship coming into a port in Bombay. So the question is, I live in state A, which is some part of India. And the state policy of state B is directly negative, or negatively impacts the people living in state A. So the example provided here is that drug manufacturing happens in particular states, where the regulation is fairly low, allowing for spurious drugs to circulate in the national market. And as a point here, one of the core tenets of federalism is that there should be a national market. And so if there is a national market and there is no way to invade the movement of goods and services across these borders, then these curious drugs do move across borders. Would not a centralized system be a better system to solve something like this? I want to add an example here that I wrote in my notes, but didn't bring up, which was factories being set up on the borders of states, such that my polluting norms are fairly low. But the pollution that takes place, for example, air pollution, does go across the border into the neighboring state, right? So this is that sort of bucket of issues. Yeah, so I think if I were to generalize this a little bit, like essentially with, if you have heterogeneity in rules, you can have forum shopping. That's how I will generalize the state. Do we need a centralized body to take care of forum shopping? Is the question with the case of drugs, it's a standards issue. And there I am not, I'm not entirely sure, but there is, there are standards that are centrally set for the production of drugs. But I don't know how the distribution works. This seems to be the problem here, right? Should it be better to have a, this is, I don't know if a centralized body will help with the monitoring of pharmaceutical, whatever, farm up producers. You need to have better monitoring agents at the state level and the state needs to have better monitoring devices agents and devices. So there has to be technology that's technology. I don't mean as wires or anything. There has to be ideas, which is the tech that essentially drives better monitoring. That's all, rules and agents. I just think the monitoring way to solve, to address the question is a straw man because monitoring is a very important thing.
is an ever-pleasant problem. Whether you are passing a rule or regulation at a local level, state level, national level, it doesn't matter. The question here is-- It doesn't matter that in federalism means I would say that the least cost localized answer-- Assuming equal abilities in monitoring, such that-- or maybe to flip the argument, I'd say, let's assume that all private parties are viewed to all norms. That is, nobody is breaking any rules and regulations. However, the rules and regulations in my particular state are diluted. And this is a raise to the bottom. So because states compete to attract business, because upon attracting business, they make revenue, I'm going to loosen the norms for, for example, pharmaceutical companies to be able to manufacture drugs. But that does affect citizens in state B, where the rules and regulations are built to protect that particular citizen, like drug rules. But that citizen, because of a national market, is consuming drugs that has periods. Yeah. So in these kind of situations, I think having-- like, OK, maybe I'll think-- I cannot imagine how you can have a centralized monitoring agency that is having agents that are all over the country. One, I don't exactly-- I can't quite imagine how this would work. But so a state is making drugs. And another state-- it's supplying to another state where the norms are higher. Yeah, and in the other state, yeah. And the norms-- since there are product market regulations that are more than protecting the consumer and not more, this is hurting because there is a national market. So then the question then is, you have to build rules that effectively need to better monitor. Still, I don't really see how it is a strong man. I mean, maybe you can help me-- you tell me how this is-- Because nobody's breaking any rules. That is, in state A, you are allowed to manufacture that drug. Yeah, so centralized standards are all four. So I am not saying that you need to have everything be centralized or it would be like the world to the lowest first real. You need standards that are fairly centralized. But the monitoring of those standards need to happen at a localized level. That's all. So that these heterogeneities, which harm welfare, don't exist. Right. And so every state cannot come up with their own policy. On, for example, what own policy can happen, but they have to area no standard, which is federally mandated. So that's how it works with most things. That's how it works. You have to ensure that you have a central standard that is made. Maybe a follow-up then is, if the question is about monitoring and enforcement, why would it be preferable to have the enforcement authority be part of the state level, as opposed to have the enforcement authority be part of a federal level and decentralize? So the easy answer to this would be is that policing is a state subject. But the reason why I think policing is a state subject, would be that, see, essentially, how norms are followed. There are formal and informal institutions. So norms are generally informal institutions. They are very, very different in different parts of it. So you need to have police, that is a police force, that is contextually relevant to the citizens that live in that state, in this case. So in the same way, enforcement also becomes, to a certain extent, a state matter. You can have central standards that they are trying to enforce. But having it-- I see the problem with what I'm saying, also, that you may have different levels of enforcement that way, which makes it problematic. Then-- Yeah, you're right. That there is an incentive for a particular state, not to enforce, because it makes it more likely that business was settled there, given that they're not enforcing. Yeah, so in the end, if you were to, let's say, let this game pan out, you are essentially still going to have bad welfare outcomes, which will essentially lead to this problem not existing because standards will get higher. Or enforcement will get higher. So what I'm trying to say is that, yes, in the short run, this may be true. But in the long run, it is not going to help anybody. So either you're going to have this system not existing once it really comes to a hang. Or this problem may not be as thick as it is. OK. I also want to trouble you about the same question, but on the opposite end, now putting on my liberty in hat, I should have the right to consume a drug that somebody makes. If you started your own pharmaceutical company, and you made a drug that you believe, Cios Cancer, or I don't know, it's a homeopathic drug or an Ayurvedic drug or whatever, you and I are signing a voluntary contract. I consent to consuming the thing that you are making. And it is so that at a federal level, there exists this vague idea of norms of standards. And as a consequence, I'm being co-hosted. You and me, our free transaction is being co-hosted, or prevented from happening because of these standards. Should I not be able to go to my state government and say, look, those people at the center, they don't understand what it's like to live here. But at a local level, we want to change this rule and allow for what somebody would call Spurious drugs. But I think is my free choice in choosing a particular drug or way of healing treatment? Is that not reasonable? That standard should happen at a state level? I think in the case of drugs at least, and having a quality that regulates drugs is essentially trying to solve for an information problem in this sense. You may possess the information and have the preference to make that choice, but for not everyone, according to the state, has that ability. And therefore, there needs to be an English that does, well, have evidence-based medicine taken into account when it comes to ensuring whatever drugs are available in the market or state in general. At a federal level. That's the standards. Standards. And in this case, if you have a policy that says that this is how this fan, you may have different policies and say it says to how we are going to go about it, as long as the standard is my, that's all. Sorry, one more time to push you back on this, okay? What? So imagine that I live in a particular part of the country that has a specific kind of problem. We have a higher incidence of goiter, or it's more likely for us to contract a particular kind of cancer because of some geographical, you know, tendency that region has. Now, I may look at the federal government and say, look, they don't have an incentive or their standards department doesn't have an incentive to move quickly and legalize these drugs because to them all drugs are the same, but to my population and the people living here, it's really important because there's a higher incidence of this particular, it could be a type of diabetes, it could be whatever. In my population subset. So you, but you're asking production standards to be lowered for a drug to be released? Is that how you're thinking about it? When you say standards, it could also be testing standards, that is you have to have an FSAI stamp before, okay? So you're saying to lower the cost of drugs, you may not want to have as many standards so that net net there is welfare for that. Or more choice for my citizens, right? That they now have more choice in terms of what they want to consume. That's the thing, okay. One, I think maybe we should have done this at the definition. Yeah. The federalism doesn't necessarily mean symmetry across. There can be car votes, like you said, with all, we have special status states in India, we have, we've had a contribution for them on Kashmir, et cetera. So car votes were necessary, can we make, so you can have a symmetric sort of rules for, I mean, a symmetry is also a good feature in federalism. So yes, you can have things there, things. I don't really see the problem there. Okay, next question. You said that's Abhishek you, that local governments in India are broken. Why is your solution to fix those local governments as opposed to remove that tier entirely? Because I think representation matters, first off. And would representation that is offered to me, via a decentralized, unitary government, be worse or so much worse than a broken federal government? Can you tell me how this looks? So I would still roll up to a ballot box, like I would still be able to vote, but I would have two options on that list. I would have the option of my representative at a local level who is part of the party, so which party is being elected to power, and then the central government. There is no parliament at a state level. There is no judiciary, there are no laws at a state level, but I do have a representation. I have a representative at my state level. So you're saying I will limit your choice for some better outcome sort of a, see, I can't let that. Essentially representation leads to accountability. Contability is, I can enforcements on for device. And accountability leads to essentially better outcomes. That's what this loop is. You want to throw this loop in the dust bin and go with some other loop, which is bringing about welfare outcomes. Okay, but what is it and how can you imagine it is a very, very important consideration? That's all. Local governments in India are a good idea because we have way too many people for in Conantica. I mean, there is, we don't have, how does representation look like? How does it look like?
people does one MLA is how many what is the constituency size like it's huge is that one MLA responsible for all my political public vote decision making I don't think that's the right way to go about it so you need to ensure that there is more choice in terms of where representative is it at the local level that is estimated by a federal I think final question that we have in federal systems to what extent can a federal government reach down the ladder to help or assist some lower tier of government or a lower tier reach up the ladder to the federal government to seek assistance depending on the specific health that is offered is this does take place that the federal government for example is helping a local municipality somewhere or vice versa local municipalities reaching out to the federal government because it feels like the state government is feeling at some action then does this impact the federal nature of that government so we have a lot of central schemes that are implemented at villages in villages Mandraila for example it's this this exact thing is happening what what was so I don't see that being a problem what I do see a problem with is having such schemes to villages that don't need it is useless right why do you need to you don't need an electrification scheme in a village that is completely electrified I'm not saying the this is what's happening but I'm saying that such schemes exist and that is just bloatware basically we need to get rid of that bloatware but should Mandraila exist or should it be instead of state subject that the central government is not thinking about employment at some local village I think exactly I think I think I think having yes I think having this as a state level scheme would possibly lead to better tailored outcomes in some ways it is currently designed with a nice mix right so works that happen in the under the umbrella of Mandraila are very locally useful things but there are schemes that are not like you don't need to put a light where you don't need a light you don't need to put a water pump where you don't need a water pump or a motor or a tap and when these are concerted by central schemes it essentially looks as if somebody in the center is saying India needs X number of water pumps and let's throw water pumps it villages and make them install it we don't need those so in a sense yes I do worry about more contextualized localized solutions but that doesn't mean that a local government should not go up the center or the center coming to the local level might be the bigger problem because that's just why do you need that why do you need somebody in the government in the central government in fact sipping in Delhi looking at what is happening in another village saying yes there needs to be a light here that's I don't that's not I don't see that as these all these schemes like the Swachabharad scheme and toilets across India these all things on a centrally plan yes and they're centrally monitored also with in in some cases with the assistance of local governments saying this is how we plan this etc but maybe see we have implementation authorities that come into the mix those are another problem which I think I mean if you want to read about that is a great place to go and see how federalism doesn't work in India we have you know like we have development authorities in states which are essentially i as officers who are going to say this is how we implement state level policy or central policy we don't need that we need local legislators saying to local level bureaucrats saying this is what we need and this needs to be catered through funds available by taxation that we have given to the treasury that's how we need this system to be okay one way to push back say that a good central planner would sort of follow the same process that a state level planner or a municipal level planner follows so the way it would work I think is something like a state budget would be set aside that would be assigned to in part to some you know local municipalities would then have to solve their local problems so you give the pump example and say how many pumps should be there in India in effect what's happening is at the smallest level possible you are asking a question do you guys need a pump and if you do how many pumps do you need in what locations and that feeds back into some document that then compiles a list of pumps required and then we enact you know a way to deploy those pumps so why not do it at a federal level it seems like they would follow exactly the same process and it would still go to the most local level to ask the question of how many pumps do you need and where and why do you want the government that is that big at the center is a question then like if you want efficient governments doing delivery of public goods efficiently and what is needed efficiently then you can't have a carganjua sitting in Delhi telling hey this is how we're going to do it if you're having a representative that you can elect at a lower level that essentially ensures subsidiarity is followed over a certain extent that's how I would answer and if I had to add to what you were saying it would be something like if only five out of the hundreds of thousands of districts in India needed pumps then the central government would never worry about this problem but those five would be unable to solve it and so that seems like one way to push back okay one final question what is the fundamental barrier or resistance that one faces like the country faces in trying to adapt federalism and to add to this you said this during our recording like the first half every level of power attempts to centralize as much as it can it seems like the natural incentive of those who can have power to have as much of it and it feels like a system designed to break that is at all points every actor in the system is attempting to accrue as much power to themselves as possible and to devolve as little of it as possible and so what are the barriers like in making this come to fruition these seem like natural problems I mean one is like you have this kind of devolution of power when you have a window to devolve power after some significant event some that usually crises right crisis tell you have you this was messed up we may have to so that see it's also not just that concentration of power the 1993 amendments to a certain extent where a political bargain between the center of the states in that the states were getting powerful there were regional politics was getting more and more important for Delhi so the people at Delhi were like okay we will give you the power to form local guards you may do so by doing xyz and that's how the 73rd amendment was written up states me do x states me have an actually states me have and the states then choose how to design that law so they have the world power now it could again you need some sort of a window where this kind of an equilibrium exists at this power devolve from the top from the state level to the local level and this also is the same right like you have my appointment if you have growing populations and smaller and smaller government representation like the ratio then you will have these kind of problems crop up and then there will be a bargain and then there will be devolution thankfully we are not like that is what is also I think there was another question which said what is the effective level of tires we need a number of tires that we need to have this is how it gets answered at some point you will need to devolve power if you don't devolve power you are going to end up being extremely talk heavy and that is inherently more fragile than having a more sort of a pyramid eclipse such a where you have equal powers distributed across tires got awesome that brings me to the end of the questions that were written in abyssaic I am very grateful for you one coming on the podcast but second coming to a live event because I don't know how this would go and it's the first time we're doing this in front of a crowd and it takes a lot because it feels like I'm disagreeing with you and then in the second half we put everybody here it was like I've had the idea and so we've like yeah so long you basically for and so thank you for even like helping you pilot this as a format I'm very grateful if you have any last words I'm very happy we did this it's I have not done something like this before so I'm quite happy with that something like this and I I have a lot to think about especially with things I haven't thought about before policing drugs come to mind but also how engagement sort of works in different levels sort of come to mind and why engagement is low in India is something I'm working towards but some of the questions here have given me a lot awesome thank you thank you very much
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