From Competitive Federalism to Competitive Sub-Federalism: Cities as Dynamos

Competition among ULBs.. 

CEA wants more competitive urban local body to tackle the problems of urban areas and cities. It sounds good. But will it solve the problems? Let’s see. We should focus more on the root of given problem. The stagnated primary sector and low wages in rural area is the main reason. There are several models on migration (Lewis model of migration, Harris-Todaro model etc.). Logic is very simple. People will move from one sector to another (or from rural to urban) until the wages in both sectors (both areas) get equated. But problem is that the rural wages and agricultural (and wages in primary sector) are increasing but as urban formal sector’s (and tertiary and secondary) wages are also increasing. So they are not being equated by any kind of transformation.

We can see the difference between daily wages in agricultural and non-agricultural sector. And that difference is actually expanding informal sector which is responsible for low standard of living. We are spending too much on rural development and infrastructure. In fact government’s main aim is to double the farm income. (With given growth rate of agriculture, it seems to be a dream only. If this aim is achieved then there is no requirement to focus more on urban area.). 

Just have a look on the spending on rural development and agricultural activities. 

Then why still we have same problem? I think our institutional framework is the main problem. Present institutional framework is not successful as far as supply chain in rural area is concerned. It’s crystal clear that there are leakages in NABARD. There is no growth of any other sector in rural area. We failed to make agri-industry, we failed to establish any kind of market mechanism through decentralization. That means our framework must be changed. Let’s take an example of Philippines’s Rural Development Project. The aim of this project is same i.e. increasing rural income and enhancing farm and fishery productivity in targeted areas by supporting smallholder and fishers to increase their marketable surpluses and their access to markets. Important thing is that local government is also responsible for infrastructure. And that thing we don’t have. Local governments are doing nothing for rural infrastructure. 

Figures give the overview of the project. So funds are important but there should be a proper framework like RDP. Local government should be encouraged to build their own infrastructure but our rural local bodies are built for political purpose only. 

Last thing is that under GST, how can we encourage ULB for more competition? If they don’t have direct source of revenue then how can they compete among themselves? We will discuss on it later…