The Centre, for the States, Strengthening Cooperative and Fiscal Federalism through NITI Aayog
Why in News?
NITI Aayog, India’s apex policy think tank, has recently highlighted significant progress in enhancing fiscal federalism and improving socio-economic indicators in backward and underdeveloped regions through coordinated efforts between the Centre and the States. This marks a visible shift from centralised policy-making to collaborative governance. 
Introduction
Over the past 11 years, India has moved steadily towards cooperative and fiscal federalism, marking a transformation in Centre-State relations. The dismantling of the Planning Commission and the establishment of NITI Aayog in 2015 was pivotal to this shift. It allowed the states a stronger voice in policy formulation and development strategies, with special attention to socioeconomic disparities across regions.
Key Developments and Institutional Interventions
1. Transformation through NITI Aayog
-
NITI Aayog replaced the top-down approach of the Planning Commission with a collaborative, state-partnered model.
-
It functions as a knowledge and implementation hub, advocating for evidence-based policymaking and customized state-level strategies.
2. Governing Council’s Role
-
The Governing Council serves as the apex platform for Centre-State cooperation.
-
The Sub-Groups of Chief Ministers (CMs) and the Committee of Secretaries ensure sectoral, inclusive dialogue on major national missions.
3. Fiscal Federalism in Action
-
Tax devolution to states increased from 32% to 42% post the 14th Finance Commission.
-
NITI Aayog helped execute a data-driven, region-specific development agenda to bridge intra- and inter-state disparities.
4. Success in Aspirational Districts
-
The Aspirational Districts Programme (ADP) has shown measurable improvements:
-
Literacy increased from 58% to 66%.
-
Institutional deliveries rose from 70% to 82%.
-
Immunisation from 53% to 78%.
-
-
This was enabled through convergent action, real-time monitoring, and outcome-focused implementation.
Impactful Outcomes
-
GSDP Growth in Poor States: From 2004–05 to 2021–22, poorer states like Bihar, Madhya Pradesh, and Chhattisgarh saw growth rates of 8%–10%, surpassing richer states like Maharashtra and Tamil Nadu.
-
Increased Capital Outlay: The Centre’s share of gross tax revenue rose to ₹6.13 lakh crore in 2021–22, benefiting states directly.
-
Health and Education Outcomes: Significant gains in maternal and child health, school enrolment, and learning outcomes.
Conclusion
The vision of “Team India”, powered by NITI Aayog’s cooperative federalism model, is delivering results. India’s approach now balances national goals with state-specific needs, giving voice and accountability to sub-national governments. The future of Indian development lies in deepening this partnership—a model of fiscal empowerment and policy inclusion for all states, not just the affluent ones.
Q&A Section
Q1. What is the core idea of cooperative federalism as promoted by NITI Aayog?
It encourages collaborative governance between the Centre and the States, promoting joint ownership of development goals and mutual accountability.
Q2. What replaced the Planning Commission in 2015?
The NITI Aayog (National Institution for Transforming India), which shifted focus from top-down planning to state-led development strategies.
Q3. How has fiscal devolution changed post the 14th Finance Commission?
The share of tax devolution to states increased from 32% to 42%, enhancing states’ financial autonomy.
Q4. What is the Aspirational Districts Programme (ADP)?
An initiative to rapidly improve the socioeconomic status of India’s most underdeveloped districts using data, monitoring, and performance ranking.
Q5. What has been the economic impact on poorer states like Bihar and MP?
These states recorded annual GSDP growth rates of 8%–10%, exceeding those of traditionally richer states, reflecting effective policy targeting and funding.
