NITI Aayog Calls for Cooperative Federalism | 07 Jun 2025

Source: TH 

Why in News? 

The 10th meeting of the Niti Aayog Governing Council was held under the theme-Viksit Rajya for Viksit Bharat@2047. The meeting underscored the significance of fostering cooperative federalism to achieve national development objectives.

What are the Key Outcomes of the 10th Meeting of NITI Aayog Governing Council?

• State-Specific Demands: Tamil Nadu sought a 50% share in central taxes (vs. current 33%) and a Clean Cauvery Mission. 
  • Punjab demanded fair Yamuna water rights and financial aid for border security & drug control. 
• Emphasis on Trade & Investment: States were asked to reduce policy bottlenecks, repeal obsolete laws, and create investor-friendly environments. 
  • NITI Aayog was directed to prepare an ‘Investment-friendly Charter’ to attract global investments. 
• Security Preparedness: PM emphasized the need for long-term security preparedness and modernized civil defense mechanisms. 
  • Operation Sindoor (targeting terror infrastructure in Pakistan) received unanimous support from attending states/UTs. 
• Economic & Industrial Development: Chhattisgarh CM presented a 3T model (Technology, Transparency, Transformation) to double its GSDP in 5 years and 10 times per capita income.  
  • Andhra Pradesh suggested sub-groups on GDP growth, population management, and AI-driven governance. 
• Sustainable Development & Social Reforms: PM pushed for global-standard tourist spots (one per state) and green energy/hydrogen investments. 
  • Focus on urban planning in Tier 2/3 cities, skilling youth in cybersecurity, and boosting women’s workforce participation. 

What is Role of NITI Aayog in Fostering Cooperative Federalism? 

• Strengthened Competitive Federalism: It promotes healthy competition among states via data-driven indexes and transparent rankings like the Fiscal Health Index, Aspirational District Programme (ADP), Composite Water Management Index, and State Energy and Climate Index, driving sectoral improvements. 
• Enhanced Cooperative Federalism: It acts as a bridge between central and state governments, aligning regional priorities with national goals.  
  • Examples include the Team India Hub for collective development and the ADP focusing on 112 underdeveloped districts through close ministry and partner collaboration. 
• Governance & Policy Advisory: It shifted focus from financial allocation to policy advisory with a decentralized governance approach.  
  • It supports states in establishing State Institutions of Transformation (SITs) for better governance and policy execution. 
• Regional & Inter-Sectoral Social Interventions: It leads initiatives addressing disparities such as the NITI Forum for the North East, SATH-E, Poshan Abhiyan, State Health Index, and education reforms. 
  • By facilitating the sharing of successful models, like Gujarat’s industrial corridors and Tamil Nadu’s skill development programs, and promoting Public-Private Partnership (PPP) models NITI Aayog helps bridge the gap between developed and developing states. 
• Digital Transformation: It drives innovation through the Atal Innovation Mission (including Atal Tinkering Labs and Incubation Centres), the Knowledge and Innovation Hub, and the National Data and Analytics Platform (NDAP), alongside creating a digital payments roadmap. 
  • NITI Aayog can expand R&D hubs to Tier-2 and Tier-3 cities (e.g., Pune’s tech parks extending to Nagpur) and mentor startups in emerging states. 

What Are the Major Challenges in Advancing Cooperative Federalism? 

• Lack of Federal Dialogue: Limited NITI Aayog governing council meetings (only once a year) and delayed GST Council sessions leads to a shift from collective solutions to individual grievances, causing policy paralysis in key areas like GST reforms and compensation disputes. 
• Undermining Federalism: The Centre has used financial leverage to enforce compliance, such as withholding Tamil Nadu’s central share of Samagra Shiksha Abhiyan funds for opposing the National Education Policy, 2020. This action undermines the spirit of cooperative federalism, reducing it to mere rhetoric.  
  • States have limited input in national schemes like PM-KISAN and Smart Cities, causing implementation challenges. 
• Unfair Tax Devolution: States are demanding a 50% tax share in the Finance Commission devolution (up from 41%), citing GST’s erosion of fiscal autonomy and sluggish revenue growth. 
  • Richer states like Tamil Nadu, Karnataka, and Maharashtra contribute more to the central pool of taxes but receive less in devolution, while poorer states like Bihar, UP, and Jharkhand stay reliant on central grants, deepening fiscal inequality. 
• Inter-State Disparities: Developed states like Maharashtra, Gujarat, and Tamil Nadu grow faster due to strong infrastructure, while weaker states lag behind amid policy bottlenecks. 
  • Insufficient financial transfers between states cause many people to migrate from poorer regions to richer ones like Mumbai and Delhi.  
  • States like Chhattisgarh and Odisha contribute significantly through natural resources (like minerals and forests) but receive less financial support for development, limiting their growth. 
• Water & Border Disputes: Persistent river disputes between states like Cauvery (TN-Karnataka) and Yamuna (Haryana-Delhi) remain unresolved. 
  • This causes water shortages harming farmers (e.g., Tamil Nadu’s delta) and escalates political tensions (e.g., Punjab’s Sutlej-Yamuna Link canal protest). 

What Measures Can Be Implemented to Strengthen Cooperative Federalism? 

• Strengthen Institutional Mechanisms: Regularizing NITI Aayog and GST Council meetings, and reviving the Inter-State Council will ensure ongoing dialogue and timely dispute resolution. 
  • This will reduce policy paralysis in areas like GST reforms and improve conflict management over water, border, and fiscal issues 
• Fairer Resource Sharing: Increasing tax devolution to states, advocating introduction of a performance-based grants system. This will incentivize reforms in lagging states (Bihar, UP) through conditional funding. 
• State-to-State Partnerships: Developed states should mentor poorer states through industrial corridors, skill development, and PPP investments to reduce regional disparities and ease migration pressure on major cities. 
• Enhance Inter-State Water Coordination: A National Water Policy 2.0 with binding river-sharing agreements, joint task forces, and central funding for inter-state projects will improve water management and infrastructure. 
  • This will reduce water disputes (e.g., Cauvery) and enhance regional connectivity, boosting trade and tourism. 
• Long-Term Strategic Planning: Align State and Centre plans with the shared vision of Viksit Rajya for Viksit Bharat@2047, using measurable targets and periodic reviews, with NITI Aayog facilitating progress while respecting State priorities. 

Conclusion 

The 10th NITI Aayog meeting highlighted both progress and persistent challenges in India’s federalism. While initiatives like state partnerships and investment reforms are promising, genuine "Team India" collaboration requires fairer fiscal devolution, regular dialogue, and depoliticized governance. Addressing these gaps is crucial to achieving Viksit Bharat by 2047.