ECONOMIC IMPERATIVE OF FEDERALISM - Seshadrinathan Memorial Lecture

Published Date: September 5, 2018

Good Evening.  Thank you all for coming to this event. I am grateful to Mr.Rajendra Kumar for inviting me to speak here today and for the Chairman CA Sundar Rajan for organizing the event. I am also very grateful to the secretary ICAI for the very kind introduction. I normally have a request but today I didn't get a chance to speak to her ahead. I would say please don't take more than 30 seconds to introduce me because if I have anything of substance to say then people should judge me based on what I say rather than what my resume looks like. Anyway, today I didn't get a chance to speak to her ahead of time, so thank you for the kind introduction. 

Actually it is not that ideal a time for me. As we know, there are a lot of political developments. We are also still mourning the loss of our great leader of our party for the last 50 years. But when I got this invitation I thought I should make every effort to attend. In fact, even though it has been sometime since the unfortunate and untimely demise of CA Seshadrinathan, as someone who lost my father very tragically and unexpectedly one day, I can only imagine how much pain and emotional distress it must have caused his family. So I thought it would be a great honor for me or for him to kick off this series on the day & have the honor and the environment it is inaugurated on - at least share my time and what little knowledge I can bring to commemorate his memory.

I'd like to talk about a topic which I picked myself because I didn't have much time to prepare. So, I wanted to pick a topic I was very comfortable with and then quite passionate about and reasonably well-informed in terms of the data. Now, we are in a very interesting phase of our evolution as a country and as a state. Politically, a lot of things are changing. You know we are seeing for the first time for the last few years a single party majority government after many many decades of coalition Governments. In Tamil Nadu we are seeing the transition, the end of an era, the two kind of Goliaths that strode over the political spectrum for at least 30, 35 years have both passed within few months of each other.

You know things change, some things are cyclical & some things are secular, they only go one way. Markets are cyclical, technologies & development is secular. It’s always ever-increasing & it’s never decreasing. What I thought, the principles that would be worth thinking about and I'm just going to give you what I hope is enough data points and perspective so we can have probably a good debate. I'll try and finish as quickly as I can and I'm open to taking questions or have any form of discussions.

Federalism means a lot of different things to a lot of different people. It is the most complex concept to do. From a political perspective when we think about Federalism we say “what should be the right kind of separation of powers between a central or a federal government and state governments which make up the country". Now if you look at India, we have a very unique history because when India was formed, as I mentioned couple of weeks ago at an Independence Day celebration, I said the notion of India as a nation was an artificial construct it had not existed in a land which had been continuously populated for thousands of years and so if you're trying to create something you know where there's a blank space it's a lot easier. If you are trying to create something where there's already rich history, rich diversity, a lot of different people, it's a very complex concept. 

And, what is a country? It is a notion. It is a constitutionally framed notion. All countries arise out of their constitutions and most constitutions start "We the People", it is people giving to themselves a constitution to form a country. If you look at India, the imperative in 1947 was to actually create the notion of a country that would be sustaining, as I said, when none had existed before. Certainly not before India’s, the British were there they had ruled at different borders, before that the Mughals, before that there is kingdoms and so, it was critical that the design was one of integration. 

And if you look at the way the Constitution was framed, when they talk about the 1st List, the 2nd List and the 3rd List, the way the power is distributed between the Center and the States & then the concurrent list, there was massive over weightage towards the center. If you were to look at the list even now, the central government list is about 97 powers and the 97th one, this extract here today, it says, any other

matter not enumerated in list 2 or list 3 including (since all of you are CAs) is any tax not mentioned in either of these, the full power to tax rests only with the Central Government. It is now explicitly listed in evidence. If you compare that to the state lists, the state lists used to be about 59 items then in amendment of 1972 like itself to viewing whatever year that was they took away, 4 or 5 of those items including education were put in the concurrent list. The concurrent list went from 47 to 52. Majority of economic power that is Taxation, distribution of funds, aggregation is with the center and significant portions of the rest of governance, the criminal court now, in the concurrent list with education most of policymaking is with the center. Numerically the numbers are again against the States. 

Of course it’s not the only model in the world, if I was to go to the other extreme for a minute. A country where I lived for 20 years the United States, the definition of that country is the United States of America. Because the colonies existed before the country, because they already created their own internal constitutions, their own sets of laws, their own taxation models, their own everything when they decided to come together as a country, they named themselves the United States of America. And there the power is significantly with the states and very little with the center. The center focuses on a handful of things such as Defense, Foreign Affairs, Trade, Interstate commerce etc. But most of the things including significant powers of Taxation are with the states, there are states that have income tax & there are states that have no income tax there are states that have various kinds of sales tax & there are states that don’t have sales taxes. So the system was designed to be a federal system where the states wanted to maintain as much of their Independence as possible when they came together as a country.

If you look at a more recent example, over the last probably 60,70 years this notion of a European Union has gone through various stages, you know the European Economic Area, the European community, the common currency for a little while, the bandit kind of matched currency movements, the European Union where it could be a full member including in the monetary union or it can be a part member. Over here political kind of standardization but not at the market level and the European Union is providing a fascinating experiment for the last probably 50

years, at least for those of us who didn’t have to suffer the vicissitudes of their failures.

Can you have a monetary or an economic Union without having a political union? That is to say, can you run common policy on economics without having a commonly elected government or have the same laws automatically applied to everybody and every time? It failed & you can actually go back and look at why it failed. And it was this you know disconnect that you simply cannot control the economic policy alone. Political policy impacts economic policy. Political positions, political movements, political changes drive economic outcomes. And therefore you know, various attempts at forming the European Union failed. 

If you look at the current status when you have this kind of two-tier membership you can either be in the Euro and in the European Union or you know you can be out of the Euro and in the European Union. Neither of those models are working particularly well. If you look back to three years ago, the problems with Greece and to a lower extent with Spain, Portugal, Ireland  etc. where because they had a common currency that means they just not only did they have relatively common economic policy they had one common central bank and one currency but set one interest rate, one reserve ratio, one bank regulation etc. But the economies were completely off from each other. One was crashing and burning and the other was doing well. So you have seen the tests of it because on the one hand the central bank says you cannot, the government cannot bail out its own banks because then the whole system will fail because everybody does what they want. But in other words, in a different context, the concept, you cannot not bail the bank because how are they going to exist if they don't get some relief from their bank problems. So, I would say the overall answer to that and now we are seeing with Brexit that even on the non-monetary but economic union that doesn't work so well either. 

Now, Brittan is leaving the European Union, though they were never in the currency and they never had the currency problems. So if you look at it from a political construct, two things become clear. One, there is no political construct that does not have an economic equivalent or an output or a counterpoint or an implication. And two, there is no model that is possible where these two are not kind of aligned

with each other. You must have the alignment of the Political model and the alignment of the economic model to be in sync for it to actually produce outcomes. Otherwise, the system breaks down sooner or later. 

In the context of India which is what I'm going to talk about, we are actually a very disparate country even as we speak. That is to say if we look back to 1947, the goal of the founding fathers, the goal of the Constituent Assembly was to create a one country out of where there had been many different kingdoms or many different fiefdoms and the notion didn't exist before. Looking back 70 plus years, it has been a remarkable success of a political perspective. It is clearly been contiguous., Never been on the threat of any real separatist or kind of non-democratic transfer of power, and the system works. Politically, the system works. We have regular elections, people get thrown out all the time. You know elected representative like me have to operate with the assumption that next time we have to go and face the voters based on our record and be answerable. So the political system works very well. 

The economics have not been anywhere near as uniformly kind of improved as one would expect. So let me just put this in context, if I go back to the date of Independence roughly from the 1947 to the 1960 kind of period there wasn't actually that much difference between the states, in terms of economics or social development indicators or other kind of performance measures. So I look back and I have some data going back to 1960 

• in income the richest state was Maharashtra and the poorest  was Bihar and the ratio was roughly 2:1

• in age the oldest state was Tamil Nadu the youngest State was Gujarat. Oldest state’s average age was 22 & youngest state was 19. 

• in literacy the highest State was Tamilnadu 36% literacy, lowest state was UP 21% literacy.

So we were somewhat the same country we had differences in states but we really didn't have such great differences.

In fact if you extrapolate it all the way till about the 90s, that didn't change that much. For those of us of my age and those who were actually here, which I wasn't, I was away in the US & Singapore for 20, 30 yrs. You will remember clearly that the whole notion of development and economic kind of progress changed after the Liberalization of the 1990-91 kind of currency crisis. In some sense, that was our induction into the period of globalization or into the age of globalization.

Now there is one defining characteristic of our adult lifetimes, it is a kind of hyper globalization that has not been seen before. And I'll break that into two concepts. It is not true that globalization has always been secular where it has gone from less to more. In fact it has been cyclical in fact there have been times when there has been a lot more globalization and then it has pulled back.

So if we look back for example the age of the Chinese Empire when everything revolved around the way China traded, that the age when the Indian empires were there, the Roman Empire, the British Empire, the colonial era where three countries in Europe small countries Germany, Netherlands & Belgium controlled vast tracts of the world and basically did commerce within their colonies as if it was frictionless or tax no nothing moving back and forth. 

But if you look at this wave of globalization, this wave of globalization is unique in the sense, because most countries are now democracies. Most people have access to globalization and in the olden days you didn't have that. Only the Kings and the merchants and the very rich people had access to the upside of globalization. Second, because of technology you can actually move capital you can move services across borders without even moving people and finally because of ease of travel even labor moves around a lot I mean if you look at places like Singapore, Dubai these places are built on migrant labor. So if you look at a comprehensive kind of measure of globalization, this is not only a high cycle but it's a particularly broad cycle because it covers all kinds of aspects of movement of goods, labor, capital, information, services, everything.

For those who have studied any kind of microeconomics or global trade one very black-and-white, mathematically quantifiable phenomenon is that “increased integration of markets of any products, of any capital always leads to greater

efficiency and greater output”. That’s black and white, I mean all things aside. What is not clear and in fact can be proven to be exactly true in an inverse way is that “as much as globalization accelerates outcomes, it will also accelerate disparity”. Because when you have the pie accelerating that fast the returns don't go equally across all levels of society. 

Those in the knowledge economy those that are already in the upper echelon, those that have a better foundation, those where the factories already existed, there will be more factories and so forth. So globalization will increase the overall productivity of the world, it will increase the overall GDP, wealth etc. But by definition especially within countries it will increase disparity, it will increase “the genie coalition?” the rich will get richer the poor not get as rich and that's still terrific it's not like they are getting poorer. They are just not sharing the upside to some extent. 

And we have seen this in so many ways, in fact one could argue that what we see in the form of Brexit, what we see in the form of kind of the Tea Party movement and the Donald Trumps and the anti-immigrant waves in the US are actually the anti-globalization backlash, that people have seen the upside. Too much of it goes to too few people and they want parity back. Someone once explained to me very clearly, he said the thing about money is that it's never absolute, it’s always relative. We don’t judge ourselves on “Have I got X, have I got 2X or have I got 5Xs etc What have I got relative to something else that is relative to the per capita, relative to my neighbor, relative to my brother and because of that this disparity usually tends to social and political unrest. And in a democracy, people actually have ways to express that.

If you take India it is very clear what happened to these differences right, if you look at post 1990 and coming up to today these differences are hugely accentuated between the states. If I take 2015 data, 


• Income - in Tamil Nadu the average income, per capita income, was Rs.1.36 Lakh in Bihar it was Rs.35000. So, ratio is 4:1. Indian average at the time was Rs.82000.

• Age - TamilNadu has a rapidly aging problem we have gone below the replacement rate of births per woman and the average age in Tamilnadu is 30 years old, in Bihar it is still 19.  • Education - in Tamilnadu the average citizen is a high school graduate in fact in the assembly in the recent demand for grants of the budget session the Government of Tamil Nadu, the Education Department put out a statistic that is remarkable. In Tamilnadu, the Gross Enrollment Ratio, that is what percentage of college going children actually enroll in a college. In a degree college, not in a Polytechnic, in a degree granting institution, that number is something about 46% for Tamilnadu. That's a remarkable number that is one out of two people are going to college. 

It’s a different matter whether the quality of the college or the quality of education is good etc is a different discussion. But 46% Gross Enrolment Ratio, in a developing country where the country’s average is 33% and the next best State is Kerala which is at some 36% or 37%. And 46% is higher than the Gross Enrolment Ratio in the U.S.A. So this kind of disparity leads to this outcome when the average Tamilnadu citizen is a high school graduate aged 30 making Rs.1.36 lacs and a slightly greater chances of being a woman than a man because our gender ratio has slightly skewed over. Whereas in Bihar the average citizen is 19 years old makes Rs.35000, has dropped out at elementary school, elementary school proper not graduate level school, and there is no discernibly different probability that it could be a man than a woman.

So, two questions arise. We have such great disparity, what caused it? And is it getting better or is it getting worse? Because I say you know from 1947 to 1960 was not that different from 1960s to 1990s, it started accelerating and once we opened up and during the global economy and if you all look back to, since you are the chartered accountants who helped companies come set up and expand & all that, think about the infusion of capital, of multinational companies, of manufacturing, of FMCG etc and you know you look at every aspect from hotels to cars to glass and I'm just thinking about the industries, just around Chennai. 

What was the reason for that and what was the consequence and is it getting more or less equal. Now if you put all the pieces of the puzzle together from what I said, obviously it says that if you started in the right place you have a greater acceleration and greater kind of multiplier effect. And if you didn't start in the right place you have lowered. What is the right place? You have good education, average skill level, you have qualified kind of discipline work force, you have enlightened government, you have historical trade relations, you know Tamils have traded, invaded in Southeast Asia, Central Asia and all over, so we have a natural boom back. And you have enough landmass and you put all the pieces of the puzzle together. But I think the key goes back to education. Because I can't think of any other variable that was that different between a place like Tamilnadu and places like UP or Bihar or Madhya Pradesh.

Now one of the ways that most federal countries or unions accept this internally, it is not unique to India. It's not unique to our state capital, states all over the world any country you go you will find some states are doing very well, some regions are doing very well & some are not. For various reasons, you know population, kind of attractiveness, natural resources & what not. To give you an example if you take New York or California in the US the substantial proportion of the GDP of the US comes from big states like New York & California. Places like let's say North Dakota or South Dakota have populations that have about 10% of the population of the city of New York of the whole state, which is a huge state. So it's not expected that you'll have great economic activity there and surely in any federal system you will try transfer of payments. That's what the central government's job is. It collects taxes from places where they make more money and have greater economic activity and it sends them to those places that have less economic activity and need basic services. The job of the government among other things is to redistribute enough wealth to ensure there is no social unrest and to make sure that everybody participates in developments. Let’s say child nutrition, maternal welfare & other developmental investments stuff like that. 

But what is unique about India is if you'll not stop bringing in things like the finance Commissions which you have every five years, that talked about how the government is, it just starts redistributing the wealth, you will find that the Finance

Commission’s recommendations obviously are going exactly inverse to the kind of spread & output that we are talking about. So if I go back Four finance commissions, Tamilnadu share of Central Taxes was about 10.5%, then it went down to 8.5%, then to 7% and then to 6%. We are now at 4.5% and if the 15th Commission goes through with the formula that they say they started in their terms of reference with, our payout will come down to 3.5% to may be 4%. We are about you know less than 7% of the population of India & roughly about 8.5 to 9 percent of the GDP of India. But even if we assume that our payment of taxes are at 9 percent (is actually more than that) then we are only going to get back about one third of what we pay at 3.5%. 

Nothing wrong with that per se, because everywhere in each state subsidized poor states, that's how you bring the country up. For this happens in India, it happens in America, it happens in Europe, it happens in China, in fact the biggest transfers of the European Union went from places like France & Germany and you know whatever extended the UK contributions part of the European Union without mark to be, to places like Spain and Portugal. And in a good system like it happens in China where the coastal provinces pay more taxes and that money gets sent to the Central, Imperial provinces, you will find that this transfer payments lower the gap. That's the job of transfer of payments, transfer payments within society or transfer payments across states, you take from those who have more and you give to those who have less & therefore you bring them to greater equality.

So the rate of climb in Tamilnadu slows & the rate of climb in Bihar rises and you get more of a fair and equitable society. That is the ambition of redistribution & that is the job of every Government. In India we have not been able to achieve that. As the rate of transfer has increased the rate of disparity has kept on increasing. So we are actually kept on transferring more and more and getting less and less equality, kept on getting more and more divergence this is very rare. 

It’s a very uncommon phenomena around the world, transfers are very common they happen all the time what is uncommon is to keep making transfers and not get convergence. Not just market convergence but actually seek increasing divergence, which then raises the question what is causing this divergence? Is

giving money simply not enough? You know there are schools of thought, there is a kind of a right-wing  economic theoretician, economic historian Ferguson, a Scottish man. He taught in Harvard for many years and now is gone back to the UK, I think teaching at Oxford. And he says “democracy's function is based on the strength of institutions if you have strong institutions the courts, the police system, you know licensing of vehicles and drivers you know making the institutions that regulate the way our society works, if you are strong institutions you will get good outcomes including that if the money comes those institutions will actually ensure you get the benefit of this funds and if you do not have such institutions no matter how much money you give me, I cannot make it give output because it gets stolen not wasted basically Stolen means rent-seeking, corruption call it whatever or it will not bring kind of growth.

In India I think part of the problem is obviously we are a far from perfect society where lot of politicians have got different kinds of sources of income, but part of the problem I believe is this lack of institution & the lack of education. We are not able to kind of put in a framework for growth. and the big difference between the states that are able to achieve the growth and those who are not, is not this money, it is the lack of framework. Now just to give you a nature of the kind of quantities involved, back in 2015 a friend of mine & I did some work. In Maharashtra, an average citizen puts in about Rs.33000 in annual tax payments to the center (direct and indirect together) the center puts back about Rs.5000 per person. So the ratio is roughly about 15 percent. Now, Maharashtra is a bit of a unique case because the government doesn't put out the data directly and so, we do all kinds of extracts & inferences. There's a lot of companies headquartered in Bombay, the exchanges trade out of all day a lot of the financial transactions happen about this so that's not a perfect basis. 

If you take states like Tamilnadu, Kerala & to some extent Gujarat, average citizen pays about Rs. 20,000, adjusting for population per capita the average citizen pays in about Rs. 20,000 in taxes to the Center or whatever Rs.16 to Rs.17 Lakh crores in taxes. Average citizen gets back about Rs.6000 in Central grants and subsidies, scheme support that's so far I don't know 25% to 30%. We go like that, then we go to the other extreme you get to a place like UP where the average citizen pays in

about Rs.7,000 and gets out about Rs. 11,500 then we were the other extreme extreme to Bihar and it's about Rs.7,000 in & Rs. 30,000 out. So basically 4:1. Now, again this is not per se a bad thing. The question is what are we getting for this, are we getting convergence or not getting convergence. If you look at the counter arguments and I did this a friend of mine work out of I don't know, better judgment because I was in politics, I removed my name from it and my friend published it in his name and it became the subject of all kinds of vicious trolling. 

When in the course of the trolling the one cogent argument that came back, it said "actually you say that you are contributing more for nation building and the fact that we buy airplanes and ships and you know you support your fellow man you know that for you must understand that places like UP & Bihar are giving up something". And they are, and what are they giving up? For those of you again who can think back to that age, when we passed the amendment supported for the concurrent list all that Mrs. Gandhi also passed on constitutional amendments a part was locking down representation to the Parliament, so that times is it since my target time of the country's population control, I will propose and of course then the Congress ran most of the States & the Center and the constitutional amendment passed. The Constitutional amendment said we will not do redistricting of Lok Sabha seats for 25 years.

So if you do redistricting in Lok Sabha seats those who have lower birth rates will start giving up seats to those who have higher birth rates. So it said then there's no incentive for you to select punishing the those who we say reduce the population so he say you keep reducing the population and we will not take away your seats. so that constitutional amendment passed in 1976, it locked the seats that we see today. That is 39 for TN, 1 for Pondicherry you know X for Kerala 19 for Rajasthan and whatever. In 2001 when the 25 year Constitutional amendment expired, the then Vajpayee government went through a lot of discussion and decided that it was going to be too problematic to reopen to redistricting and said we will extend this for another 25 years. So until 2026 the number of seats will not get a changed and we are all where we are now. Think about the Democratic implications of that in Tamilnadu the average Lok Sabha seat is about 14 to 15 lakh registered voters, so

about 2.5 lakh voters per constituency. And there 6 MLA Constituency & 4 VIP constituencies. 

In UP just as one example Gorakhpur, where the current CM vacated after being a 20 year MP, has 19.6 lakh registered voters and that's pretty typical of UP. That means the 20 lac voters have 1 MP and 15 lac of us see 1 MP. One question that this raises is, is this truly representative democracy? Are they taking a cut or are they paying some kind of representation kind of penalty or price at our benefit? Well these are some really important issues because in 2026 this thing is going to expire and we will have to go back to redistricting and some people have done very interesting research using the current population and said, for example if we want redistrict based on population alone today, Tamilnadu should go down from 39 Seats to about 33 seats. We should lose 6 seats. Likewise, because unlike America, there’s a big difference between us & America. 

There's a big difference between America and India, in America the most populous states are also the ones that have the greatest economic activity, New York & California the most populous states and that's where the most economic activity happens that's where the most taxes are collected that's where the greatest subsidy donors come from and per capita they actually pay less because they're more people to divide the cost. Whereas in India it is the other way around & the most populous states, densely populated states have the lowest economic activity as a rule. Then we're the ones who should have greater representation. We are the ones who are in the greatest need of subsidy which Holds up the point, what happens in 2026? If I am a citizen of Tamil Nadu, what is my incentive to keep on giving up representation in Delhi and keep on paying more and more in contributions to the Center If they produce good results, it’s a different story? But if I keep paying them and they keep leading to greater and greater disparity where my share of payouts will come from 10% down to 4% or now going below 4%, where is the system? 

This is why I think federalism is realistically the only solution. We need to reconsider where the separation of powers are. We are no longer operating in an economic model that is similar enough, it was never identical doesn't have to be, but we are

no longer operating economic models across states that are similar enough that the overwhelming majority of policymaking, taxation and general kind of governance can come out of debt.

Now we have seen the flipside of that, you know that this government, no politics just execution, this government came to power and created one Cess after another. Now what is the great luxury of Cess? As you know they don't have to be put into the tax pool & they don't have to be shared according to the finance commission ratios, they can be targeted and spent to those programs that was set under the original Cess. So you take Swaach Bharat or other Cesses, but the problem is the Central government every year has been unable to spend the majority in some cases 75% and sometimes 80% but every year more than 50% of the targeted Cess money has not been spent. 

Because you can collect Swacch Bharat Abhiyaan Cess, you cannot spend it without then diverting it back to the states & having them build the toilets. The central government doesn’t have mechanism to build toilets. it doesn't have a department that can go around the country and start identifying land and acquiring to build it. Even to build national highway in Tamilnadu, the Government of Tamilnadu has to acquire the land. So it is almost impossible that you can sit in a country of a billion and 300 million people in a central place and drive policy and execution to your desired goals. 

It's not being done anywhere else in the world short of you know dictatorial Communist China and it's not a model that works. if any you know anybody wants to go through the logistics or kind of a simulation modeling of that. So if you put you know all these numbers and everything in context the question is surely at some point we must become a more representative democracy it is not a sustainable model. 

I just take an example in my Constituency, there are a 22 wards. Some wards because of the absence of redistricting and the government's laxity, some wards have 4000 voters & some wards have 27000 voters. In my own constituency of over 4.5 Lakh people, how is it fair that 4000 people have a Councilor who sits on the

Town Council, Corporation Council, and decides how the funds get spent and 27000  people have only access one, it's not fair. 

So I went to court among other people, and asked for redistricting and it said making the average something like, 10000 people per ward, 2.4 lakh people across 22 wards.  Redefine the wards so that no and I can take all that stuff but average voters must go down, otherwise it's not fair. 

Surely that argument must come in 2026 when we say let's get equal representation why should we get only 15 Lakh people per MP but they get 20. But what happens, the follow up question is if 39 MPs are not able to get the right outcomes why am I going to be happy with 33 MPs to do that.  so you know if there was another way to improve the implementation and execution model directly which there isn't and there hasn't been any other demographic system that I know of, if you have to end up with the states doing the execution anyway, even for something as simple as building toilets. 

And if the fact is that the states are completely different in any basic measure, you know human development index, child mortality rates, birth rates, education rates, sanitation levels, college access and there are bad loans also. Something like 40% of the education must be taken every year are taken in the state of Tamilnadu alone. In all of India, educational loans being taken from nationalized banks, many of which turned out to be non performing, great problems for the banks are taken in Tamilnadu alone. So there's only good in bad in everything. I said I'm not saying one thing is always good. So  the question is is there any other model that will allow for flexibility in execution, parity in kind of representation versus distribution or redistribution and will allow you to adapt to the realities at an economic level we are not operating anywhere in the realm of each other.

We are not you know if you look at this, just compare it to a global standard, we are close to in the state of Tamil Nadu or Kerala or Karnataka or Gujarat for that matter we are close to middle-income country in the world. And we are not someone states we are 75, 80 million per State. Tamilnadu by itself would be the 18th or 19th largest country in the world, so it's not that you know the scale is not a problem scale is a problem but after this we are operating as if we were

economically middle income country, there are parts of India that are operating as if there are sub-Saharan countries in terms of infant mortality, birth rates, maternal health issues, sanitation levels, income levels education levels. 

So I would say in conclusion that everything affects everything else, of course politics is economics & economics is politics. But in the case of Federalism what we have learnt over 70 years of Independence and particularly over the last probably 25+ years of participation in the global economy is that there is no alternative to an increasingly Federal model, because every other approach gives you fundamental unfairness. Either unfairness in representation or unfairness in redistribution or kind of sacrifice unfairness or representation for unfairness in distribution in any tradeoff between the two, which are not "like for like" tradeoffs. 

So in this next five to ten years especially with the constitutional amendment expiring, this is going to be you know one of the defining issues of our democracy in our lifetimes and I hope that myself included many of us will come back to another "Seshadrinathan Memorial Lecture" at somepoint in the future where we can see how this debate has evolved. What kind of new issues and insights show up in the future. 

Once again, I pay tribute to his memory.

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