One of the most persuasive arguments for centralisation rests on the principle of equal citizenship. In a constitutional democracy, basic dignity and life chances should not depend on one's geographical location. A child born in a historically disadvantaged state is entitled, in principle, to the same foundational standards of health, education, nutrition, and legal protection as one born in a more prosperous region. The equalisation argument, therefore, maintains that national authority must intervene to narrow inter-state disparities and to give practical meaning to constitutional guarantees across the Union.
This moral claim is reinforced by a practical concern. Poorer regions often lack the fiscal capacity to invest adequately in human development. Without redistribution through shared taxes, formula-based transfers, or equalisation grants, regional inequalities may deepen and become self-reinforcing. For this reason, all mature federations operate mechanisms of fiscal equalisation to preserve national cohesion.
Yet the moral force of equalisation does not resolve the question of institutional design. The critical issue is whether centralisation—understood as central control over policy design and programme delivery—is either necessary or sufficient to achieve equal outcomes. Inter-state disparities are rarely fiscal alone. They arise from differences in human capital, social institutions, administrative capability, and political mobilisation. When equality is pursued primarily through central patronage rather than local agency, the result is often what may be termed a “transfer raj”—a system that sustains dependency and compliance but fails to generate the institutional transformation required for genuine convergence.
Indian evidence: Agency vs aid
The strongest rebuttal to the belief that central oversight ensures equitable development lies in the comparative economic history of Indian states. As documented by A Kalaiyarasan and M Vijayabaskar in The Dravidian Model: Interpreting the Political Economy of Tamil Nadu (2021), both Bihar and the erstwhile Madras State (now Tamil Nadu) began the post-independence period with similar disadvantages. In the early 1960s, Bihar was the poorest state in India, while Madras state also ranked in the lower half of States on income and several development indicators.
Under a strictly centralised development model, decades of uniform planning, national schemes, and fiscal transfers—larger in Bihar’s case—should have produced convergence. Instead, the outcomes diverged sharply. Six decades later, Bihar remains at or near the bottom of most indicators of economic and human development, including per-capita income, health outcomes, educational attainment, and human development. Tamil Nadu, by contrast, consistently ranks among the top three to five states in most indicators, such as per-capita income, life expectancy, infant mortality, fertility decline, school enrollment, Gross Enrollment Ratio in higher education, industrial diversification, and social mobility.
This divergence did not occur because Tamil Nadu followed central directives more faithfully. On the contrary, its development trajectory often departed from national templates. Driven by sub-national political mobilisation associated with the Dravidian movement, the state prioritised social infrastructure: building a robust public health system, expanding reservations in education and public employment, and investing heavily in welfare and human development. Bihar, by contrast, remained trapped in patronage-driven politics, relying heavily on central transfers without undertaking comparable institutional reform.
The contrast illustrates a fundamental lesson: agency matters more than aid. Tamil Nadu’s progress was driven by a distinctive state-led development model that emphasised human capital, social justice, and administrative capability. A strongly centralised policy regime in the 1960s might have constrained such innovation without addressing Bihar’s deeper structural deficits.
The international parallel
International development experience reinforces the same conclusion. For decades, development policy assumed that capital scarcity was the primary constraint on economic growth. International donors, therefore, channelled large flows of financial aid to poorer countries in the expectation that investment alone would trigger development. Yet critics such as William Easterly in The White Man’s Burden (2006) and Dambisa Moyo in Dead Aid (2009) have shown that such transfers often failed to generate sustained growth. In many cases, large inflows of aid fuelled corruption, rent-seeking, and long-term dependency rather than productive transformation.
Financial resources alone cannot substitute for human capital, administrative competence, or institutional reform. Without functioning institutions, transfers resemble water poured into a leaking vessel. Countries that eventually achieved rapid development—such as South Korea and Vietnam—did so not because of perpetual aid but because they invested systematically in education, public health, governance capacity, and industrial policy.
India’s own planning experience reflects the same lesson. If centralisation and fiscal transfers alone could equalise opportunity, decades of centrally designed Five-Year Plans and Centrally Sponsored Schemes should have eliminated persistent regional disparities. They did not. In many instances, uniform schemes produced compliance without ownership, crowding out local initiative while leaving institutional weaknesses untouched.
A better institutional design
None of this suggests that equalisation is unnecessary. The decentralist critique is narrower and more precise. It argues that guaranteeing minimum outcomes and narrowing disparities does not require centralised ownership of programme design or delivery. Mature federations distinguish between national guarantees and service delivery. National governments establish rights, benchmarks, and fiscal transfers to ensure that no region falls below a social floor, while sub-national governments retain the authority to design and implement programmes suited to local conditions. This model offers three advantages: it safeguards equal citizenship through national minimum standards; it allows diversity above the floor to address region-specific challenges; and it fosters experimentation and learning.
Equality via capacity, not command
The lesson is clear: centralisation, justified in the name of reducing inter-state disparities, is flawed in theory and ineffective in practice. Uniform rules do not guarantee uniform outcomes. Real equality emerges when capable institutions convert resources into human development. A federation committed to equal citizenship must therefore combine redistribution with decentralised capacity-building. While centralisation may equalise inputs, only decentralised agency can produce equitable outcomes and genuine convergence.
To be concluded
The author is retired IAS officer of Tamil Nadu cadre, former Vice-Chancellor of Indian Maritime University, Chennai, and Member, High-Level Committee on Union-State Relations constituted by the Government of Tamil Nadu