A recurring justification for centralisation in India is the incapacity thesis — the claim that state governments lack the administrative or technical competence to discharge major responsibilities and therefore require close supervision, if not substitution, by the Union. Often presented as pragmatic realism, this argument is conceptually flawed and institutionally self-defeating. It misunderstands how capacity is created and, in doing so, reproduces the very weakness it purports to cure.
Indian states are not minor administrative units. In population, economic diversity, and governance complexity, several are comparable to major nation-states. Maharashtra’s population approximates that of Japan; Tamil Nadu’s that of Germany; Karnataka’s that of France.
Uttar Pradesh, if sovereign, would be the fifth most populous country in the world. To suggest that elected governments governing territories of this scale are inherently incapable of managing education, health, agriculture, rural development, or urban governance — and therefore require intrusive, uniform Union-level regulation, guidelines, and centrally designed schemes — is to imply that Indians are intrinsically less capable of self-government than the Japanese or Europeans. This is a proposition incompatible with national self-respect, and a calumny no patriot can tolerate.
The philosophical rebuttal to such paternalism was articulated during India’s freedom struggle. The British justified imperial rule on grounds of efficiency and competence.
Mahatma Gandhi rejected that logic, insisting that good government is no substitute for self-government. His argument was moral as well as administrative: political dignity, civic maturity, and institutional growth arise from responsibility.
Administration imposed from a distance, however competent, cannot substitute for the democratic maturity that emerges from self-rule. The same insight applies to Union-state relations.
A technically sound policy designed in New Delhi cannot replace policies conceived, owned, and implemented by states that bear political responsibility for outcomes. To deny states this autonomy is to perpetuate a colonial habit of mind — one that treats states as dependents rather than partners.
The incapacity argument rests on a fundamental misunderstanding: it assumes capacity precedes responsibility. In truth, responsibility creates capacity. Centralists argue that states are weak and therefore need Union intervention. Yet it is precisely this intervention that prevents states from becoming strong, creating a self-fulfilling cycle of dependence.
Capacity — individual or institutional — is not an inherited endowment; it is built through practice. Parents who never entrust children with responsibility produce permanent dependence. Organisations whose leadership refuses to delegate produce weak, risk-averse subordinates. Governments are no different. Competence arises from responsibility, accountability, and the freedom to make — and correct — mistakes.
This insight was formalised by Nobel laureate Kenneth J Arrow in ‘The Economic Implications of Learning by Doing’ (Review of Economic Studies, 1962). Arrow demonstrated that productivity and capability are not static attributes but functions of cumulative experience.
Skill is acquired by doing. Applied to federalism, this means governance capacity cannot be bestowed by the Union; it must be forged by states through real decision-making authority, experimentation, feedback, and correction. When states are reduced to implementing agencies for centrally designed schemes, this learning loop is severed.
The states’ planning expertise, technical cadres, and policy innovation atrophy, replaced by a culture of compliance and dependence on ‘guidelines’ from New Delhi.
Organisation theory reinforces this conclusion. Alfred Chandler’s Strategy and Structure (1962) showed how industrial giants such as General Motors and DuPont faltered when organised as highly centralised unitary (U-form) entities. Headquarters became overwhelmed by operational detail, leading to strategic paralysis. These firms survived only by adopting the multidivisional (M-form) structure: headquarters retained control over strategy and capital allocation, while divisions were granted substantial operational autonomy.
The parallel with Indian federalism is striking. The Union continues to behave — in Chandler’s terms — like a U-form organisation, attempting to micromanage the operational details of 28 diverse states. The result is congestion at the centre and atrophy at the periphery.
Peter Drucker captured this danger succinctly in Concept of the Corporation (1946):
“Without strong central leadership, no institution can itself be unified; but without a strong and autonomous local leadership, willing to assume responsibility on its own, no institution could properly function... In every large-scale organisation, there is a natural tendency to discourage initiative and to put a premium on conformity.”
Over-centralisation stifles initiative and rewards conformity — precisely the opposite of what complex governance demands.
Scholars such as Xu Chenggang have characterised China’s governance model as “Regionally Decentralised Authoritarianism” (Journal of Economic Literature, 2011). While political authority remains tightly centralised, economic administration is markedly decentralised. Provincial and local governments exercise substantial autonomy over land use, industrial policy, investment facilitation, and implementation.
After the 1978 reforms, this decentralisation generated intense inter-jurisdictional competition, compelling local governments to build fiscal and administrative capacity. Though many factors contributed to China’s growth, decentralised economic governance played a significant role.
The relevance of this example lies not in endorsing Chinese-style authoritarianism, but in exposing a functional irony. A regime deeply suspicious of political pluralism nevertheless trusted its sub-national governments with real economic authority.
India, a constitutional democracy founded on federal principles, often proceeds on the assumption that its own states cannot be trusted with comparable autonomy.
When states are entrusted with real powers, incentives, and accountability, they are compelled to develop the competence to use them. When the Union withholds trust, it breeds dependency — and then cites that dependency as justification for further control. The incapacity argument thus becomes self-validating. A Union that transforms constitutional partners into administrative dependents weakens not only the states, but the Republic itself.
To be concluded
The author is retired IAS officer of Tamil Nadu
cadre, and Member, High-Level Committee
on Union-State Relations constituted by
the Government of Tamil Nadu