France beat Croatia 4-2 in the FIFA World Cup final and both countries emerged winners! All of France is deliriously happy, all of Croatia is proud and happy. Everyone knows something about France. It was a colonial power, it is a nuclear power, it is among the five veto-holding members of the UN Security Council, it is a member of the European Union, NATO and G7, and it has Paris and the Eiffel Tower. What do we know about Croatia? Very little. It was part of the erstwhile Yugoslavia, but Yugoslavia does not exist any more. It broke up into Croatia, Slovenia, Bosnia & Herzegovina, Montenegro, Serbia, Kosovo and Macedonia. Compared to France, Croatia is a minnow. France’s land area is 10 times that of Croatia, its population is 15 times that of Croatia. Needless to say, France’s GDP is 50 times the GDP of Croatia — $2582 billion vs $55 billion. (Only a few days ago, the Government of India boasted that India’s GDP had overtaken France’s and we were the sixth largest economy in the world.)
Can small countries match big countries? They cannot ever in land area or population or military power, but they can in other parameters that actually matter to the people. See how Croatia measures up in comparison with France (see table). Croatia’s population is 41,25,700 — about the same as Kanpur. Its income per capita is a commendable $13,295 which places it as a middle-income country. The country was ravaged by war during 1991-1995, but its people have lifted themselves up by the bootstraps. A look at the data will show that Croatia is highly globalised. It receives foreign direct investment that is 4% of its GDP (or $500 per person).
Croatians live long, are healthy, have few children, are secure within their borders, and not too worried about the fact that they are a small country that doesn’t make the wrong headlines every day. There are 195 countries in the world. 182 countries have a population of less than 100 million and nearly 107 countries have a population of less than 10 million. Small can be beautiful. Small countries can be modestly rich with their people enjoying a good quality of life — good enough to produce a world-class football team.
On its way to the final, Croatia beat Nigeria, Argentina, Iceland, Denmark, Russia, England and drew with Switzerland. Other examples of small but prosperous countries are Iceland, Austria, Norway, Sweden and New Zealand. Big countries (in size and/or population) too can be wealthy with their people enjoying a good quality of life. Examples are the United States, Canada and Australia — and now an aspirational China. There is not one model that will apply to all countries. There is also not one model that can be applied to the constituents of a large, federal nation. We have to invent a model that will accommodate the peculiar characteristics of a large country like India, with numerous states, multiple races, many religions, thousands of languages, and different states at different stages of development and different rates of growth.
Such a model can be constructed in a federal country, provided it is based on some fundamental principles such as:
Decentralisation: Over the years, the Central government has arrogated too many powers to itself leaving states with little autonomy and few resources. The first order of the day must be to respect the Constitutional distribution of legislative powers. List II of the Seventh Schedule is for the states; List III too should be with the states. Although titled Concurrent List, the time has come for the Centre to withdraw, as much as possible, from List III and allow the states to legislate on those subjects.
Natural Resources: The Central government should cede control over natural resources like coal, minerals etc to the states in which they are located. Each state will then discover its comparative advantages and disadvantages and find ways to compete with other states. All states will benefit from such competition.
Financial Resources: At present, states have been reduced to supplicants for money. This situation must be drastically overhauled. The two taxes that will account for the bulk of the revenues are Income-Tax (including Corporate Tax) and GST. Like in the case of GST, both the Centre and the states must have the power to levy Income-Tax (including Corporate Tax) on incomes.
Autonomy: On matters such as education, health care and health insurance, support prices, crop insurance, welfare measures, social security etc, the states must have the authority and freedom to devise their own policies and design their own programmes. Many states will do a better job than the Centre is doing now.
That’s transformational reform. And then we may dream of having a World Cup football team.
Website: pchidambaram.in @Pchidambaram_IN