Today, Nepal is on the threshold of carving out a number of federal states in line with the changed political context. The country has changed from a unitary mode of governance to a federal one. The federal structure has to be encapsulated in the new constitution, for which the Constituent Assembly has not been able to make any final decision although various modules of federalism have cropped up.

Economic aspects

It is imperative to look into economic matters also while federating the country. But the political parties that are presenting one proposal after another on federalism do not seem to have paid adequate attention to the economic aspects of federalism. They are harping on ethnic (single-caste and multi-caste), capacity-based, geography-based and other federalisms. This is not a healthy sign.

A federal state that is open and liberal can make progress whereas one adopting a parochial policy cannot make desirable headway. Likewise, a federal state which has literate people, big cities and ample land together with ample natural resources can make advances on various fronts. As such, for the balanced development of each federal state, it is desirable that the north-south demarcation should be adopted so that each federal state will have Himalayan, hilly and Terai regions. The Himalayan and hilly regions are rich in natural resources, whereas the Terai region is the granary of the country and a hub of trade and commerce.

The country is least developed. As per official statistics, over 25 per cent of the people are living below the poverty line. Unofficial data show that upto 60 per cent of the people are living in abject poverty. The economy of the country is not strong enough to fulfill the demands of the people. Under such circumstances, we are going into federalism. The federal system will be much costlier than the present system of governance. As such, it would be sagacious to look into the economic aspects of the federal system.

The country may not be able to sustain many federal states as proposed by the major political parties. Five or six federal states would be ideal for the country at present. The number of federal states can, however, be adjusted in due course.

At the beginning, the central or federal government should help out the weak federal states until they become self-sufficient. For this, the central government should initiate infrastructure development in such federal states. But such help cannot be provided on an unlimited basis. Sooner or later, the federal states will have to be self-sufficient for development.

Administrative expenses need to be managed economically by each federal state. If such administrative expenses become high, it will make a dent on the development expenses. This would imply that development expenses will have to be diverted to bear the administrative cost of the federal state, hampering the development activities in that state.

There may arise disputes over the distribution of revenue and natural resources between the federal states. The central government should be strong enough to settle such disputes, or else the federal states will be embroiled in inter-state disputes, hampering their development.

Federalism is more than decentralisation. The basic thrust of federalism is to distribute development benefits down to the underprivileged people by making the local bodies effective. In fact, the central government, provincial governments and local governments should have felicitous coordination. When the underprivileged people can benefit politically, economically, socially and culturally, the nitty-gritty of federalism can be said to have been fulfilled. For this, the central, provincial and local governments need to be made effective.

It follows that long-term vision should be exercised while federating the country. Federating the country to please the whims of certain groups will not be sustainable in the long term. Nowadays, the issue of ethnic federalism is heating up. Every ethnic community wants a state in its name. There are over 100 ethnic castes in the country. It is out of the question to carve out a state for each community.

Similarly, some people want a whole region for them. The undivided Far-West, the undivided Mid-West and One Terai One Province are some of the prominent examples. There should be scientific demarcation of states based on certain parameters such as geography, capacity and economic aspects.

Sustainable federalism

After all, we need sustainable federalism. For this, economic aspects must be considered. But it would be disheartening to note that discussions on this important aspect have not been initiated. Only political and ethnic issues relating to federalism have been accentuated. As such, it would be prudent to consider economic aspects while federating the country. National integrity, economic development and capacity are the hallmarks of federalism. Each federal state should strive to achieve these. If the federal states cannot be economically viable, the whole federal system of the county will flunk, and it will be very difficult to pick up the pieces.