In recent days, we have been witness to two extraordinary acts of sub-national assertion by powerful regional leaders. In the first, Bihar Chief Minister Nitish Kumar addressed a rally - not in the city of Patna, which he rules and has transformed, but in the beating heart of the Union of India, the Ramlila grounds in Delhi - demanding that his state receive a larger share of central funds and investment. The political formation that promises Bihar "special category status" - a status that eases access to central grants and ups the Centre's investment in a state - will, he implied, receive his support once the next general elections are done. And not just his and Bihar's, he added, but that of other "backward" swing states, like Odisha. In effect, Mr Kumar has announced he is a political free agent, and will use that status to bend the Union of India's fisc to his will.

Both Mr Karunanidhi and Mr Kumar are, in a sense, following in the footsteps of West Bengal's Mamata Banerjee, who, during her tenure as the UPA's opposition-in-residence, scuttled the prime minister's foreign policy initiatives citing her state's concerns, and demanded a greater share of central monies to cover up her maladministration.

We are in the middle, we know, of a giant shift of power to the states. But we have failed to comprehend exactly how deep this change might run, and how much it might lead to division and paralysis even in areas we have come to take for granted will be managed, behind the scenes, by New Delhi's technocrats and experts.

This has been coming for some time. The Left's withdrawal of support to UPA-I over relations with the United States might be explained away by referencing its ingrained anti-Americanism. No states' interests seemed involved, though speeches from the CPM's leaders at the time suggesting it was their misguided way of placating West Bengal's Muslims infuriated by the Party's excesses in Nandigram should have told us there was more to it. Now, however, there is no mistaking the shift. But India is ill prepared for border states' powerful chief ministers having a say in foreign policy. If Mr Kumar declares that Nepal needs more Indian pressure to force that country's government to ensure the Kosi floods less often, will he care if a future alliance partner quotes shibboleths from the 1950s about "non-interference" to him? If Narendra Modi of Gujarat wishes to scuttle peace moves with Pakistan by insisting that the people of his state must have a greater say in what happens to the boundary dispute in Sir Creek, will he be swayed by the arguments of foreign office mandarins? Until India evolves a structured way for regional leaders to impact foreign policy without actually joining a central government and then threatening to leave, it will be unable to frame a coherent approach to the world. The days of Delhi dealing undisturbed with the world are done.

Even more worrying, perhaps, is the fact that the task of fiscal federalism has always been incomplete. The Finance Commission works on an apolitical formula to determine which state gets what proportion of centrally levied taxes. It's based in Delhi, but meets every state government. The formula appears superficially fair, and few complain. The Planning Commission gives off a similar air of apolitical by-the-numbers policy making as it dispenses Plan expenditure. But, Nitish Kumar now points out, somehow Bihar never quite gets what he thinks it deserves. As this newspaper has argued editorially, Bihar is so poor that its government has limited revenue resources of its own; but it receives less central assistance per capita than the average state does, not more, as you would expect under such circumstances. Stepmotherly treatment has been the case since Independence; in pretty much every Five-Year Plan, Bihar's per capita Plan outlay has been at or near the bottom. The wonder is not that Mr Kumar demands more now; the wonder is that no leader from Bihar has done the maths so far, and really worked at translating his state's votes into more money from the Centre.

Some argue that Bihar should not expect more - after all, as The Financial Express pointed out in an editorial yesterday, it contributes only 2.8 per cent of national income, but receives 8.6 per cent of central funds. On the other hand, it's also 8.8 per cent of India's population, and pretty much the poorest eight per cent at that. Not progressive transfers, prioritising the poorest, but a flat distribution. Do you really expect that state of affairs to continue in a democracy? Internal transfers will have to be more equalising than they have been hitherto, hidden as they were behind supposedly apolitical mechanisms. Indeed, such equalising transfers are basic to well-functioning unions. Consider the United States: The Economist has calculated that, just in the last two decades, states like West Virginia have received over 200 per cent of their GDP in federal spending alone. That's in a system where the central government collects a smaller fraction of overall taxes than ours. In fact, even more blatantly, US states where net federal spending is highest are those with more swing voters.

Sooner or later, Mr Kumar's articulation of poorer states' demands for money will receive pushback from the wealthy West and South. In fact, perhaps the worst thing for Indian federalism is if Narendra Modi's prime ministerial ambitions are thwarted; he will then suddenly discover that Gujarat's money is flowing to all those casteist populists in Bihar and Uttar Pradesh he despises and, by then, can no longer hope for support from. The divisive rhetoric and sub-national power games over transfers to states, over foreign affairs, and over all sorts of policy areas previously the private preserve of New Delhi, have only just begun.

mihir.sharma@bsmail.in