Laggard States need handholding to improve: Sitharaman

In a renewed push for the idea of federalism, Finance Minister Nirmala Sitharaman on Thursday (August 6, 2026) said India needs every State to be “strong”, and that “laggard” States need to be given “every handholding” so they can improve. At the same time, the country also needs a strong Centre to manage defence, exports and manufacturing, which a few States cannot take care of for the whole country, she said.

“I strongly believe States have to be strong,” she said in response to a question on Centre-State relations. “I strongly believe States have to be helped. I also strongly believe laggards among States will have to be told that you cannot be a laggard. Many times, we hesitate to say the fact, but they have to be pulled up.”

Ms. Sitharaman, who was speaking at the India Policy Forum 2026 organised by the National Council of Applied Economic Research, said: “It cannot be that some States can do well and some others can remain where they are… We have to give them every handholding to get them to be back.”

However, the Finance Minister said that strong States themselves are not sufficient for the country. “You also need a Centre which has the resources to take care of the defence of this country, which takes care of having a policy which will enable exports, which will enable manufacturing,” she said. “It cannot be left to the States, and a ‘beggar your neighbour’ policy to get the industries and the investment.” 

Ms. Sitharaman said the country needs a Centre that can set “all the clear tones” to get investments and policies and ensure that parts of this country that have remained underdeveloped for a long time are helped to catch up with the rest of the country.

“So, there is a role for the Centre, and that role cannot be played by one or two States,” she said. “But yet, unless the States, and I mean each one of them, is empowered and given the resources and also given thoughts about how capacity can be built, the aspirations of India cannot be met.”