Federalism

Overview

Federalism is a constitutional arrangement in which power is divided between a central (national) government and regional (state or provincial) governments. Both levels derive their authority from the constitution, not from each other. The central government cannot abolish the regional governments, and the regional governments cannot secede from the union. This is different from a unitary system (like the UK or France), where the central government can create, abolish, or reorganize regional governments at will.

The classic argument for federalism is that it allows large, diverse states to coexist. Different regions may have different languages, religions, cultures, and economic interests. A unitary system forces a single policy on all regions, producing resentment and conflict. Federalism allows regions to govern themselves in areas that affect their daily lives while delegating national concerns (defence, foreign affairs, currency) to the centre.

But federalism also creates tensions. The centre and states compete for resources, jurisdiction, and political power. In some federations, the centre dominates (India, Russia). In others, the states are strong (USA, Canada, Germany). The balance between unity and autonomy is the central dilemma of federal design.

Types of Federalism

Coming-Together vs. Holding-Together

• Coming-together federalism: Independent states voluntarily unite to form a federation. The states retain significant sovereignty; the centre has only enumerated powers. This is "bottom-up" federalism. Examples: USA (1787), Switzerland (1848), Australia (1901). The states existed first; the federation was created by treaty or constitution. The centre's powers are limited to what the states explicitly delegated. In the USA, the Tenth Amendment reserves all powers not delegated to the federal government to the states.
• Holding-together federalism: A unitary state grants autonomy to regions to prevent secession, manage diversity, or accommodate ethnic demands. This is "top-down" federalism. Examples: India (1950), Belgium (1993), Spain (1978). The centre creates the regions and can alter their boundaries (as India's Parliament can under Article 3). The centre is stronger; the states have autonomy but within constitutional limits set by the centre.
• Implication: In coming-together federations, the states are co-equal with the centre; the centre is an agent of the states. In holding-together federations, the centre is supreme; the states are agents of the centre. This distinction is crucial for understanding why Indian federalism is more centralized than American federalism.

Symmetrical vs. Asymmetrical Federalism

• Symmetrical federalism: All states have the same powers and status. The USA is broadly symmetrical (though states vary in size and influence, their constitutional powers are identical). Germany is symmetrical: all 16 Länder have the same legislative and administrative powers.
• Asymmetrical federalism: Some states have more powers or different arrangements than others. This is usually used to accommodate special circumstances — ethnic minorities, border regions, or historically autonomous areas. Examples: Jammu and Kashmir (before 2019 abrogation of Article 370) had its own constitution and flag. Nagaland (Article 371A) and Mizoram (Article 371G) have special protections for customary law and religious/social practices. Scotland in the UK has its own Parliament and broader powers than Wales or Northern Ireland.
• Rationale: Asymmetry recognizes that uniform treatment of unequal units is not equality. It allows flexible accommodation without breaking the federal principle. Critics argue it creates resentment among "ordinary" states and encourages secessionist demands.

Dual Federalism vs. Cooperative Federalism

• Dual federalism (layer cake): Centre and states operate in separate, exclusive spheres. The USA in the 19th century approximated this: the federal government handled foreign affairs and interstate commerce; states handled everything else. The two levels did not interact much. This has largely broken down in the USA due to federal grants and conditional funding.
• Cooperative federalism (marble cake): Centre and states share responsibilities and work together. The USA since the New Deal (1930s) and especially since the 1960s has moved toward cooperative federalism: federal grants fund state programs, federal standards apply to state implementation, and joint programs are common. Germany is a quintessential cooperative federation: the Bundestag passes framework laws, but the Länder implement them.

Indian Federalism

India's Constitution is federal in structure but unitary in spirit — a phrase attributed to K.C. Wheare and often cited by Ambedkar. The Constitution creates a strong centre with extensive powers to override the states in emergencies, to reorganize states, and to legislate on state subjects under certain conditions. This was a deliberate choice by the Constituent Assembly, which had witnessed the partition of India and the secession of Pakistan, and wanted to prevent further fragmentation.

The Three Lists

• Union List (List I — 97 subjects): Defence, foreign affairs, atomic energy, currency, railways, post and telegraph, citizenship, banking, insurance. Only Parliament can legislate. The Union government also collects the major taxes: income tax, customs, excise (before GST), and now GST.
• State List (List II — 61 subjects): Public order, police, agriculture, public health, local government, forests, education (previously), irrigation, land revenue. Only state legislatures can legislate. However, the Centre can legislate on state subjects during a national emergency (Article 250) or with the consent of two or more states (Article 252).
• Concurrent List (List III — 47 subjects): Criminal law, marriage, education, economic planning, trade unions, bankruptcy, transfer of property. Both Parliament and state legislatures can legislate. In case of conflict, Union law prevails (Article 254). The Centre has effectively used the Concurrent List to dominate areas like education, criminal law, and economic policy.
• Residuary powers (Article 248): Subjects not in any list belong to the Union. This is a major departure from classic federations like the USA, where residuary powers belong to the states. It makes India significantly more centralized.

Centre's Dominance Mechanisms

• Article 356 (President's Rule): If a state government cannot be carried on in accordance with the Constitution, the President (on the Governor's report) can dismiss the state government and assume direct control. Parliament then approves the proclamation. This has been used over 100 times since 1950. The Supreme Court in S.R. Bommai v. Union of India (1994) laid down guidelines: President's Rule must be based on objective material, is subject to judicial review, and cannot be used for partisan political purposes. However, concerns remain about its misuse.
• Article 3: Parliament can alter state boundaries, create new states, or change names — with or without the state's consent. Conventionally, the state is consulted, but Parliament is not bound. This was used extensively in the 1950s–1970s for linguistic reorganization (States Reorganization Act, 1956) and later for the creation of Uttarakhand, Chhattisgarh, Jharkhand (2000), and Telangana (2014).
• Article 249: The Rajya Sabha can pass a resolution (by 2/3 majority) authorizing Parliament to legislate on a State List subject in the national interest. This is rarely used but is a powerful tool.
• All-India Services (IAS, IPS, IFS): The Centre recruits and controls the senior bureaucracy that serves in the states. This gives the Centre leverage over state administration. The IAS officer is a servant of the Union even when posted in a state, creating dual loyalty.
• Governor's role: The Governor is appointed by the President (effectively the Prime Minister) and is not accountable to the state. Governors have used their discretion to delay legislation, reserve bills for Presidential assent, dismiss Chief Ministers, and invite the party with the largest support to form government after elections. The Sarkaria Commission (1988) and the Punchhi Commission (2010) recommended reforms, but they have not been implemented.

Special Provisions

• Article 370 (abrogated 2019): Originally gave Jammu and Kashmir special status — its own constitution, flag, and autonomy over all subjects except foreign affairs, defence, and communications. The abrogation in August 2019 split the state into two Union Territories (Jammu and Kashmir with legislature, Ladakh without) and removed all special protections. This was the most significant federal restructuring in India's history and is being challenged in the Supreme Court.
• Article 371A (Nagaland): Protects Naga customary law and religious/social practices. No act of Parliament affecting Naga religious or social practices, customary law, or land ownership applies to Nagaland unless the state legislature approves. The Armed Forces (Special Powers) Act (AFSPA) has been a persistent source of tension despite this protection.
• Article 371G (Mizoram): Similar protections for Mizoram. Parliament cannot legislate on Mizo customary law, religious and social practices, or land ownership without the state legislature's consent.
• Article 371 (various states): Special provisions for Maharashtra and Gujarat (development boards for Vidarbha, Saurashtra), Andhra Pradesh and Telangana (equal opportunities for all regions), Karnataka (development boards for Hyderabad-Karnataka), and others. These are asymmetrical arrangements to address regional imbalances within states.

Fiscal Federalism

Fiscal federalism concerns how financial resources are distributed between the centre and states. In India, there is a significant "vertical fiscal imbalance" — the Centre collects most taxes, but states do most of the spending. The Constitution provides mechanisms to address this imbalance.

Finance Commission (Article 280)

• Mandate: The Finance Commission is constituted every five years to recommend the distribution of tax revenues between the Centre and states, and the allocation among states. It also recommends grants-in-aid to states.
• Key recommendations over time: The 14th Finance Commission (2015–2020) increased the states' share of central tax revenue from 32% to 42%. The 15th Finance Commission (2020–2025) maintained 41% (after adjusting for Jammu and Kashmir becoming a UT, which reduced the divisible pool). The 16th Finance Commission (2025–2030) will submit its report in 2025.
• Criteria for allocation: Population (15th FC used 2011 Census, controversial because it penalized states that controlled population), income distance (poorer states get more), forest cover, tax effort, and demographic performance. The shift from 1971 to 2011 population data was contested by southern states, which argued they were being penalized for successful population control.

GST and the GST Council

• 101st Amendment (2016): Created a unified Goods and Services Tax (GST) replacing multiple central and state taxes. The GST Council decides on tax rates, exemptions, and thresholds. This was a major constitutional innovation — a federal body with binding decisions on both centre and states.
• Voting: The Centre has 1/3 of the vote; states have 2/3 combined. Decisions require a 3/4 majority, meaning the Centre effectively has a veto. This has been criticized as undermining state autonomy.
• Impact: GST has created a unified national market, reduced tax cascading, and increased compliance. However, states lost the power to set their own tax rates (except on alcohol, petroleum, and electricity). The promise of revenue compensation to states (for 5 years) ended in 2022, creating fiscal stress for some states.

Other Fiscal Transfers

• Centrally Sponsored Schemes (CSS): The Centre designs welfare schemes (MGNREGA, PM Awas Yojana, Ayushman Bharat) and funds them partly or wholly, but states implement them. This gives the Centre leverage over state policy and creates "fiscal federalism as coercion." The NITI Aayog has recommended reducing the number of CSS and giving states more flexibility.
• FRBM Act: The Fiscal Responsibility and Budget Management Act (2003) set limits on central and state deficits. States were incentivized to adopt fiscal responsibility legislation. This has improved fiscal discipline but also constrained state spending on social sectors.

Cooperative and Competitive Federalism

Cooperative Federalism

• Definition: Centre and states work together to achieve national goals. This was the dominant model during the Planning Commission era (1951–2014). The Five-Year Plans set national targets; states implemented them through state plans. The National Development Council (NDC) brought together the Prime Minister, Chief Ministers, and Planning Commission members to coordinate policy.
• NITI Aayog (2015): Replaced the Planning Commission. NITI Aayog does not have financial allocation powers (unlike the Planning Commission) but functions as a think tank and coordinator. It promotes competitive federalism through indices (SDG India Index, Health Index, Water Management Index) and best-practice sharing.
• Current cooperative mechanisms: Inter-State Council (Article 263), Zonal Councils (North, South, Central, East, West), GST Council, National Integration Council, and various sectoral forums. However, the Inter-State Council has met infrequently and has not resolved major disputes.

Competitive Federalism

• Definition: States compete with each other for investment, rankings, and resources. This model was promoted by NITI Aayog and the current government. States are ranked on ease of doing business, health outcomes, education, and water management. Top performers get public recognition and sometimes fiscal incentives.
• Advantages: Competition can drive efficiency, innovation, and accountability. States learn from each other. Investors benefit from better governance.
• Disadvantages: Poorer states with weaker capacity cannot compete effectively. Competition may lead to a "race to the bottom" — states cut regulations, labor protections, and environmental standards to attract investment. The"ease of doing business" rankings have been criticized for measuring only a few cities and ignoring rural conditions.

Challenges and Debates

Regionalism and Sub-State Demands

• Demand for new states: Telangana was created in 2014 after a 40-year movement. Demands for Vidarbha (Maharashtra), Gorkhaland (West Bengal), Bodoland (Assam), and other regions persist. The criteria for creating new states are unclear — language, culture, development, administrative convenience, or political expediency?
• Inter-state disputes: Water disputes (Cauvery between Karnataka and Tamil Nadu, Krishna between Andhra Pradesh, Karnataka, Maharashtra; Ravi-Beas between Punjab and Haryana) are chronic. The Inter-State Water Disputes Act establishes tribunals, but their awards are often delayed and contested. The Cauvery dispute has been going on for over 150 years.
• Border disputes: Maharashtra-Karnataka (Belgaum), Assam-Mizoram (violent clashes in 2021), Assam-Nagaland, and others. These disputes involve competing historical claims, ethnic tensions, and colonial boundary ambiguities.

Centralization vs. Autonomy

• Trends toward centralization: The abrogation of Article 370, the use of ED and CBI against opposition state governments, the withholding of central funds to non-BJP states, and the "one nation, one" policy initiatives (one nation-one ration card, one nation-one tax, one nation-one election) have been seen by critics as eroding federal autonomy. The "one nation-one election" proposal, if implemented, would significantly reduce the political salience of state elections.
• State resistance: Some states have resisted central policies. West Bengal, Punjab, Kerala, and Tamil Nadu have been vocal in opposing central schemes, demanding more GST compensation, and challenging central laws in the Supreme Court. The Tamil Nadu government's refusal to implement the National Education Policy (NEP) fully, and Punjab's opposition to the now-repealed farm laws, are examples of state resistance.
• Demand for more autonomy: Southern states, in particular, have argued that the centralizing trends unfairly penalize them. They contribute more in taxes than they receive, have better social indicators, and feel their voices are not heard in national policy. The "South India" versus "North India" narrative has gained traction in recent years, though it oversimplifies complex realities.

Local Government and Federalism

• 73rd and 74th Amendments (1992): Added constitutional status to Panchayats (rural) and Municipalities (urban). States are required to devolve powers, functions, and funds to local bodies. This created a third tier of federalism — "local self-government."
• Implementation gaps: Despite constitutional status, Panchayats remain weak in most states. They lack fiscal autonomy, trained staff, and meaningful powers. The State Finance Commissions are supposed to recommend fund devolution, but implementation is patchy. Kerala's People's Plan Campaign (1996) was a pioneering experiment in devolving 40% of plan funds to Panchayats, but few states have followed.

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