Subject: Federal System

PYQ Relevance [UPSC 2024] What changes has the Union Government recently introduced in the domain of Centre-Stare relations? Suggest measures to be adopted to build the trust between the Centre and the States and for strengthening federalism. Linkage: This question directly examines contemporary shifts in Centre-State dynamics, aligning with the structural reset debate. It enables discussion on centralisation trends, fiscal federalism, and institutional trust, core themes of the article.

Mentor’s Comment:

This article addresses the structural evolution of Indian federalism, a core GS Paper II theme with direct constitutional and governance relevance. It equips aspirants to critically analyse Centre-State tensions beyond politics, linking doctrine, fiscal policy, and institutional accountability.

Why in the News?

The federalism debate has intensified after the Tamil Nadu-constituted Justice Kurian Joseph Committee submitted Part I of its report reviewing Union-State relations. The report questions the expanding legislative and fiscal footprint of the Union and argues that excessive centralisation is weakening functional federal balance. Since federalism forms part of the Constitution’s Basic Structure, the issue carries long-term institutional implications beyond routine political contestation.

What Is the Current Constitutional Structure of Federalism in India?

The current constitutional structure of Indian federalism is a “Union of States” (Article 1) featuring a dual polity with a strong centralizing bias, designed to balance regional autonomy with national integrity. It operates through a three-fold legislative distribution (Seventh Schedule), a written constitution, an independent judiciary, and emergency provisions (Articles 352-360) that can alter the federal balance. 

Key components of this structure include:

1. Quasi-Federal Design: Establishes a federal polity with a strong Union; sovereignty rests with the Constitution, not the States.
2. Division of Powers: The Seventh Schedule divides subjects into the Union List (exclusive central power), State List (exclusive state power), and Concurrent List (shared power).
3. Residuary Powers (Article 248): Vests residuary subjects in Parliament, strengthening central authority.
4. Emergency Provisions (Articles 352, 356, 360): Enable temporary centralisation; Article 356 permits President’s Rule in States.
5. Fiscal Federalism: The Finance Commission (Article 280) recommends tax revenue distribution between the Union and States.
6. Judicial Oversight: The Supreme Court (e.g., S.R. Bommai case) has declared federalism part of the “Basic Structure,” meaning it cannot be destroyed by constitutional amendment.
7. Cooperative/Asymmetrical Federalism: Mechanisms include the Inter-State Council (Article 263) and special provisions for certain states (Schedules V and VI). 

While often called “quasi-federal” due to these centralizing features, the system enables states to function as independent constitutional entities in ordinary times

Why Is There a Need for a Structural Reset in India’s Federal Framework?

1. Excessive Centralisation: Union intervention has expanded beyond constitutional limits. Example: Increasing central laws on education policy despite education being in the Concurrent List.
2. Diminished State Autonomy: Legislative and administrative discretion of States has narrowed. Example: Uniform GST structure limits States’ independent taxation powers.
3. Governor’s Expanding Discretion: Delays in assent affect State legislative functioning. Example: Delay in assent to Bills passed by the Tamil Nadu Assembly led to litigation before the Supreme Court.
4. Overlapping Governance Roles: Union ministries operate in State-assigned sectors. Example: Central regulatory frameworks in health and agriculture influence areas primarily managed by States.
5. Weak Institutional Dialogue: Federal mechanisms function less as consultative forums. Example: Limited effective use of the Inter-State Council under Article 263 for resolving disputes.

Has Centralisation Distorted the Original Constitutional Balance?

1. Historical Design Bias: The Constitution adopted a federal structure with a strong Centre due to post-Partition insecurity and integration of 500+ princely States.
2. Legislative Expansion: Expansion of Union legislation in Concurrent List subjects has reduced State autonomy.
3. Subordinate Legislation: Union executive increasingly overrides State laws through procedural and regulatory mechanisms.
4. Conditional Fiscal Transfers: Centrally Sponsored Schemes impose rigid templates, limiting State flexibility.
5. Administrative Duplication: Expansion of Union ministries into domains traditionally managed by States creates functional overlap.

Outcome: Centralisation increases reach but reduces contextual responsiveness.

Does Judicial Doctrine Adequately Protect Federalism in Practice?

1. Basic Structure Protection: Federalism declared part of Basic Structure in S.R. Bommai (1994).
2. Plenary State Authority: States are not administrative appendages within their allotted spheres.
3. Doctrinal-Practical Gap: Despite judicial affirmation, legislative and fiscal trends favour uniform national solutions over contextual diversity.
4. Executive Overreach: Increasing preference for central regulation in health, education, and agriculture dilutes State discretion.

Outcome: Constitutional doctrine protects federalism normatively; implementation trends weaken it functionally.

Does Over-Centralisation Reduce Governance Effectiveness?

1. Administrative Overstretch: Concentration of responsibilities burdens Union institutions beyond efficient supervisory capacity.
2. Context Insensitivity: National policy frameworks fail to reflect linguistic, ecological, agricultural, and industrial diversity.
3. Innovation Suppression: Uniform schemes restrict experimentation at State level.
4. Evidence of Success:
   1. Tamil Nadu’s noon meal scheme originated as a State innovation before national expansion.
   2. Kerala’s public health and literacy models evolved from decentralised governance
   3. Maharashtra’s employment guarantee model preceded national adoption.

Outcome: Decentralisation enables pilot-based policy diffusion and scalable innovation.

Does Fiscal Federalism Adequately Empower States?

1. Vertical Imbalance: States undertake major expenditure responsibilities (health, education, policing) but possess limited taxation powers.
2. Centrally Sponsored Schemes: Rigid conditionalities reduce State fiscal discretion.
3. GST Structure: Shared taxation reduces independent fiscal manoeuvrability.
4. Expanding Mandates: Increasing regulatory complexity and expanding central schemes stretch State resources.

Outcome: Fiscal dependency weakens accountability and policy autonomy.

Does Capacity Argument Justify Intrusive Central Control?

The Capacity Argument refers to the claim that many States lack adequate administrative, financial, or technical capability to effectively implement complex policies. On this basis, the Union justifies greater central intervention, standardisation, and control in governance domains.

1. Capacity Paradox: Claims that States lack administrative capacity lead to central intervention.
2. Dependency Cycle: Persistent intervention prevents States from developing institutional competence.
3. Accountability Deficit: Decision-making shifts away from local voters toward distant central authorities.
4. Comparative Federalism Insight: Decentralised federations globally deliver sustained quality, equity, and competitiveness through shared responsibility.

Outcome: Capacity develops through responsibility, autonomy, and corrective feedback.

What Institutional Reforms Are Being Proposed for Recalibration?

1. High-Level Committee Review: Comprehensive review of Governors’ role, legislative competence, and fiscal relations.
2. Right-Sizing Objective: Aligns authority with responsibility without weakening national unity.
3. Structural Reforms: Calls for rebalancing rather than incremental adjustment.
4. Federal Accountability: Emphasises trust-based partnership between Union and States.

Outcome: Recalibration deepens unity by strengthening cooperative federalism.

Conclusion

India’s constitutional design created a Union with strength, not supremacy. Contemporary governance trends indicate a steady expansion of central authority across legislative, fiscal, and administrative domains. The Justice Kurian Joseph Committee’s intervention reframes the debate from political contestation to structural recalibration.

A durable federal balance requires aligning authority with responsibility, restoring meaningful consultation, and strengthening institutional trust. Recalibration of Centre–State relations would enhance accountability, improve policy responsiveness, and preserve the constitutional promise of cooperative federalism.