Reassessing Centre-State Power Distribution in India: A Post-Liberalisation Perspective
Introduction
India’s federal architecture, as defined by the Constitution, rests on a quasi-federal model that structurally favors the Centre. Drafted in the aftermath of Partition and the need for national consolidation, this design enabled a strong Union government to steer the developmental and security agenda. However, the political economy and administrative imperatives of India have transformed significantly since liberalisation in 1991. The growing assertiveness of regional parties, the economic rise of states, and the complexities of cooperative and competitive federalism have necessitated a critical reassessment of the philosophy and administrative mechanisms that govern Centre–State relations.
This essay examines the evolving political, economic, and institutional dynamics of Indian federalism in the post-liberalisation era. It argues that while India’s constitutional framework provided a robust foundation for national integration and state-led development, it must now be recalibrated to accommodate decentralised governance, fiscal empowerment, and federal pluralism to ensure democratic deepening, efficient resource management, and policy responsiveness.
1. Constitutional Framework of Indian Federalism
A. Asymmetric and Centralised Design
- India’s Constitution follows a ‘federation of convenience’, per K.C. Wheare’s classic categorization.
- Division of powers is heavily tilted in favor of the Centre:
- Union List (97 subjects) outweighs the State List (66 subjects),
- Residuary powers lie with the Union (Article 248),
- Emergency provisions (Articles 352–360) allow suspension of federal arrangements,
- The Governor, a central appointee, holds key discretionary powers in states.
This framework was suited to the early postcolonial context marked by national integration, regional insurgencies, and economic central planning.
B. Principles Governing Power Distribution
- Legislative: Article 245–255 lay down subject-wise jurisdiction.
- Administrative: Article 256–263 regulate the executive relationship.
- Financial: Articles 268–293 provide fiscal arrangements, mediated by the Finance Commission and Planning Commission (replaced by NITI Aayog).
2. Post-Liberalisation Transformations and Federal Reconfigurations
The liberalisation reforms of 1991 shifted the Indian economy toward market-oriented governance, altering the role of both the Union and State governments.
A. Erosion of Centralised Planning
- The decline of the License Raj, and the replacement of the Planning Commission with NITI Aayog, signaled a move away from top-down resource allocation.
- States gained increased autonomy in investment, infrastructure, and welfare programs, prompting competitive federalism.
- However, without a constitutional status, NITI Aayog’s role remains advisory, raising concerns over institutional accountability and federal parity.
B. Rise of Regional Political Power
- Coalition politics (1996–2014) saw regional parties emerge as kingmakers in national governance, reinforcing political federalism.
- States have demanded greater devolution in sectors like education, health, and agriculture, particularly in response to varied developmental needs.
C. Fiscal Federalism and GST
- The implementation of the Goods and Services Tax (GST) created a unified national market, but also centralised indirect taxation, undermining state fiscal sovereignty.
- The GST Council, while deliberative in design, has faced criticism for Union dominance in decision-making.
- Vertical devolution (Union-to-State transfers) has become more politicised, and horizontal imbalances (between rich and poor states) persist.
3. Challenges to Federal Balance in the Current Context
A. Centralising Tendencies and the Unitary Drift
- Frequent use of Article 356 and the assertion of Central agencies (e.g., CBI, ED) have drawn criticism for weakening state autonomy.
- Laws passed on education (NEP 2020) and agriculture (2020 farm laws, since repealed) raised debates over legislative overreach into State List subjects.
B. Weakening Institutional Mechanisms of Federal Coordination
- The Inter-State Council (Article 263), meant to foster dialogue and policy harmonisation, has remained largely inactive.
- The Zonal Councils are underutilised despite their potential for resolving inter-state conflicts.
- Asymmetric federal arrangements under Article 371 and the abrogation of Article 370 (Jammu and Kashmir) have rekindled debates on the balance between uniformity and autonomy.
C. Emergent Forms of Competitive Federalism
- States now compete for foreign direct investment (FDI), ease of doing business, and infrastructure projects, often aligning more with global capital flows than central diktats.
- While fostering innovation, this competitive ethos risks deepening inequalities between resource-rich and lagging states, especially in the absence of redistributive mechanisms.
4. Reassessing the Philosophy of Federalism
A. From Administrative Convenience to Federal Ethics
- Indian federalism must evolve from a model of “central control and state compliance” to one of “collaborative governance and shared sovereignty.”
- The Gandhian vision of gram swaraj and Ambedkar’s emphasis on constitutional morality support a deeper federal spirit rooted in deliberation and mutual respect.
B. Strengthening Cooperative Federalism
- Institutionalisation of the Inter-State Council with regular meetings and binding recommendations.
- Clear delineation of roles in concurrent subjects through sectoral federal compacts.
- Empowering NITI Aayog with constitutional status and independent evaluation powers to prevent politicisation.
C. Reimagining Fiscal Federalism
- Ensuring predictable and equitable revenue-sharing through the Finance Commission, based on needs and performance.
- Revisiting the structure of the GST Council to ensure equal voting power for states or rotational leadership.
- Building state capacity in tax administration, data governance, and public expenditure management.
5. Institutional and Policy Recommendations
- Legislative Clarity: Re-evaluate the Concurrent List to reduce jurisdictional conflicts and promote decentralisation in sectors like health, education, and environment.
- Judicial Interpretation: The Supreme Court must continue to protect federal integrity, as seen in S.R. Bommai v. Union of India (1994) and State of West Bengal v. Union of India (1962), while adapting doctrines to current fiscal and cooperative frameworks.
- Decentralisation Beyond States: Strengthen the 73rd and 74th Amendments for meaningful local governance, as Panchayats and Urban Local Bodies are vital for bottom-up planning and inclusive development.
- Equity-Oriented Federalism: Implement mechanisms for special grants, capacity-building, and regional planning in underdeveloped states to prevent federal fragmentation.
Conclusion
The post-liberalisation transformation of India’s polity and economy necessitates a paradigmatic shift in the federal discourse—from centralised control and administrative convenience to a dynamic, equitable, and pluralistic federalism. While India’s constitutional framework has allowed remarkable flexibility, it now demands deeper democratic reconfiguration to accommodate the aspirations of powerful regional actors, the complexities of economic interdependence, and the imperatives of local empowerment.
Such a reassessment requires not merely institutional reforms, but also a normative commitment to federal ethics—where dialogue, respect for diversity, and interdependence become the foundational principles of governance in a 21st-century India. The future of Indian democracy lies not in unitary command, but in the collaborative synergy between the Union, the States, and the people they jointly serve.
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