Federalism in Practice: States' Powers Explained

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The Indian Constitution does not describe India as a federation. Article 1 calls it a Union of States, a phrase B. R. Ambedkar defended in the Constituent Assembly on the ground that the states had not come together by agreement and had no right to leave. Constitutional scholars have variously described the result as quasi federal or as federal with a strong centralising bias. What matters for anyone trying to follow Indian politics is less the label than the machinery, because that machinery decides who runs the police, who sets school syllabuses, who taxes what, and who can dismiss whom.

The division of subject matter sits in the Seventh Schedule, which contains three lists. The Union List, with close to a hundred entries, covers defence, foreign affairs, currency, banking, railways, atomic energy, telecommunications and inter state trade. The State List covers public order, police, public health and sanitation, hospitals, agriculture, land, local government, liquor and betting. The Concurrent List, on which both may legislate, covers criminal law and procedure, marriage and divorce, contracts, bankruptcy, forests, electricity, trade unions and education. Article 254 resolves conflicts: where a state law is repugnant to a Union law on a concurrent subject, the Union law prevails, unless the state law was reserved for and received the President's assent, in which case it may operate in that state. Anything not listed anywhere falls to the Union under the residuary power, which is the reverse of the arrangement in the United States or Australia.

These boundaries have moved. Education was originally a State List subject and was shifted to the Concurrent List by the Forty Second Amendment in 1976, which is why the Union can now issue a national education policy at all. Forests and the protection of wild animals moved the same way at the same time. Parliament can also legislate on a State List subject if the Rajya Sabha, the chamber representing the states, resolves by a two thirds majority that it is in the national interest, and it may legislate to implement international treaties.

Money, and why it concentrates

Fiscal design pulls harder towards the centre than the legislative lists suggest. The Union collects the most buoyant taxes, principally income tax and corporation tax, while states carry the larger share of spending responsibility for health, education, policing and agriculture. The gap is bridged by a Finance Commission, appointed by the President roughly every five years under Article 280, which recommends what proportion of the divisible pool of central taxes goes to the states and how it is split among them. Recent commissions have recommended devolving somewhat over two fifths of that pool. States receive further money as centrally sponsored scheme grants, which typically require the state to contribute a matching share and to follow Union designed conditions, so the money arrives with the policy attached.

The largest structural change in decades came with the goods and services tax, introduced by the Hundred and First Amendment in 2016 and launched in July 2017. It merged a thicket of central excise, service tax, state value added taxes and entry taxes into one destination based tax, and in doing so required both the Union and the states to surrender most of their independent indirect taxing power to a joint body. The GST Council, created by Article 279A, is chaired by the Union finance minister and includes a minister from every state. Decisions need a three quarters majority of weighted votes, in which the Union holds one third and all the states together hold two thirds, meaning neither side can act alone. States were promised compensation for revenue shortfalls, funded by a cess, for five years to mid 2022. When the pandemic collapsed collections, the resulting fight over borrowing to fund that compensation became the sharpest centre to state financial dispute in recent memory, and several states have continued to press for a longer compensation period.

Governors, President's Rule and asymmetry

The most contentious feature is the office of Governor. Each state has one, appointed by the President on the advice of the Union council of ministers, holding office at the President's pleasure. The Governor normally acts on the advice of the state cabinet, but retains discretion in appointing a chief minister when no party has a clear majority, in recommending that the state's constitutional machinery has broken down, and under Article 200 in withholding assent to a state bill or reserving it for the President. Because the holder is a Union appointee, opposition governed states routinely accuse Governors of obstruction, and disputes over prolonged delays in granting assent to bills passed by state legislatures have reached the Supreme Court from more than one state in recent years.

Article 356 allows the President, on a Governor's report, to assume the functions of a state government. It was used with striking frequency in the decades after independence, often against opposition state governments, and the practice was curtailed by the Supreme Court's judgment in S. R. Bommai v. Union of India in 1994, which held that a proclamation under Article 356 is subject to judicial review, that a ministry's majority must be tested on the floor of the assembly rather than assessed in the Governor's drawing room, and that the assembly may only be dissolved after both Houses of Parliament approve. Use of the article fell substantially afterwards.

Indian federalism is also deliberately asymmetric. Article 371 and its lettered successors give special arrangements to states including Nagaland, Mizoram, Sikkim, Maharashtra, Gujarat, Andhra Pradesh and others, protecting customary law, land rights or regional development boards. The Sixth Schedule creates autonomous district councils with legislative powers in tribal areas of Assam, Meghalaya, Tripura and Mizoram. Delhi occupies an anomalous position under Article 239AA as a Union Territory with a legislature but without control of police, public order or land, a division that has produced repeated litigation and central legislation. In August 2019 the special status of Jammu and Kashmir under Article 370 was hollowed out by presidential order and parliamentary resolution, and the state was reorganised into two Union Territories, a step that critics argue exceeded constitutional limits and that has been the subject of extended litigation.

The direction of travel is disputed. Some argue that the Union has steadily accumulated power through fiscal leverage, investigative agencies and Governors. Others point out that coalition politics from 1989 to 2014 gave regional parties real influence in Delhi, that the GST Council forces genuine bargaining, and that on the ground it is state governments that deliver almost everything a citizen encounters. Both capture part of a system designed to lean either way.

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