Understanding India's Federal Structure

Reference library · 1014 words

The first article of the Indian Constitution declares that India, that is Bharat, shall be a Union of States. The wording was deliberate. The drafting committee chose Union rather than Federation to signal that the country was not created by a bargain among pre-existing sovereign states that might later withdraw, as the American colonies were once argued to have been. B R Ambedkar told the Constituent Assembly that the union was indissoluble and that its states derived their existence from the Constitution itself. Yet the machinery that follows is unmistakably federal: two levels of government, each with its own legislature, executive and revenue, and a written division of powers policed by the courts. Political scientists have been arguing about the label ever since, and the description most often used is quasi-federal, a phrase associated with the constitutional scholar K C Wheare.

The division of powers sits in the Seventh Schedule, which sets out three lists. The Union List covers defence, foreign affairs, currency, atomic energy, railways, banking and interstate commerce. The State List covers police, public order, public health, agriculture, land and local government. The Concurrent List, where both may legislate, covers education, criminal law, forests, marriage and succession, electricity and economic and social planning. Where laws conflict on a concurrent subject, the central law prevails unless the state law has received the President's assent. Anything not on any list falls to the Union. Compared with the American or Australian constitutions, where undelegated powers rest with the states, this arrangement leans towards the centre from the start.

Where the centre reaches into the states

Three mechanisms in particular give the Union leverage. The first is the office of governor. Each state has a governor appointed by the President, meaning in practice by the central government, who holds office at the President's pleasure. The governor gives or withholds assent to state bills, may reserve them for the President, and reports to the centre on the state's affairs. Because governors are political appointees, their handling of chief ministerial appointments after inconclusive elections and their delay of bills passed by opposition-run states have produced repeated litigation and repeated accusations of partisanship.

The second is Article 356, President's Rule, under which the Union may dismiss a state government and assume its functions if the governor reports that the state cannot be carried on in accordance with the Constitution. It was used well over a hundred times in the first four decades of the republic, frequently against governments run by parties opposed to the one in Delhi. The Supreme Court curtailed the practice decisively in S R Bommai v Union of India in 1994, holding that a proclamation is subject to judicial review, that a ministry's majority must be tested on the floor of the assembly rather than judged by the governor, and that the dissolution of the assembly should await parliamentary approval. Use of the power fell sharply afterwards, which is a good illustration of a court altering the working balance of a federation without amending a word of text.

The third and most powerful lever is money. States carry the heavier spending responsibilities, running schools, hospitals, police and roads, while the more elastic taxes are collected centrally. The gap is bridged by a Finance Commission, appointed under Article 280 roughly every five years, which recommends what share of central tax revenue should be devolved to the states and how it should be distributed among them. The Fifteenth Finance Commission recommended that forty one per cent of the divisible pool go to the states. Two persistent grievances complicate this. Central levies described as cesses and surcharges are not part of the divisible pool, so their growth reduces what states actually receive. And devolution formulas that reward population create a sense of grievance in the southern states, which reduced their fertility earliest and feel penalised for it. The same arithmetic underlies anxiety about the delimitation of parliamentary seats, frozen since the 1970s, whose eventual revision could shift seats from south to north.

Pooled sovereignty, local government and asymmetry

The most significant recent change to Indian federalism was the goods and services tax, introduced on 1 July 2017 after a constitutional amendment. It replaced a thicket of central and state indirect taxes with a single system, and in doing so required states to surrender independent power over most indirect taxation. In exchange they sit on the GST Council with the Union finance minister, a body that sets rates by a weighted voting formula in which the centre holds a third of the votes and the states together two thirds, with a three quarters majority required to carry a decision. It is a genuine experiment in pooled sovereignty, and it has been strained, notably over the compensation payments promised to states for revenue losses during the pandemic years.

Below the states sits a third tier. Constitutional amendments passed in 1992 gave mandatory status to panchayats in rural areas and municipalities in towns, requiring regular elections, reserving seats for scheduled castes, scheduled tribes and women, and providing for state finance commissions. Their practical strength varies enormously between states because the transfer of functions, funds and functionaries was left to state legislatures, many of which have been reluctant to devolve.

Indian federalism is also deliberately asymmetric. Article 371 and its lettered sub-articles give special arrangements to Nagaland, Mizoram, Sikkim, Manipur, Maharashtra, Gujarat, Andhra Pradesh and others, often protecting customary law, land ownership or regional development boards. The map itself has been redrawn repeatedly: the States Reorganisation Act of 1956 recast state boundaries along linguistic lines after mass agitation, Telangana was carved out of Andhra Pradesh in 2014, and in August 2019 Jammu and Kashmir was stripped of the special status conferred by Article 370 and split into two union territories, a step upheld by the Supreme Court in December 2023 but still politically contested. Parliament can create, merge or rename states by simple majority, and a state's own legislature can only be asked its views, not obeyed. That single fact captures the design: a federation in normal working, with a strong unitary reserve.

Back to the library