How Federalism Works in India in Practice

India's Constitution describes the country not as a "federation" but as a "Union of States" — a deliberate choice by the drafters to signal that Indian unity was not contingent on a voluntary compact among pre-existing sovereign states. The distinction matters: Indian states have no right to secede, no independent constitutions, and — unlike American states — no residual sovereignty over domains not assigned to them. Constitutional scholar K.C. Wheare described India's system as "quasi-federal": it has the formal architecture of a federation — written constitution, division of powers, independent judiciary — but its operational tilt consistently favours the Centre over the states. Emergency provisions (Articles 352–356) can temporarily convert the federation into near-unitary rule; the Governor (appointed by the Centre) presides over each state; the all-India services (IAS, IPS, IFS) serve both Centre and states under central control; and residual powers vest in Parliament rather than the states.

Representational Image: How Federalism Works in India in Practice

This formal structure, however, does not capture the full complexity of how India actually governs. In practice, federal dynamics are shaped as much by political configurations as by constitutional text. When different parties control the Centre and multiple large states simultaneously — as has been frequent in the periods of coalition government and opposition state dominance — the federation operates with considerably more state assertiveness and inter-governmental negotiation than the constitutional design alone suggests. The GST Council, where both Centre and states vote and make recommendations; the Finance Commission, which determines resource devolution; the Inter-State Council (Article 263), convened periodically for policy dialogue; and the judicial recourse available to states under Article 131 — these mechanisms create real arenas of federal negotiation that sit alongside the Constitution's formal power hierarchy.

Essential Context

• India has 28 states and 8 union territories; union territories are governed directly by Parliament (even on State List subjects) under Article 240 and through Lieutenant Governors or administrators appointed by the President; the largest union territory, Delhi (NCTD), has a legislative assembly with limited powers, subject to ongoing Centre-state conflict resolved partly by the Government of NCT of Delhi (Amendment) Act, 2021 and Supreme Court judgments.
• The Finance Commission under Article 280 — constituted every five years — determines vertical devolution (Centre to states) and horizontal devolution (among states); the 16th Finance Commission (covering 2026–31) retained states' share at 41% of the divisible pool; states argue this should be 50% given rising state fiscal responsibilities.
• Centrally Sponsored Schemes (CSS) — where the Centre provides conditional grants to states to fund programmes in State List or Concurrent List domains — are a major mechanism of central policy influence; states must match Centre contributions and comply with scheme guidelines; the CSS system has been criticised for reducing state fiscal autonomy and accountability.
• The GST Council — constituted under Article 279A — brings together the Union Finance Minister and state Finance Ministers to make recommendations on GST rates, exemptions, and administration; the Supreme Court in Union of India v. Mohit Minerals (2022) held that GST Council recommendations are non-binding on Parliament and state legislatures, preserving some state legislative autonomy.
• Article 131 grants the Supreme Court original jurisdiction over disputes between the Union and one or more states, or between two or more states — making the court the constitutional forum for inter-governmental legal disputes; states have used this jurisdiction to challenge central policies including river water allocation, GST compensation delays, and fiscal transfers.

How It Works in Practice

1. Political federalism and party competition: The Constitution's formal Centre-heavy design operates very differently when opposition parties control large states than when a single party dominates both Centre and states. From 2014–2024 (NDA majority at Centre with multiple opposition state governments), federal dynamics involved significant friction over: state police and investigation agencies vs central agencies (CBI, ED); Governor controversies in Tamil Nadu, Kerala, Punjab; GST compensation disputes; state resistance to central agricultural and labour law reform.

2. Centrally Sponsored Schemes as policy instruments: Through CSS, the Centre shapes policy delivery in Education, Health, Rural Development, and Housing — all Concurrent or State List subjects. States implement schemes designed centrally, with central monitoring. The abolition of the Planning Commission in 2015 reduced one channel of central transfers but Centrally Sponsored Schemes remain the primary vehicle for conditional central grants to states.

3. All-India Services and bureaucratic federalism: IAS officers serve both central ministries and state governments, with service conditions controlled centrally. This means a state government may find its own Chief Secretary or Home Secretary transferred on central direction, or may be unable to post an officer who is regarded as politically problematic by the Centre. This gives the central government a bureaucratic lever over state administration that has no equivalent in classic federal systems.

4. Cooperative federalism since 2015: The NITI Aayog replaced the Planning Commission in 2015, redesigned as a think-tank rather than a resource-allocating body. The government has emphasised "cooperative federalism" — Centre and states working as partners. The GST Council's consensus mechanism, the Chief Ministers' meetings on national policy issues, and the Finance Commission's consultation process are institutional expressions of this aspiration.

5. Competitive federalism: States compete for investment, central scheme allocations, and rankings on governance indices. This competition has produced differentiated state policies on labour flexibility, land acquisition, industrial licensing, ease of business, and welfare delivery. Constitutional scholars debate whether competitive federalism — where states offer different regulatory environments — is a healthy feature or a race to the bottom on labour and environmental standards.

What People Often Misunderstand

• State governments are not powerless: On State List subjects — particularly police, law and order, agriculture, land, and local governance — state governments exercise extensive real authority that shapes daily governance more directly than most central legislation.
• The Centre cannot simply override states on State List subjects outside emergencies: While the Centre has routes to legislate on State List subjects, using them requires either a Rajya Sabha resolution (two-thirds majority), a national emergency, or state consent; routine central override of state authority on their exclusive subjects is constitutionally difficult.
• The Governor is not automatically a Centre agent: The Governor is constitutionally bound to act on the advice of the state Council of Ministers on most matters; the Supreme Court's 2025 Tamil Nadu judgment has reinforced that Governors who act as partisan agents of the Centre violate constitutional norms.
• Federal conflicts are often political, not constitutional: Many Centre-state disputes are politically driven — between different parties — rather than constitutional conflicts over jurisdiction; the constitutional framework provides the terrain, but political calculation drives the contest.
• India's federation has become more contested as state governments strengthen: The rise of regional parties since the 1990s, the formation of coalition governments at the Centre from 1996 to 2014, and the subsequent assertion of state political identity have produced a more genuinely contested federal politics than the Constitution's formal Centre-heavy design might suggest.

What Changes Over Time

The 16th Finance Commission's shift toward performance-based criteria in horizontal devolution — giving more weight to GDP contribution — marks a potential long-run change in federal fiscal incentives, rewarding economically productive states rather than distributing primarily on equity grounds. The ongoing Supreme Court jurisprudence on Gubernatorial powers, the GST compensation settlement process, and the delimitation debate (which affects state representation in Parliament) are all active sites of federal evolution. The proposed 131st Constitutional Amendment on Lok Sabha expansion will have direct implications for how states are represented at the Centre.

Sources and Further Reading

• Anantam IAS — Federalism in India: https://anantamias.com/federalism-india/
• I-Connect Blog — Cooperative Federalism to Coercive Federalism: https://www.iconnectblog.com/cooperative-federalism-to-coercive-federalism-how-gubernatorial-discretion-in-practice-is-rewriting-indian-federalism/
• PRS Legislative Research — 16th Finance Commission Report: https://prsindia.org/policy/report-summaries/report-of-the-16th-finance-commission-for-2026-31
• Centre-State Relations — Supreme Court Article 131 jurisdiction: https://main.sci.gov.in/jurisdiction/
• The IJNRD — Federalism and Centre-State Relations in Contemporary India: https://www.ijnrd.org/papers/IJNRD2510015.pdf

(This series is part of a long-term editorial project to explain the structures, institutions, and practical realities of governance in India for a global audience. Designed as a 25-article briefing cluster on Federalism, States & Centre–State Relations, this vertical examines how power, money, and authority are distributed between New Delhi and India's states — from the Seventh Schedule, fiscal federalism, GST, Governors, and central agencies to Centre–state disputes, regional parties, and the evolving balance of the Indian Union. Written in an accessible format for diplomats, investors, researchers, academics, journalists, students, policymakers, civil society organisations, and international observers, the series seeks to explain both the constitutional design of Indian federalism and the political realities through which it operates in practice. This is Vertical 4 of a larger 20-vertical knowledge architecture being developed by IndianRepublic.in under the editorial direction of Saket Suman. All articles are protected under applicable copyright laws. All Rights Reserved.)