How India Uses Cooperative Federalism Rhetoric

Cooperative federalism became a formal policy framework in India after 2014, when the newly elected BJP government abolished the Planning Commission — the primary channel through which the Centre had directed state-level development spending for 65 years — and replaced it with the NITI Aayog, with a stated mandate to foster "Team India" and "cooperative federalism." 

The government increased states' share of central tax devolution from 32% to 42% (subsequently revised to 41%) on the recommendation of the 14th Finance Commission, presenting this as an enhancement of state fiscal autonomy. GST — implemented in 2017 — was described as the defining exercise in cooperative federalism: a constitutionally embedded joint decision-making framework where Centre and states jointly set tax rates and administer a common tax through the GST Council. The term entered common governance vocabulary in India, referenced by Prime Ministers, NITI Aayog reports, and Finance Commission recommendations alike.

Representative Image: How India Uses Cooperative Federalism Rhetoric

The concept itself — cooperation between different levels of government rather than hierarchical direction from Centre to states — has genuine theoretical content and real instances in Indian governance: the GST Council's consensus-based decision-making on rate changes and exemptions has functioned reasonably well as a cooperative mechanism; the NITI Aayog's Governing Council (Prime Minister plus all Chief Ministers) provides an annual consultation forum; Finance Commission recommendations, arrived at after extensive state consultation, reflect a form of cooperative fiscal federalism. 

But the rhetoric has also consistently outrun the reality. The period in which "cooperative federalism" became the official framing — 2014 onwards — also saw increased Governor controversies, withdrawal of general consent for CBI by multiple states, farm laws passed without state consultation (and subsequently repealed), UAPA and ED deployment patterns that opposition states characterised as coercive, and National Education Policy implementation without legislative consensus from all states.

The Ground Reality

• NITI Aayog's Governing Council — Prime Minister plus all Chief Ministers and Lieutenant Governors — meets annually and discusses national policy priorities; it has addressed agriculture, health, water, urbanisation, and other developmental themes; it has no formal decision-making authority and produces no binding outcomes; meetings have been boycotted by some opposition Chief Ministers on specific occasions, including the 2019 meeting by four states.
• The GST Council has functioned with greater regularity than any previous Centre-state fiscal forum; it has met approximately 50+ times since 2017 and made recommendations on hundreds of rate changes and policy issues; the Supreme Court confirmed in Mohit Minerals (2022) that its recommendations are non-binding, preserving state legislative autonomy; major disputes — including compensation defaults and petroleum inclusion — have not been resolved by the Council's consultative mechanism.
• The 2020 farm laws — three central agricultural marketing laws passed without meaningful consultation with state governments, which have jurisdiction over agricultural markets — were a paradigmatic case of central legislation on a sensitive state subject without federal negotiation; they were repealed in November 2021 after sustained farmer protests primarily from Punjab and Haryana; Punjab and Chhattisgarh had passed state laws rejecting the central farm laws before the repeal.
• The National Education Policy (NEP) 2020 was developed through consultations (over 2 lakh suggestions received) but without legislative buy-in from all state governments; Tamil Nadu's opposition to the three-language formula in NEP 2020 — which it characterised as Hindi imposition — illustrates how central education policy, even when consultatively developed, can collide with state political economy around language identity.
• Drishti IAS's "Frictions in Centre-State Relations" analysis (2023) documented that federal friction had increased between 2021 and 2023: states reverting to the Old Pension Scheme (rather than central NPS), fiscal concentration of central spending in three largest states, and reduced actual (as opposed to announced) CSS transfers to opposition states.

How It Works in Practice

1. Where cooperative federalism genuinely operates: The GST Council's regular functioning — with Finance Ministers from all states and the Centre meeting quarterly to make recommendations on the country's most important tax system — is the clearest genuine instance of cooperative federalism in India's contemporary governance. Decisions have been made by consensus in most cases. The Finance Commission consultation process, where states' Finance Secretaries and Chief Ministers present their cases to the Commission, is another genuine cooperative fiscal forum.

2. NITI Aayog as a cooperative framework: The Governing Council meetings, NITI Aayog's Aspirational Districts Programme (working with backward districts in states on specific governance targets), and NITI Aayog's performance index publications represent genuine forms of cooperative engagement between Centre and states — even if the Centre directs the agenda and the outcomes are advisory rather than binding.

3. Centrally Sponsored Schemes as constrained cooperation: CSS represent a form of cooperative implementation — Centre designs and co-finances, states implement. But the design responsibility rests entirely with the Centre, the conditions are set centrally, and states that disagree with the scheme design can only accept or forgo the funds. This is cooperation in implementation but not in design — closer to conditioned grant-giving than genuine federal partnership.

4. Where the cooperative label obscures hierarchy: Central legislation on state-adjacent subjects without state legislative consent — farm laws, labour codes, national education policy, dam safety legislation — represents the Centre using its constitutional legislative advantage rather than cooperative negotiation. Calling this "cooperative federalism" when states had not consented to the policy direction conflates consultation with agreement.

5. The political economy of cooperative federalism: Cooperative federalism functions best when Centre and states share political alignment — when the same party or allied parties govern both levels, conflict is managed internally; when different parties govern at Centre and in states, the same constitutional and institutional mechanisms that are called cooperative when aligned become arenas of political conflict. The concept is politically mediated, not constitutionally automatic.

What People Often Misunderstand

• Cooperative federalism and central hegemony can coexist: Increasing fiscal devolution to states (from 32% to 41%) is a genuine increase in state fiscal resources; simultaneously passing legislation on state-adjacent subjects without state consent is a genuine assertion of central authority; both can happen simultaneously without contradiction.
• GST is both cooperative and centralising: The GST Council is a genuine cooperative fiscal institution; the replacement of states' own VAT and entry tax powers with centrally-administered CGST+SGST has simultaneously reduced states' independent tax-setting authority; the institution is cooperative, but the overall fiscal federal design gave the Centre more control over the indirect tax system than states had before.
• The label matters less than the mechanisms: Whether India's federal system is "cooperative" depends less on what it is called and more on whether states have genuine voice in central decisions that affect them, genuine fiscal autonomy to make their own policy choices, and genuine protection against central overreach — questions that require examining specific mechanisms rather than accepting official characterisations.
• NITI Aayog is not the Planning Commission: The Planning Commission allocated discretionary development grants to states with strong conditionality and significant central direction; NITI Aayog has no financial allocation authority and functions as a policy advisory body; its "cooperative federalism" is a different kind of federalism, involving advice rather than conditional finance.
• Opposition boycotts of NITI Governing Council meetings reflect political rather than institutional failure: When Chief Ministers boycott Governing Council meetings, it is a political expression of their relationship with the central government rather than an institutional failure of the Governing Council design.

What Changes Over Time

The 16th Finance Commission's framework (2026–31) continues the cooperative federal fiscal machinery that has operated since 1951, with its performance-based criteria representing a new institutional signal. The post-GST fiscal landscape — after the compensation guarantee expired in 2022 — has made the GST Council a more contested forum as states' fiscal interests diverge from the Centre's. The ongoing state-level resistance to NEP language provisions in southern states represents the latest episode of state-federal cultural politics. The 131st Amendment on Lok Sabha expansion is generating a new cooperative/competitive dynamic around demographic and representational federalism.

Sources and Further Reading

• Drishti IAS — Cooperative and Competitive Federalism: https://www.drishtiias.com/to-the-points/Paper2/cooperative-and-competitive-federalism-in-india
• Next IAS — NITI Aayog and Deepening Federalism: https://www.nextias.com/ca/editorial-analysis/04-06-2025/niti-aayog-deepening-federalism-india
• Anantam IAS — Federalism in India: https://anantamias.com/federalism-india/
• IJIRL — Cooperative Federalism in India: https://ijirl.com/wp-content/uploads/2025/05/COOPERATIVE-FEDERALISM-IN-INDIA-NAVIGATING-THE-INTERPLAY-OF-COLLABORATION-AND-COMPETITION-IN-A-DIVERSE-NATION.pdf
• The Academic — Changing Role of Centre-State Relations 2014-2024: https://theacademic.in/wp-content/uploads/2024/06/56.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.)