Federalism is a system of government in which power is divided between a central authority and constituent political units, such as states or provinces. India is a federal state, but it is a federation with a strong centre. The Constitution establishes a dual system of government: the Union government at the centre and state governments in the states, each with clearly defined powers. However, the division of powers is designed in a way that gives the centre greater authority in certain matters.
The word 'federation' is not used in the Constitution, but the nature of the Indian state is clearly federal. The Constitution provides for a division of powers between the centre and the states through the Union List, State List and Concurrent List, and establishes a common Constitution, an independent judiciary to settle disputes, and a single citizenship. At the same time, several unitary features give the centre special strength, making India a unique federal system.
Federalism is a system in which governmental power is divided between two or more levels of government, each with its own jurisdiction. In a federation, the constitution is the supreme law, the central and regional governments are not subordinate to each other but coordinate within their spheres, and disputes between the levels are resolved by an independent judiciary. Each level of government has its own executive, legislature and administrative machinery.
There are two main kinds of federations. In a 'coming together' federation, independent states unite to form a larger nation, as in the USA. In a 'holding together' federation, a large country decides to divide its power between the centre and the states, as in India. In coming-together federations, constituent states usually have equal power and are strongly entrenched, while in holding-together federations, the centre tends to be stronger.
The Indian Constitution establishes a federal structure with a clear division of powers. Article 1 describes India as a 'Union of States', not a federation of states. The union is indestructible, which means no state can secede from India. The Constitution provides for a single citizenship, a single judiciary, and the supremacy of the Constitution, all of which are federal features.
The framers chose a federal system because India is a vast and diverse country. Federalism allows regional diversity to be accommodated while maintaining national unity. The Constitution lists the subjects on which the centre and states can legislate, divides revenue sources, and provides mechanisms for cooperation and conflict resolution between the two levels of government.
The Seventh Schedule of the Constitution contains three lists that divide legislative powers between the centre and the states. The Union List contains subjects of national importance, such as defence, foreign affairs, railways, currency, banking and communications, on which only the Union Parliament can legislate. The State List contains subjects of regional and local importance, such as police, public health, agriculture and local government, on which only the state legislatures can legislate.
The Concurrent List contains subjects of common interest, such as education, forests, marriage and divorce, criminal law and trade unions, on which both the centre and the states can legislate. When there is a conflict between central and state laws on a concurrent subject, the central law prevails. Residuary powers, covering subjects not mentioned in any list, belong to the Union Parliament.
The Union List has about 100 subjects and includes defence, foreign affairs, banking, currency, railways, posts and telegraphs, and inter-state commerce. The State List has about 61 subjects and includes police, public health, agriculture, irrigation, fisheries, and local government. The Concurrent List has about 52 subjects including education, forests, marriage and divorce, adoption, and trade unions.
The dominance of the Union List, the large number of subjects of national importance in it, the residuary powers of the centre, the overriding power of Parliament in concurrent matters, and the appointment of the Governor by the President all tilt the balance of power towards the centre. This is why the Indian federal system is often described as a quasi-federal or unitary-in-federal system.
Several provisions make the Indian federation strong at the centre. There is a single citizenship, a single Constitution, a single judiciary, and a single civil service. The centre has residuary powers, and in concurrent matters central law prevails. The President can appoint the Governor of a state, and under Article 356 can impose President's rule in a state if the constitutional machinery fails. During a national emergency, the centre can take over the administration of states.
The centre also enjoys financial superiority. The most lucrative taxes, such as income tax, corporation tax, customs and excise duties, are levied by the centre. The states depend heavily on grants and shares of central taxes, which are distributed by the Finance Commission. This financial dependence is a major reason for the strength of the centre in Indian federalism.
The Constitution provides a clear division of revenue sources. The centre raises taxes on income (except agricultural income), customs duties, corporation tax and excise duties. The states raise taxes on agricultural income, land revenue, stamp duties, and taxes on entertainment and professions. The centre shares some taxes with the states, and the Finance Commission (Article 280) recommends the distribution of taxes between the centre and the states.
The Constitution also provides for grants-in-aid from the centre to the states and for loans to be given to states by the centre. This financial structure creates interdependence but also gives the centre leverage. States that need additional funds must often depend on the centre, which strengthens central authority in fiscal matters.
The Constitution provides special provisions for certain states to protect their regional identities and interests. Article 370 (now abrogated in 2019) gave special status to Jammu and Kashmir. Special provisions exist for the north-eastern states, such as Nagaland (Article 371A), Assam, Manipur and Arunachal Pradesh, which protect their customary laws and land rights. These provisions recognise the diversity of the country and allow flexibility in the federal arrangement.
Special provisions also include the creation of new states, alteration of boundaries, and the institution of the Governor to act as a link between the centre and the states. The Zonal Councils, established under the States Reorganisation Act 1956, provide a forum for cooperation between the centre and the states and among states.
Centre-state relations in India operate at three levels: legislative, administrative and financial. Legislative relations are governed by the three lists, with the centre dominant in the Union and Concurrent Lists and holding residuary powers. Administrative relations are managed through the Governor, All India Services, and various coordinating bodies. Financial relations are governed by the Finance Commission and the sharing of taxes.
Conflicts between the centre and states can arise, and the judiciary resolves them. The Supreme Court settles disputes between the centre and states under its original jurisdiction. The smooth working of Indian federalism requires mutual trust and cooperation, and mechanisms such as the NITI Aayog, the Interstate Council and Zonal Councils have been created to foster cooperative federalism.
The 73rd and 74th Constitutional Amendments (1992) added a third tier to Indian federalism by constitutionally establishing panchayats and municipalities as institutions of local self-government. This decentralisation brought democracy closer to the people and created a three-tier system of government: the centre, the states and the local bodies. This is discussed in detail in the chapter on Local Governments.
| List | Number of Subjects | Examples |
|---|---|---|
| Union List | About 100 | Defence, foreign affairs, railways, currency, banking |
| State List | About 61 | Police, public health, agriculture, local government |
| Concurrent List | About 52 | Education, forests, marriage, criminal law, trade unions |
| Federal Features | Unitary Features |
|---|---|
| Division of powers (three lists) | Single citizenship |
| Written and supreme Constitution | Single Constitution and judiciary |
| Independent judiciary to settle disputes | Residuary powers with centre |
| Bicameral legislature (Rajya Sabha) | Central law prevails in concurrent matters |
| Dual government | Governor appointed by President |
| Financial autonomy of states | Article 356 President's rule |
Federalism is the arrangement through which power is divided between the centre and the states to reconcile national unity with regional diversity. The Indian Constitution creates a federation with a strong centre through the Union, State and Concurrent Lists, residuary powers with the centre, financial superiority and unitary features. Yet, the states have substantial autonomy within their spheres, and cooperative mechanisms help resolve centre-state tensions. The addition of local governments as a third tier has deepened federalism and democracy. Indian federalism is thus a dynamic balance between unity and diversity.