The Functioning of the Federal System in India: Challenges and Dynamics

On paper, India is a union of two distinct levels of government, each with its own sphere of authority. In practice, the relationship between the centre and the states has rarely been one of equal partners. The Constitution itself tilts the balance toward the union, and over the decades the central government has steadily expanded its reach into areas that the states once considered their own. Yet this is not a one-way story of domination. Courts have intervened, commissions have recommended restraint, and new institutions have tried to rebuild trust through collaboration. Understanding how the federal system actually works means looking at this constant tug-of-war between centralisation and cooperation.

A federation with a built-in centralising tilt 🔗

The Constitution divides legislative powers between the union and the states through three lists in the Seventh Schedule: the Union List, the State List, and the Concurrent List. The arrangement looks balanced, but the design favours the centre in several ways. The Union List contains more subjects than the State List, and when union and state laws clash on a Concurrent List subject, the union law prevails. Residuary powers, meaning authority over any subject not mentioned in any of the three lists, rest with the union government under Article 248. This is the opposite of the United States, where residuary powers belong to the states.

This is why scholars have long described the system in qualified terms. Constitutional expert K.C. Wheare called India a quasi-federal state, a “federation with unitary bias.” Ivor Jennings described it as a federation with a strong centralising tendency. The framers made this choice deliberately. The trauma of Partition and the fear of separatist movements convinced many leaders that a strong centre was essential to hold the country together. The very first article of the Constitution, which declares India to be a “Union of States,” signals that the states cannot claim sovereignty or break away, and that even their boundaries can be redrawn by Parliament alone.

How the centre expands into state territory 🔗

Beyond the constitutional design, the union government has found practical ways to grow its influence. One method is the expansion of legislative competence, where the centre uses its dominance over the Concurrent List and its residuary powers to legislate on matters that touch state subjects. Another is the financial route. For decades, the Planning Commission directed development spending across the country, deciding how much money flowed to which state and for what purpose. Because states depended heavily on these central transfers, the planning process became a powerful lever of central control.

The Governor and the emergency provisions 🔗

Two features stand out as instruments of central influence. The first is the office of the Governor. Governors are appointed by the President on the advice of the union government, and they are usually not residents of the states they serve. In times of political instability, a Governor’s report can trigger central intervention, and the office has frequently been criticised for being used to destabilise state governments run by parties different from the one in power at the centre.

The second, and far more contentious, is Article 356, which allows the imposition of President’s Rule when the constitutional machinery in a state breaks down. During this period the union effectively takes over the administration of the state. The history of this provision is troubling. In the late 1970s and early 1980s, when opposition parties governed many states, the centre repeatedly invoked Article 356 to dismiss elected governments. The scholar Bhagwan D. Dua argued that the excessive use of President’s Rule had reduced the autonomy of states to a farce. This period of confrontational federalism, with regional movements emerging in Punjab, Assam, and elsewhere, exposed how fragile the balance had become.

The checks: courts and commissions push back 🔗

The centralising drift did not go unchallenged. Two forces in particular worked to restore balance and protect the federal principle.

The Sarkaria Commission 🔗

By the early 1980s, friction between the centre and the states had become one of the most contested areas of Indian politics. To examine the strained relationship, the government set up the Sarkaria Commission in 1983, chaired by retired Supreme Court judge Justice Ranjit Singh Sarkaria. After years of consultation, the Commission submitted its report in 1988 with 247 recommendations covering legislative, administrative, and financial relations.

Its most influential recommendations addressed precisely the points of friction. On Article 356, the Commission insisted it should be invoked very sparingly and only as a measure of last resort, after all alternatives had been exhausted. It recommended issuing a warning to the errant state first and considering any explanation offered. On Governors, it argued they should be impartial figures, ideally from outside the state, and clarified that a Governor reporting under Article 356 is not an agent of the centre but answerable to the Constitution. The Commission also proposed setting up a permanent Inter-State Council under Article 263 to institutionalise dialogue, and it defended the All-India Services as a unifying thread rather than a threat to state autonomy.

The S.R. Bommai judgment 🔗

What the Sarkaria Commission recommended, the Supreme Court later turned into binding constitutional doctrine. The landmark case came in 1994, when a nine-judge bench decided S.R. Bommai v. Union of India, arising from the dismissal of the Karnataka government under Article 356. The Court delivered several rulings that reshaped centre-state relations.

It held that the imposition of President’s Rule is subject to judicial review, meaning courts can examine whether the action was based on relevant material rather than political motive. It mandated that the majority of a government must be tested on the floor of the Assembly, not decided by a Governor’s subjective opinion. Most significantly, the Court declared that federalism and secularism are part of the basic structure of the Constitution, which means they cannot be casually overridden. The judgment affirmed that state governments are not mere appendages of the centre, striking a balance between national unity and state autonomy. Together, the Sarkaria report and the Bommai verdict drastically reduced the arbitrary dismissal of state governments.

Cooperative federalism: governing together 🔗

Even with a strong centre, the federal system cannot function through domination alone. The sheer scale of national development requires the two levels of government to work together. Granville Austin, observing this need, described the Indian model as cooperative federalism, noting that the strong centre was never meant to reduce states to mere administrative agencies. This idea of partnership has become central to how the system operates today.

From the Planning Commission to NITI Aayog 🔗

The shift away from top-down planning is one clear sign of this change. In 2015, the government abolished the Planning Commission, which had directed state-level development spending for decades and was criticised as centralising, and replaced it with the NITI Aayog. The new body was designed as a think-tank that brings states together as “Team India,” emphasising a more collaborative approach and encouraging states to take ownership of their development agendas. It also promotes competitive federalism, ranking states on parameters like ease of doing business and sustainable development to spur healthy rivalry. Around the same time, the 14th Finance Commission raised the states’ share of central tax revenue, presenting this as a boost to fiscal autonomy.

The GST Council 🔗

The clearest institutional experiment in cooperative federalism is the Goods and Services Tax, introduced in 2017. GST replaced a tangle of separate central and state taxes with a single unified system, creating a common national market. Decisions on rates and policies are made by the GST Council, comprising the Union and all state finance ministers, working through shared decision-making. It is a constitutionally embedded forum where both levels of government negotiate jointly. Even so, critics note that the centre retains significant weight in the Council, raising questions about how equal the cooperation truly is.

An ongoing balancing act 🔗

The working of the federal system is best understood as a dynamic equilibrium rather than a fixed arrangement. The constitutional design leans toward the centre, and political practice has often pushed that tilt further through tools like the Governor’s office and Article 356. But the judiciary and expert commissions have repeatedly intervened to defend state autonomy, while institutions like NITI Aayog and the GST Council attempt to rebuild the relationship on cooperative terms. Tensions have not disappeared. Disputes over Governors, fiscal sharing, and central agencies continue to surface. What keeps the system stable is the recognition that neither level of government can deliver national development or maintain constitutional order alone. The centre needs the states to implement, and the states need the centre to coordinate.

What do you think? Does India’s strong centre genuinely strengthen national unity, or does it risk hollowing out the autonomy that makes federalism meaningful? And as the country relies more on bodies like the GST Council, can shared decision-making survive when one partner clearly holds the upper hand?

References

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