Federalism – Definition, Feature – Indian Polity Notes for Competitive Exams

Federalism: Indian Polity for Competitive Exams with a Focus on Federal Governance

To prepare for INDIAN POLITY Understanding federal governance, a crucial aspect of the polity syllabus (GS-II), is essential. Federalism is a system where power is divided between regional and national governments. Each government operates independently in its own domain, with the constitution delineating powers between the Union (central) and State governments. States and the Union government are autonomous within their areas of authority, ensuring a balanced distribution of power.

“FEDERALISM IS LIKE A RAINBOW, WHERE EACH COLOUR IS SEPARATE, YET TOGETHER THEY MAKE A HARMONIOUS PATTERN”

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Federalism: Understanding the Essence of Agreement and Autonomy in Indian Polity

• Federalism is an institutional mechanism to accommodate two sets of polities: At regional level and at the national level. Each government is autonomous in its own sphere.
• Federalism originates from the Latin term “foedus,” which means agreement.
  • A federation is an arrangement where two types of governments share power and manage their respective areas.
  • This system combines national and local governments under a common sovereignty, with both national and federating units having autonomous domains assigned by the constitution..
    
• There is a constitutional division of powers between the national & regional governments and both operate in their respective jurisdictions independently.
• Federation is a new state (political system) which is formed through a treaty or an agreement between the various units and known by different names- provinces (In Canada), states (in USA), and republics (in Russia).
• While the term “federation” is not explicitly used in the Indian Constitution, Article 1(1) states that India, known as Bharat, shall be a Union of States.
  • This concept is reinforced by the First Schedule, which delineates the states and territories within the Union, emphasizing the federal structure of India’s governance. 

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EVOLUTION OF INDIAN FEDERALISM and its Unique Character

• The American Constitution is the oldest federation, adopted in 1787. It established the framework for the federal government and remains a foundational document in American governance.
• The Canadian constitution is federal in nature with a strong centre.
• Taking healthy part of both US and Canadian constitution, Indian constitution is “federal in nature but unitary in spirit”
• Residuary Subject: rests with centre, a model adopted by India from Canada
• Indian federation system is based on Canadian model on account of–
  • Formation: By way of disintegration.
  • Preferences: Preferred the term ‘Union’.
  • CentralisingTtendencies: Vesting more powers in the centre.
• The term ‘Union of States’ is preffered instead of ‘Federation of States‘ to signify that:
  • The Indian federation is not formed by an agreement among the states.
  • States do not have the right to secede from the union
• Indian constitution: “Indestructible union of destructible states”
• US constitution: “Indestructible union of indestructible states”
• Phrase “federation” is nowhere mentioned in the constitution.
• “India federation is a case sui generis” (i.e. unique in character).
• “Federal character of Indian constitution” is a basic feature of the constitution.
• The Indian Constitution is mainly federal, with unique safeguards for enforcing national unity and growth.

“Indian Constitution avoids the tight mould of federalism and could be both unitary as well as federal according to the requirements of time and circumstances”- B. R. Ambedkar 

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Constitutional Dynamics of Indian Federalism: ‘Union of States’ Principle 

• S.R. Bommai case (1994): SC laid down that the Indian Constitution is federal and characterized federalism as its ‘basic feature’.
• Article 1: of the Constitution states, “India, that is Bharat, shall be a Union of States”.
  • While the Constitution doesn’t mention the term “federal”, it does provide for a governance structure that is primarily federal in nature.
  • It provides for separate governments in the Union and in the states.
  • Additionally, it defines and delineates the powers, functions, and jurisdictions of the two levels of government.
  • Finally, it outlines the legislative, administrative, and financial relationships between the Union and the states.
• Legislative powers are divided into three lists: the Union List, the State List, and the Concurrent List.
  
  • Parliament: holds exclusive authority to legislate on matters in the Union List.
    
  • States: have exclusive powers to legislate on items in the State List, but
  • Parliament can legislate on these matters under certain conditions.
    
  • The Concurrent List presents a more complex scenario.
    
    • In case of a conflict between state and central legislation on matters in the Concurrent List, parliamentary legislation takes precedence.
      
  • The residuary powers of legislation are vested in the Union, which gives a “unitary” tilt to India’s federal structure.
• Since 1950, a troubling trend has emerged: while the Union and Concurrent Lists have grown, the State List appears to have diminished.
  • This has prompted many to question the structure of Indian federalism and suggest the need for its restructuring.

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Federalism: A Comparative Analysis of Unitary and Federal Governance Models

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Federalism: Dual Landscape of Indian Governance

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Competitive Federalism in India: Vertical and Horizontal Dynamics in Governance

• In competitive federalism, the relationship between the central and state governments is vertical, while the relationship among state governments is horizontal.
• The concept of competitive federalism gained prominence in India following the economic reforms of the 1990s.
• In a free-market economy, states’ endowments, resource bases, and comparative advantages encourage a competitive spirit.
• However, increasing globalisation has exacerbated existing inequalities and imbalances between states.
• In competitive federalism, states must compete among themselves and with the central government for benefits.
• Healthy competition aims to improve both physical and social infrastructure within the states.

Cooperative vs. Competitive Federalism: What Sets Apart the Governance Models in India?

• India opted for quasi-federal structure after independence.
• Although the term “federal” is not explicitly mentioned in the constitution, Indian democracy operates on a federal structure.
  
• The practical application of federalism in India has led to the emergence of cooperative federalism and competitive federalism.
  
• The current government emphasises the importance of utilizing cooperative and competitive federalism to achieve comprehensive inclusive development in India.
  
• Cooperative and competitive federalism complement each other.
  In this context, it is necessary to explore the concepts of cooperative and competitive federalism.
  
• Federalism is categorized into cooperative federalism and competitive federalism based on the relationship between the central and state governments.

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Competitive Federalism in India: Challenges and Bridging Trust Gaps in Centre-State Relations

• Various challenges, such as a widening trust deficit and reduction in divisible pools, impact Centre-State relations, hindering complete cooperation.
  
• Many state governments perceive the emphasis on federalism as being confined to lofty ideals and rhetoric, rather than substantive action.
• In letter, the Centre has increased the States’ share of the divisible pool but in sprit, reality States are getting a lesser share.
  • The allocation for various social welfare schemes has decreased, negatively impacting the well-being of states.
    
• It is premature to determine whether the current interstate competition to attract investments will indeed promote sustained patterns of competitive investment.
• The socio-economic parameters and development of each State in India are different, and while a few have made substantial progress in terms of employment, literacy and creating a conducive environment for doing business and investments, there are a few which are lagging.
• There are varied economic patterns in different states. Some states are in deficit or have backward regions or are burdened with debt.
  • These states should not be treated the same as prosperous states.
    
• States like West Bengal, Bihar, Orissa, and Assam have complained about the equal funding approach because they have special situations where they need extra funds from the central government.
  • Without this support, these states can’t fully join in competitive federalism.
    
• Even though states have financial independence, it’s wrong to think that all states will develop at the same pace.
• Some states have advantages like skilled workers, money, and good infrastructure, while others are struggling.
  
• Some prosperous states are unhappy about losing revenue because of the GST system, showing they’re not fully committed to competitive federalism.

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Cooperative and Competitive Federalism: A Path to Strengthening India’s System of Governance

• Reactivation of Inter-State council under Art 263.
• States have been granted more control over areas in the Concurrent List such as health, education, land, labor, and natural resources.
  
• The establishment of NITI Aayog marks a significant shift in this direction, replacing the central government’s role as a mere “facilitator” and moving away from the “one-size-fits-all” approach.
  
• While not all states have fully embraced competitive federalism, some are actively improving their business environments by undertaking challenging reforms in land acquisition and labor laws.
  
• Federalism is no longer a source of tension between the Center and states but represents a new partnership for Team India.
• The Central government has promised decentralization of power and minimum interference in the State affairs.
• The implementation of the GST strengthens the federal structure.
  
• The Planning Commission has been abolished by the government and replaced with NITI Aayog. One of NITI Aayog’s tasks is to promote competitive federalism which includes,
  • Share of states in central tax revenue has been increased from 32% to 42% after the recommendation of the finance commission.
  • States have freedom to plan their expenditure based on their own priorities.
  • States would work with the center on a shared vision of national objectives.
  • Restructuring of centrally sponsored schemes.
  • Financial sector bailout programme under UDAY
  • Swachh Bharat Ranking
  • State wise Ease of Doing Business ranking to build a huge sense of competition.

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Indian Federalism: NITI Aayog’s Dual Approach to Cooperative and Competitive Governance

• In 2017, NITI Aayog emphasized the concept of competitive “cooperative federalism” to redefine the Center-State relationship.
  
• Former Vice Chairman Arvind Panagariya urged states to contribute to India’s image-building.
  
• Chief Secretaries showcased their states’ best practices in meetings to encourage the exchange of ideas.
  
• NITI Aayog’s role in promoting governance initiatives through “cooperative, competitive federalism” shows promise.
  
• An important goal of NITI Aayog is to involve non-governmental experts in policymaking.
  
• NITI Aayog’s priorities include streamlining central schemes and maintaining Clean India efforts.
  
• NITI Aayog encourages Chief Ministers to expedite project implementation and attract investments for their states.
  

For federalism to succeed, states must collaborate and support national objectives.
Not granting statutory status to NITI Aayog could expose it to political changes in the future, potentially undermining its effectiveness.

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Symbiosis of Cooperative and Competitive Federalism

• India requires a blend of competitive and cooperative federalism to progress.
  
• The future of India lies in embracing both cooperative and competitive federalism.
  
• Competitive federalism brings needed dynamism, while cooperative federalism ensures balance.
  
• The Constitution must align with economic needs, prioritizing integration over sovereignty to foster internal unity in India.
• GST, which seeks to introduce the concept of one nation-one tax, in order to economically unify the country for the first time, is described as “pooled sovereignty.” This would significantly alter the functioning of federalism in the country.

Federal Governance: Threads of Cooperative and Competitive Federalism in India

• Efforts toward cooperative and competitive federalism have begun but require strengthening.
  
• NITI Aayog focuses on overarching policy frameworks rather than micro resource allocation functions. Hence, further steps are needed.
  
• Reviving the Centre-State Council: According to Article 263, this council is tasked with investigating and advising on disputes, discussing topics common to all states, and making recommendations for improved policy coordination.
  
• NITI Aayog cannot replace the council’s functions as it is the only recognized constitutional entity for aligning the actions of the Centre and states.
  
  • Its effective utilization would enhance the legitimacy of cooperative federalism.
• On complex issues like land, labor, and natural resources, the state should encourage best practices.
  
• This will attract more investment and boost economic activity in states with favorable regulations.
  
• State laws should quickly receive approval from the central government.
  
• The World Bank’s Ease of Doing Business index has increased competition among states, which is positive and should be maintained.
  
• States that rank poorly on the index often criticize the process for its flaws.
• These processes need to be more transparent and acceptable.
  
• For matters such as international treaties, WTO obligations, or environmental concerns, a formal system should be established to ensure key decisions are thoroughly discussed with states.

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WAY FORWARD

• Cooperative and competitive federalism are not mutually exclusive. They have the same basic principle underlying the development of the nation as a whole.
• Cooperative and competitive federalism are interconnected, as competition alone isn’t sufficient for optimal results; it’s the combination of competition and cooperation that will drive meaningful change.
  
• Some states will need the Centre’s support to effectively engage in competitive federalism.
  
• Strong states are crucial for a strong nation, and achieving this vision requires a “Team India” approach to national development.
  
• The passage of the GST Bill heralds a new era of cooperative fiscal federalism and reflects a growing political consensus on economic reforms.
  
• The government’s structural reforms, especially in land and labor, are widely seen as essential for realizing the economy’s potential.
  
• Policy-makers and economists agree that true cooperative federalism is the way forward, emphasizing the need for the Centre to involve states more actively in decision-making.
  
• Many state finance ministers believe that the Centre should allocate funds to states more judiciously.

Challenges and Dynamics of Indian Federalism

• Politicization of Governors and imposition of President’s rule – Appointment (Art.155) and Removal (no procedure for impeachment). E.g. appointment of Ex-CJI P Sathasivam as Kerala Governor.
• Unequal Representation of States in the Rajya Sabha– Many UTs don’t even qualify to get 1 seat. Just 10 big states occupy nearly 70% seats.
• Demands for New States and assertion of more autonomy – Gorkhaland (WB), Vidarbha (MH)
• Inter-State Water sharing conflicts– Between Kerala and Tamil Nadu for Cauvery river.
• Territorial disputes between states – MH and KA over Belgaum region.
• Demand for Special Category Status (SCS) – E.g. Andhra Pradesh

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Special Category Status, Federalism and Regional Dynamics in India

• Initiated in 1969 by 15th Planning Commission based on Gadgil-Mukherjee Formula.
  • Hilly and difficult terrain;
  • Low population density or sizeable share of tribal population;
  • Strategic location along borders with neighbouring countries;
  • Economic and infrastructural backwardness;
  • Non-viability of state finances

Experts Views on Indian Federalism: A Quasi-Federal Union with Subsidiary Features or an Extremely Federal System?

• “Quasi-federal” – “Indian Union is a unitary state with subsidiary federal features rather than a federal state with subsidiary unitary features.”- KC Wheare
• Indian system is “extremely federal” – Paul Appleby
• Morris Jones termed it as a “bargaining federalism”.
• “Federation with a strong centralizing tendency”- Ivor Jennings
• Indian federalism is “cooperative federalism”– Granville Austin. 

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Challenges and Complexities of Indian Federalism

1. Regionalism

• Managing the balance of power between the Centre and the states is a significant challenge to federalism in India.
  
• Federalism thrives in a democratic system by mitigating the centralization of power between the Centre and the states.
  
• India’s pluralistic character leads to various issues, including regionalism.
  
  • Example: people in the Northeast often feel ignored by New Delhi, while those in larger southern states feel neglected.
    
• The demand for creating more states has become more prominent, particularly since the formation of Telangana in 2014.
  • Example: like the four-fold division of Uttar Pradesh and the creation of Gorkhaland from West Bengal are instances of aggressive regionalism. The agitations for Gorkhaland, Bodoland, and Karbi Anglong have been revived.
• In addition to these, there are new demands for separate states such as Vidarbha in Maharashtra and Harit Pradesh and Poorvanchal in Uttar Pradesh.
• An increase in the number of states could result in the Centre being increasingly influenced by state parties on national matters.

2. Division of Powers

• In India, the distribution of power is outlined in the Three Lists found in the Seventh Schedule of the Constitution.
  
• Powers listed in the Concurrent List are shared by both the Central and state governments.
  
• Residuary powers are vested in the Central government.
  
• Matters of national importance are assigned to the Central government, while those of local or regional importance are assigned to state governments.
  
• Some issues, such as criminal law, forests, and economic and social planning, require involvement from both the Centre and states and are therefore included in the Concurrent List.
  
• In cases of conflict over legislation on subjects in the Concurrent List, the Centre’s laws take precedence over those of the states.
• Article 200 (reservation of State Bills by the Governor for consideration of the President), emergency provisions under Art. 352, 356 and 360 and Art. 256 and 257 (compulsory compliance by the States with the executive power of the Centre) amount to centralisation of power which has been the major concern among the states. Centralisation is as such a threat to Indian federalism.

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3. Absence of Fiscal Federalism

• The Indian Constitution gives the Centre greater taxation powers but establishes the Finance Commission to correct this imbalance by determining states’ share in Central tax revenues.
  
• The Finance Commission addresses both vertical and horizontal imbalances while deciding tax devolution and grant provisions.
  
• Currently, around 40 percent of Central revenues (including tax and non-tax) are transferred to the states.
  
• Despite the 80th Amendment enlarging the shareable pool to include all central taxes, there have been no significant changes in revenue accruals for the Centre and the states.
  
• Uneven development across the country stems from asymmetrical revenue sharing and resource constraints at the periphery.
  
• Many states fear that the current GST measure undermines fiscal federalism in India and are advocating for increased financial autonomy.

4. Unequal Representation of Units

• To counteract the issue of larger units overpowering smaller ones within a federation, many federations worldwide have implemented constitutional mechanisms.
• These include measures like providing equal representation for units or states in the Second Chamber and requiring all constitutional amendments to be ratified by states.
• However, in India, there is no provision for equal representation of states in the Rajya Sabha, and states lack significant influence over constitutional amendments.
• The Punchhi Commission recommended equal state representation in the Rajya Sabha to address this concern.

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5. Centralized Amendment Power

• In most federations, the authority to amend the Federal Constitution is shared between the federation and its constituent units.
  
• In contrast, in India, the power of constitutional amendment is vested solely with the Centre according to Article 368 and other relevant provisions.
  
• While there are instances where the ratification of half of the states is required for certain amendments, the states within the Indian Union have minimal influence in this pivotal aspect of governance.

6. Office of the Governor

• The appointment of governors for each state in India has remained a contentious issue, occasionally undermining the federal nature of the Indian Union.
  
• The visible tendency of the Centre to misuse this constitutional office has sparked heated debates and varied opinions across the country.
  
• The unequivocal backing of the Central Government for Governors in such crucial matters underscores a significant weakness in India’s quasi-federal structure.
  
• Instances of the Central Government’s abuse of power under Article 356 are abundant in the political annals of the nation.
  
• Consequently, this has solidified centralized forces and fostered dissatisfaction among constituent states regarding the federal essence of the Indian Polity.

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7. Single Constitution and Citizenship

• Unlike the US Constitution, the Indian Constitution provides a framework for the States and does not grant any state the authority to determine its own constitution.
  
• Unlike other federal constitutions globally, the Indian Constitution establishes single citizenship, following the principle of ‘one nation, one citizenship’.
  
• Citizenship in India is universal, regardless of the state of residence; all individuals are recognized as citizens of India.
  
• States do not bestow any distinct citizenship status upon their residents.

8. Integrated Services

• In the Indian federation, an integrated judiciary is a distinctive feature where the Supreme Court holds the highest authority, and all other courts are under its jurisdiction.
  
• Unlike typical federations, India lacks separate independent courts at the state level dedicated to state matters.
  
• Additionally, the electoral, accounting, and auditing systems in India are unified.
  
• Many states and critics perceive All India Services and central services as undermining federal principles.
  
• However, given the nature and breadth of administration in India, such services are deemed indispensable as they contribute to the nationwide character of governance.

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9. Centralised Planning

• Despite economic and social planning being listed in the Concurrent List of the Constitution’s Seventh Schedule, the Union Government holds significant control over both national and regional planning in India.
  
• NITI Aayog, established by the Centre, exercises considerable influence in legislative matters, alongside the Union’s dominant financial position and states’ dependency.
  
• The administrative disparity between the Centre and the states often results in the latter feeling submissive and disadvantaged.
  
• States primarily play a supplementary role in planning, filling in the gaps left by the central government, without any dedicated planning commission for themselves.

10. Language Conflicts

• The linguistic diversity in India can occasionally challenge the federal essence of the Constitution, with 22 officially recognized languages listed in the eighth schedule and numerous dialects spoken nationwide.
  
• Conflict arises when the dominant unit of the federation seeks to impose a specific language on others, fueling ongoing debates over the official language of India.
  
• The persistent opposition from southern states to Hindi as the official language has intensified the language debate, creating a significant crisis in India.

11. Issue of Religion

• India showcases remarkable religious diversity, which, at times, can lead to challenges that undermine the unity of the federation.
  
• However, religious diversity does not inherently lead to division.
• With adequate tolerance among the populace and a sincere commitment to secular governance by the government, religion may not disrupt the balance within a federation.

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12. Economic Incompatibilities of the units

• Economic disparities and fiscal differences among constituent states can jeopardize a federation.
  
• Imbalances in economic standards lead to demands for economic planning, regional economic equality, and financial autonomy for states.
  
• The quest for financial equality within a region can cause challenges in a federation.
  
• In India, certain states are labeled as economically disadvantaged and receive grants-in-aid to address this. However, sticking strictly to the equalization principle could hinder national and total income growth.

13. External Forces

• The tension in the North Eastern States in India is due to the interference of neighboring countries.
• China’s assertion of ownership over parts of Arunachal Pradesh along the Line of Actual Control poses a threat to India’s territorial integrity.
  
• The Tamil conflict in Sri Lanka causes disturbances within India.
• The alleged Pak’s hand in Khalistan movement in the past also has a say in weakening the Indian federation.

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India’s Quasi-Federal System: Unique Landscape of Cooperative and Competitive Federalism

• Federalism involves the sharing power between a central authority and individual political units.
  
• India’s federal model is often termed as quasi-federal, blending elements of both federation and union.
  
• Article 1 of the Indian Constitution declares India a union comprising states.
  
• Unlike many federations formed through states coming together, India’s federation evolved from a unitary system.
  
• It represents a compromise between state autonomy within the limits set by the Constitution (State List) and the necessity for a strong central authority to maintain national unity and integrity (Union List).

Evaluating India’s Federalism: Unity in Diversity for Effective Governance in the 21st Century

• Federalism is crucial in modern governance, especially for diverse countries like India.
  
• In India, federalism aims for unity amidst diversity by sharing authority and decentralizing administration.
  
• It helps balance different socio-cultural and economic needs for the common welfare.
  
• Federalism is seen as the best fit for India due to its vast and diverse nature.
  
• It promotes cooperation between different identities through shared rule mechanisms.
  
• Center-state relations and state autonomy are key concerns in Indian federalism.
  
• The Sarkaria Commission was set up in 1983 to review Indian federalism, but many of its recommendations remain unimplemented.
  
• The Union government has been slow in adopting some of the Commission’s suggestions.
  
• This highlights a need to rethink and improve Indian federalism to better address socioeconomic challenges and strengthen national unity.
  
• Restructuring Indian federalism to align with current realities and promote better center-state relations is necessary.

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WAY FORWARD

• The Punchhi Commission recommended equal representation for states in the Rajya Sabha.
  
  • It outlined procedures for appointing and removing Governors.
    
  • The Inter-State Council was suggested to become a permanent institution.
    
• The Sarkaria Commission’s recommendations on Centre-State relations included establishing a permanent Inter-State Council.
  
  • It proposed that when the Union plans legislation on a Concurrent List subject, the states’ views should be considered through inter-governmental councils.
    
  • The Union should typically only intervene in a Concurrent List subject to ensure national uniformity, leaving the rest to the states.
    
  • The Governor’s report during President’s rule (Article 356) should be comprehensive and widely publicized.
    
  • Governors should be eminent individuals from outside the state with minimal political affiliations.
    
  • Resolutions from states regarding the creation or abolition of Legislative Councils should be presented to Parliament promptly.
    
  • Federalism is primarily about cooperative action rather than rigid institutional arrangements.
    
• The Second Administrative Reforms Commission (ARC) made 22 recommendations to improve Centre-State relations, emphasizing that existing provisions were sufficient and ruling out constitutional amendments.
  
  • Establishment of an Inter-state Council under Art. 263 of the constitution
  • Delegation of powers to the maximum extent to the states – financial and legislative among others.
  • Enhancing states’ financial resources through fiscal transfers from the Centre.
    
  • Appointing non-partisan individuals with extensive public life and administrative experience as Governors.
    
  • Placing residuary fields, apart from taxation, under the Concurrent List.
    
  • Resolving differences between the Union and states through mutual consultation.
    
  • Supporting states’ demand for increased financial resources.
    
  • Proposing economic liberalization and appropriate constitutional amendments to enhance Centre-State relations in the country.

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PHRASES FOR MAINS

• “Asymmetric federalism” (E.g. Special provisions for some states, 5th and 6th schedule)
• Cooperative and Competitive federalism (E.g. GST and Indexes by NITI resp.)
• “3Ss” – Samovar – Samanvay – Samadhan
• Indian federalism- “Indestructible union of destructible states”
• Holding together vs Coming together (E.g. India vs USA model)
• Federalism With “Unitary Bias”
• Rajya Sabha symbolizes “Federal equilibrium”

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