Complexities of Indian Federalism – UPSC Daily Editorial Analysis – 21st June 2024

Indian federalism is a unique and intricate system of governance characterized by a delicate balance of power between the central government and the states. Established by the Constitution of India in 1950, this federal structure aims to accommodate the country’s vast and diverse population, which spans different cultures, languages, religions, and economic backgrounds. Unlike traditional federal systems, Indian federalism features a strong central authority with the ability to reconfigure state boundaries, an asymmetry in the distribution of powers among states, and a dynamic interplay of regional and national interests. This complexity is further amplified by the political landscape, economic disparities, and socio-cultural variations across the states, making Indian federalism a continually evolving and challenging framework to navigate.

Context: 

• In recent years, disputes between the Union government and the States have become increasingly common.

Federalism in India:

• Meaning:
  • Federalism involves a vertical division of power in a political system, where authority is distributed between a central government and other constituent units. 
  • For instance, in India, political power is divided among the Central government, state governments, and local governance institutions.
• Features of a federal system:
  • Multiple levels of government: Federalism necessitates the functioning of multiple levels of government within their respective jurisdictions.
  • Division of Power: Power is distributed among different entities according to the division of subjects, minimising chances of conflict.
  • Written Constitution: A written and rigid constitution ensures clarity in the allocation of powers and stability in governance.
  • Independent Judiciary: The judiciary acts as a mediator to resolve disputes between various levels of government.
  • Interdependence of state and Central Government: India adopted a form of federalism where the Union and State governments are interdependent, with states more reliant on the Union government, contrary to the autonomous spheres characteristic of federal constitutions.
• ‘Holding together’ Federalism:
  • India’s centralised federal structure was established through ‘holding together’ and ‘putting together’ processes, rather than the ‘coming together’ process typical of federal systems.
• Indestructible & Flexibility:
  • B. R. Ambedkar termed India’s federation a Union because it is indestructible, hence the Constitution avoids using explicit federal terms. 
  • He also noted the Constitution’s flexibility to function as federal or unitary based on necessity.

Types of Federalism:

• Cooperative Federalism:
  • Cooperative federalism involves the horizontal relationship between entities within a federal structure. 
  • It emphasises cooperation between different levels of government to achieve unified socio-economic development.
• Competitive Federalism:
  • Competitive federalism promotes healthy competition among states to encourage economic development. 
  • Lagging states are incentivized to improve, while leading states strive to maintain their position in various indices.
• Fiscal Federalism:
  • Fiscal federalism deals with the division of financial powers and functions between different levels of government. 
  • It includes the imposition and division of taxes, as well as joint tax collections with fair fund allocation based on objective criteria. 
  • Institutions like India’s Finance Commission ensure equitable distribution.

About the Increasing Federal Frictions:

• Dependence on Public Expenditure:
  • Despite economic reforms since 1991 granting some autonomy, state governments still rely on the central government for revenue. 
  • This dependency often leads to friction between the Centre and states, limiting negotiation space.
• Other Areas of Conflict:
  • Apart from resource allocation, conflicts arise in social sector policies, regulatory institution functioning, and the powers of central agencies. 
  • States ideally should have discretion in these matters, but central bodies sometimes seek to extend influence over state decision

Economic Consequences of Federal Frictions

• Dilemma of Investments:
  • The expanding role of the Centre often results in crowding out state investments, particularly in infrastructure development. 
  • For instance, initiatives like PM Gati Shakti integrate schemes across Ministries and States under a national master plan, limiting state flexibility in planning and implementation.
• Concentrated Spending:
  • Between 2021-22 and 2023-24, nearly half of the total expenditure by 16 states was concentrated in Uttar Pradesh, Maharashtra, and Gujarat. 
  • This concentration affects regional economies, as investments by these states generate significant local linkages compared to national projects that focus on global economic ties.
    • Data for 25 States shows that a total of ₹7.49 lakh crore was budgeted for by these States but they spent only ₹5.71 lakh crore which is 76.2% of the total.
• Limited Competition:
  • Frictions with the Centre reduce competitive dynamics among states and between states and the Centre, particularly in welfare provisioning. 
  • The Centre’s larger fiscal space allows it greater spending power, while states face constraints in raising non-tax revenues due to the Centre’s direct provision of many services.
• Inefficiencies of Parallel Policies:
  • Federal tensions often lead to duplication of policies between the Centre and states, resulting in parallel schemes and a trust deficit within the federal system. 
  • These inefficiencies impose long-term fiscal costs on the economy, impacting overall efficiency and development outcomes.

Way Forward

• Securing Implementation:
  • The Centre relies on states, especially in concurrent areas, to effectively implement laws and policies. 
  • This interdependence underscores the need for collaborative governance frameworks that enhance coordination and mutual support.
• Executive Functions:
  • States, with the Centre’s consent under Article 258A, delegate their executive functions to central government agencies or bodies. #
  • This mutual delegation acknowledges the practical necessity of cooperation and coordination between different levels of governance.
• Preserving Interdependence:
  • Given India’s vast size, diversity, and developmental challenges, maintaining and nurturing interdependence between the Centre and states is crucial. 
  • This ensures efficient governance, effective policy implementation, and equitable development across the country.

Source:   IE

FAQs

1. What is the basic structure of Indian federalism?

Answer: Indian federalism is characterized by a dual system of government, with powers and responsibilities divided between the Union (central) government and the state governments. The Constitution of India delineates this division of powers through three lists: the Union List, the State List, and the Concurrent List. The Union List includes subjects on which only the central government can legislate, the State List contains subjects for state legislatures, and the Concurrent List encompasses subjects where both the Union and state governments can make laws, though central laws prevail in case of conflict.

2. How does the Indian Constitution address the distribution of financial resources between the Union and the states?

Answer: The financial distribution between the Union and the states in India is guided by the Constitution, which establishes the Finance Commission. This commission is appointed every five years to recommend the distribution of taxes between the Union and the states, and among the states themselves. Additionally, the Constitution provides for grants-in-aid to states from the Union’s revenues to ensure that states can meet their financial needs and achieve equitable development.

3. What role do the states play in the legislative process in India?

Answer: States play a significant role in the legislative process in India. Each state has its own legislature, which can be unicameral or bicameral, to make laws on subjects listed in the State List. States also have the power to legislate on subjects in the Concurrent List, where both the Union and state legislatures have jurisdiction. However, if there is a conflict between central and state laws on a Concurrent List subject, the central law prevails. Moreover, states have a say in the amendment of certain provisions of the Constitution that affect their interests, requiring ratification by at least half of the state legislatures.

4. How does the concept of ‘cooperative federalism’ manifest in Indian governance?

Answer: Cooperative federalism in India refers to a collaborative approach between the Union and state governments to achieve common national goals. This is evident through mechanisms such as the Inter-State Council, the National Development Council, and various other committees and forums where Union and state representatives discuss and formulate policies collectively. The NITI Aayog (National Institution for Transforming India) is another key institution promoting cooperative federalism, facilitating strategic planning and coordination between different levels of government.

5. What are the challenges faced by Indian federalism?

Answer: Indian federalism faces several challenges, including:

• Centralization of Power: Despite constitutional provisions for federalism, the Union government often exerts significant influence over states through financial control and emergency provisions.
• Inter-State Disputes: States frequently encounter conflicts over resources, such as water disputes, and boundary issues.
• Economic Disparities: There are significant economic and developmental disparities among states, leading to demands for more equitable distribution of resources and greater autonomy.
• Political Dynamics: The political dominance of the central ruling party can sometimes undermine the autonomy of state governments, especially when different parties are in power at the center and in states.
• Implementation of Central Schemes: While central schemes aim to promote uniform development, their implementation can sometimes be at odds with local priorities and conditions, leading to friction between the Union and state governments.

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