UPSC NCERT Notes – Indian Polity – Indian Federalism and Centre – State Relations

The UPSC NCERT notes on Indian Polity, specifically focusing on Indian Federalism and Centre-State Relations, serve as an indispensable resource for aspirants preparing for the Civil Services Examination. Indian federalism, a unique and intricate system, delineates the distribution of powers and responsibilities between the central government and the states, ensuring a delicate balance in the governance structure. These notes delve into the constitutional provisions, historical context, and evolving dynamics of federalism in India. Understanding the nuances of Centre-State relations is crucial for aspirants aiming to navigate the complexities of Indian governance. With comprehensive coverage of relevant topics, the UPSC NCERT notes on Indian Polity offer candidates a solid foundation to grasp the intricacies of federal governance, a pivotal aspect of the examination syllabus.

The historical roots of Indian federalism 

• The historical roots of Indian federalism can be traced back to the Government of India Act, of 1935, which introduced the federal concept and referred to the “Federation of India” in a constitutional context. 
• While the specific distribution of legislative power outlined in the 1935 Act isn’t entirely replicated in the current Constitution, the fundamental framework remains consistent.
• Under this system, Provinces obtained their authority directly from the Crown, exercising legislative and executive powers within a defined sphere relatively free from central control. 
• Despite this, the Centre maintained influence through the Governor’s special responsibilities, requiring individual judgment and discretion in certain matters.
• The Constitution of India outlines a federal structure for governance. Notably, Article 1 designates India as a “Union of States” rather than a “Federation of States.” 
• According to Dr. BR Ambedkar, this choice signifies that the Indian Federation is not a result of a state agreement, as seen in the American Federation, and states lack the right to secede from the federation.
• Modeled after the Canadian system, the Indian federal structure emphasizes a strong union, both referred to as a “Union” and sharing a similar disintegration formation.
• Despite being termed federal, India’s constitutional design incorporates unitary elements, allowing for a shift towards a unitary system during emergencies. 
• Theoretical perspectives, such as KC Wheare’s, suggest that India exhibits a quasi-federal nature, leaning more towards a unitary state with subsidiary federal features.
• In the 1994 case of SR Bommai v. Union of India, the Supreme Court affirmed federalism as a fundamental feature of the Constitution, emphasizing its principled nature rather than mere administrative convenience.

Federal Features of the Indian Constitution

Dual polity

• Key federal features of the Indian Constitution include a dual polity system, dividing responsibilities between the Union and State governments based on subjects of national and local importance.

Written Constitution

• The extensive and written nature of the Indian Constitution, with 470 Articles, 25 Parts, and 12 Schedules, details the structure, functions, and power distribution at both central and state levels.

 Division of powers 

• The Seventh Schedule delineates a clear division of powers between the Union and states, categorized into Union, State, and Concurrent Lists, ensuring smooth governance and decision-making.

The Constitution’s supremacy 

• The Constitution’s supremacy is upheld, requiring all laws enacted by the Union and states to align with its provisions, subject to judicial review. Courts have the authority to declare any law unconstitutional.

 Rigidity Constitution 

• The rigidity of the Indian Constitution necessitates a rigorous amendment procedure, emphasizing the importance of joint action by the Union and states to bring about changes in the federal structure.
• Amendments to the basic structure require a special majority in Parliament and approval from half of the State Legislatures.

Bicameralism:

• The Constitution establishes a bicameral legislature comprising the Rajya Sabha and Lok Sabha. 
• The Rajya Sabha, or Upper House, represents the states of the Indian Federation, while the Lok Sabha, or Lower House, represents the entire Indian population. 
• The Upper House safeguards the federal balance by protecting state interests against union pressure.

Independent Judiciary:

• The Constitution institutes an independent judiciary for two primary purposes: first, to safeguard the supremacy of the Constitution through judicial review, and second, to resolve disputes between states and the union. 
• Measures such as fixed salaries and tenures are in place to ensure the judiciary’s independence, headed by the Supreme Court of India.

Unitary Features of the Indian Constitution:

Several unitary features of the Indian Constitution include:

Strong Union:

• The Constitution establishes a robust Union to maintain the integrity of the federation. 
• The Union possesses residuary powers in the division of subjects, jurisdiction over more subjects than the states, and supremacy in matters concerning Concurrent Lists.

Parliamentary Supremacy:

• Parliament is empowered to legislate on any subject from the State List if the Rajya Sabha passes a resolution, placing the matter in the national interest. 
• Parliamentary legislative powers are overarching without amendments and limit the state’s exclusive authority, applicable even in normal circumstances.

Indestructible Union:

• India is described as an indestructible union of destructible states. 
• States lack the right to territorial integrity through unilateral decisions and simple majority, as Parliament has the authority to change territorial boundaries and state names.

Single Constitution:

• Unlike other federations, India does not grant states the right to frame their separate constitutions. 
• Both the Union and states operate within the framework of a single constitution.

Flexible Constitution:

• India’s constitution is more flexible than other federations, allowing amendments through a simple majority and unilateral action of Parliament, with a few exceptions.

Unequal State Representation:

• Seats in the Rajya Sabha are allocated based on population, leading to varying representation among states and Union Territories. 
• This differs from the USA, where there is equal representation, ensuring safeguards for smaller states.

Emergency Provisions:

• The Constitution outlines three types of emergencies—National, State, and Financial. 
• During emergencies, the Central Government gains extensive powers and exercises control over states, transforming the federal structure into a unitary system without requiring constitutional amendments. 
• This unique transformation in Indian federation involves structural changes in Union-State relations.

Single Citizenship:

• In India, there exists a singular form of citizenship; an individual is solely a citizen of India and not affiliated with any specific Indian state. This singular citizenship aims to reinforce national unity and integration. 
• In contrast, the United States follows a system of dual citizenship, where an individual is both a citizen of America and a specific state within America.

Integrated Judiciary:

• While the Indian Judiciary operates independently, its structure is integrated. 
• The Supreme Court holds the apex position, followed by High Courts at the state level, with lower and district courts forming the lower levels. 
• This unified judiciary system enforces both Union and State laws. In contrast, the U.S. employs a dual-court system, where federal courts handle federal laws, and state laws are enforced by state courts.

All India Services:

• Despite India having public services at both the central and state levels, All India Services (IAS, IPS, and IFS) are common to both the Center and the States. 
• These officers are recruited and trained by the Union, with the Union maintaining complete control over them.

Integrated Audit Controls:

• The Comptroller and Auditor General of India audit both Central and State Government accounts, limiting the financial autonomy of states.
• Unlike in other federations, such as the USA, where the CAG has no role in managing state accounts.

Integrated Election Machinery:

• Similar to the Comptroller and Auditor General, the Election Commission conducts elections at both the Central and State levels. 
• The body is constituted by the President, and the States have no role in appointing or removing members of the Election Commission.

Appointment of Governors:

• Following the Canadian model, the Governor is not elected but appointed by the President. 
• The Governor acts as the head of the state and holds office at the pleasure of the President, thereby allowing the Central government to exercise control over states.

Veto Power over State Bills:

• In contrast to the Union Government, the President enjoys absolute veto power over state bills. 
• The Governor can reserve certain bills for the President’s assent, and in such cases, the President can withhold assent not just once but twice.

Evolution of Federalism in India:

• Indian federalism represents a balanced compromise that enables states and the Centre to work both independently and collaboratively on subjects of mutual concern. 
• The evolution of federalism in India has seen distinct phases, such as the dominance of a single party during 1950-1967, leading to the influence of institutions like the Planning Commission and the National Development Council. 
• Subsequent phases, like 1966-1977, witnessed a dilution of single-party dominance, the emergence of regional parties, and increased stress in the Centre-State relationship, marked by political complexities and unethical practices.
• The third phase of federalism, spanning 1977-1989, witnessed aggressive centralization and political misuse of Article 356, leading to increased antagonism and mistrust. 
• In response, the Sarkaria Commission was appointed in 1983 to investigate Centre-State relations.
• Post-1989, significant changes, such as the advent of a multi-party system and coalition government, have profoundly influenced the functioning of the federal system. 
• This shift has bestowed unprecedented power upon regional parties, enabling them to influence national and regional policies.
• The introduction of economic reforms in 1990 paved the way for globalization, imposing new responsibilities and roles for the states.
• The latest phase of federalism, commencing in 2014, reveals two opposing and parallel phenomena. Firstly, the new administration has made decisions indicative of its enthusiasm for cooperative federalism. Simultaneously, another trend has been observed.

Cooperative and Competitive Federalism:

• Dr. BR Ambedkar contends that the federal nature of the Constitution is established by the existence of a dual polity, where the Union and States derive power.
• The interpretation of Union-State relations varies among constitutional experts and political theorists. Some view it as quasi-federal, while others consider India extremely federal. 
• Federalism can be classified as cooperative or competitive based on its nature and the relationship between the Central and State Governments.

Difference between Cooperative and Competitive Federalism

Aspect	Cooperative Federalism	Competitive Federalism
Relationship	Horizontal relationship between Centre and States, emphasizing cooperation.	Vertical relationship between the Central and State Governments; horizontal relationship among State Governments.
Objective	States ‘cooperate’ for the larger public interest, participating in national policy formulation.	States compete to attract funds and investment, fostering administrative efficiency and development.
Constitutional Obligation	Constitutionally obliged to cooperate on matters specified in Schedule VI of the Constitution.	No constitutional obligation to cooperate; decisions are left to executives, as specified in Schedule VII.
Participants	Cooperation involves Centre, Federal units, and even local bodies acting collectively for common goals.	States compete at various social and development indicators independently.
Inclusion in Basic Structure	Part of the basic structure of the Indian Constitution.	Not part of the basic structure of the Indian Constitution.

Reviews of Federalism by Constitutional Experts

Experts	KC Wheare	K Santhanam	Paul Appleby
Description of Indian Federal Structure and Constitution	Quasi Federal – Union/State with subsidiary federal features and not vice versa.	Reasons for increased unitary bias – (i) Supremacy of Centre in finances and (ii) Strong Planning Commission controlling development across states.	Extremely Federal.

Experts	Morris Jones	Ivor Jennings	Alexandrowicz
Description of Indian Federal Structure and Constitution	Bargaining Federalism. Federation with a strong centralizing tendency.	India is a case of sui generis (i.e., unique).

Experts	Granville Austin
Description of Indian Federal Structure and Constitution	Cooperative Federalism; is a new kind of federation to meet India’s peculiar needs.

Centre-State Relations

• Detailed provisions regulating the relations between the Centre and the States are outlined in Articles 245 to 255 in Part XI of the Constitution of India. These relations can be broadly categorized into three aspects:

Legislative Relations:

• Legislative relations between the Centre and the States are delineated in Part XI, specifically Articles 245 to 255 of the Constitution.
• Given India’s federal structure, legislative powers are divided between the Centre and the States concerning both territory and subjects of legislation.

Territorial Extent of Central and State Legislation:

• Parliament, under Article 246(1), has the authority to pass legislation covering all or a portion of India’s territory (including Union, State, Union Territory).
• Article 245(1) empowers State Legislatures to enact laws applicable to the entire state or a specific portion, with restrictions on extraterritorial application.
• Parliament, per Article 245(2), holds the exclusive power to pass ‘extra-territorial’ legislation, subject to certain limitations.
• The President may enact rules with the same force as Parliament’s laws for specific regions like Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, and Lakshadweep.
• Acts of Parliament may be made applicable with modifications and exceptions to specific state areas by the Governor.
• The Governor of Assam and the President for Meghalaya, Tripura, and Mizoram have the authority to instruct specific adjustments or non-application of an Act of Parliament.

Distribution of Legislative Subjects:

• The Constitution provides a three-fold distribution of legislative subjects between the Centre and States: Union List (List I), State List (List II), and Concurrent List.
• Parliament has exclusive power over matters enumerated in the Union List.
• Both Parliament and State Legislatures have concurrent powers over matters listed in the Concurrent List.
• State Legislatures have exclusive power over matters specified in the State List.
• Parliament, however, can legislate on any matter for any part of the Indian territory not covered by the State List.
• The 2nd Amendment Act of 1976 transferred five subjects, including education and forests, from the State List to the Concurrent List.

Residuary Power:

• Article 248 grants exclusive power to Parliament to legislate on any matter not enumerated in the Concurrent List or State List.
• In case of a conflict between Central and State laws on a matter in the Concurrent List, the federal law prevails.
• State legislation takes precedence in the state if reserved by the President.

Parliament’s Authority to Legislate on State List Matters

• Various powers enabling Parliament to legislate on State List matters include:

Resolution by Rajya Sabha:

• As per Article 249, if the Rajya Sabha approves a resolution with a two-thirds majority of members present and voting, Parliament gains the authority to enact legislation on a State List matter.
• This resolution remains effective for one year and can be renewed indefinitely, but not for more than a year at a time.
• Laws enacted under this resolution cease to be effective six months after adoption, and in case of conflict, Union legislation prevails.

National Emergency:

• Article 250 empowers Parliament to pass laws on any matter within the State List during a declared National Emergency.
• Legislation enacted under this provision remains valid for six months and may be superseded by State legislation. However, in case of a conflict, Union law takes precedence.

Legislation for Two or More States:

• Article 252 grants Parliament authority to legislate on a list of issues when a state requests it through a resolution. Once this resolution is passed, the states relinquish their right to legislate on that matter.

Implementing International Treaties:

• According to Article 253, Parliament can make laws on State List matters to implement international treaties, agreements, or conventions.

President’s Rule:

• Article 256 states that during the imposition of the President’s rule in a state, Parliament is empowered to make laws on any matter within the State List concerning that state.
• Such laws remain in effect even after the President’s rule concludes, but the State Legislature retains the authority to repeal or alter them.

Centre’s Oversight on State Legislation

• Alongside Parliament’s direct authority to legislate on state subjects, the Constitution introduces a mechanism for the Centre’s approval before a bill from a State Legislature attains the status of law. 
• Despite the state’s autonomy to legislate on State List matters, the Centre possesses the ability to instruct the State Legislature to align with Union Laws.
• Constitutionally, the Central Government holds specific powers to influence State Legislative affairs:
  • The Governor is empowered to reserve certain categories of measures enacted by the State Legislature for the President’s consideration, with the President exercising complete control over them.
  • Bills addressing specific subjects, such as inter-state trade and commerce as listed in the State List, can only be introduced in the State Legislature with prior consent from the President.
  • In instances of a financial emergency, the President can request a state to set aside money bills and other financial bills for his deliberation.

Articles Related to Legislative Relations

Articles Related to Legislative Relations	Subject Matters
Article 245	Extent of laws made by Parliament and by the Legislatures of States. Subject matter of laws made by Parliament and by the Legislatures of States.
Article 246	Special provision with goods and services tax.
Article 246(A)
Article 247	Power of Parliament to provide for the establishment of certain additional courts. Residuary powers of legislation.
Article 248	Power of Parliament to legislate with respect to a matter in the States List in the national interest.
Article 249	Power of Parliament to legislate with respect to any matter in the State List, if a Proclamation of an Emergency is in operation.
Article 250
Article 251	Inconsistency between laws made by Parliament under Articles 249 and 250 and laws made by the Legislatures of States.
Article 252	Power of Parliament to legislate for two or more states by consent and adoption of such legislation by any other state.
Article 253	Legislation for giving effect to international agreements.
Article 254
Article 255	Inconsistency between laws made by Parliament and laws made by the Legislatures of States.
	Requirements as to recommendations and previous sanctions to be regarded as matters of procedure only.

Administrative Relations

• Articles 256 to 263 in Part X of the Constitution delve into the administrative relations between the Centre and the states.
• These administrative relations correspond to coordination aspects between the states and the Centre.
• The Constitution mandates that the states adhere to the directions given by the Centre.
• This includes actions that should be taken for the implementation of Union Laws and policies as determined by the Union Government.
• If the states refuse to comply with these directions, the President may declare a situation has arisen in the state, leading to a breakdown of constitutional machinery, and may invoke the President’s rule in that state.

Power of the Union Government to Entrust Some Responsibilities to the State Governments

• According to Article 256, the executive power of the Governments of States is to be exercised to ensure compliance with the Laws of the Union.
• Under Article 365, the Union Government is empowered to issue directions to the State Governments to ensure such compliance.
• Non-compliance of Central Directives by the State Governments is tantamount to the failure of constitutional machinery in the concerned state and may invite the imposition of the President’s Rule under Article 356.

Power of the Union to Issue Directions to the State Governments

• Under Article 258, the Union Government has the power to issue directions to the states with respect to the construction and maintenance of means of communication of national and military importance and the protection of railways within the state.
• The cost incurred in performing these functions is borne by the Union Government. The Union can give directions in matters related to the following as well.
• Designing and implementing schemes for the welfare of the tribals.
• Primary education for linguistic minorities in their mother tongue under Article 351 (A).
• Promotion of Hindi under Article 351.

Mutual Delegation of Functions

• To avoid rigidity in the executive sphere, our Constitution has provisions that allow for mutual delegation of executive functions by the Centre and States.
• Article 257 considers the Union’s authority over States in specific circumstances.
• It provides that the executive power of every state shall be exercised so as not to impede or prejudice the exercise of the executive power of the Union, and the Executive Power of the Union shall extend to giving such directions to a state as may appear to the Government of India to be necessary for that purpose.
• Even with regard to the issues listed in the State List, the Union Government may give instructions to the State Government.
• As per Article 258(1), the President may assign the executive duties of the union to the State Government with the permission of the State Government.
• With the agreement of the federal government, the governor may assign the state’s executive functions to the union. This agreement to share authority may be either conditional or unconditional.
• The Constitution also permits the state to provide the Union executive authority without the state’s consent.
• However, such delegations are made by Parliament rather than the President. The executive authority of a state, however, cannot be transferred in the same manner.
• According to Article 258(A) of the Constitution, the Governor of a State can, with the approval of the Government of India, delegate functions either conditionally or unconditionally to that Government or its officers concerning any matter within the State’s executive power.

Provisions of All India Services

• Article 313 of the Constitution outlines the establishment of All India Services, including IAS, IPS, and IFS (Indian Forest Service). These services members are recruited by the UPSC, and their service conditions are regulated by the Union Government.
• Members of these services hold top positions in the State Government Administration, with their ultimate authority residing with the Union Government.
• Article 313 also grants Parliament the authority to create new All India Services if the Rajya Sabha passes a resolution to that effect.
• For the creation of such services, the Rajya Sabha must pass a resolution supported by a two-thirds majority of its members. These officers are recruited and trained by the Union, and they possess complete control over them.

Integrated Judiciary

• India operates under an Integrated Judicial System, with the Supreme Court at the apex and State High Courts below it.
• The Single Integrated Judicial system enforces both Central Laws and State Laws. The Central Government handles the appointment, removal, and transfer of State High Court Judges. 
• Additionally, the establishment of a common High Court for two or more states is vested in the Central Governments.

Relations through the Public Service Commission

• Centre and State Administrative relations are fortified through Public Service Commissions. 
• While the State Governor appoints the Chairman and Members of the State Public Service Commission, only the President holds the authority to remove them.
• The Parliament of our country is authorized to establish a Joint Public Service Commission (JPSC) for two or more states upon the request of the concerned State Legislature. 
• Additionally, the Union Public Service Commission (UPSC) can cater to the needs of a state upon the request of the Governor, subject to approval by the President.

In the realm of Centre-State administrative relations during emergencies:

• During a National Emergency under Article 352, the central government gains the authority to issue directions to the state on any matter.
• In the case of a State Emergency under Article 356, the President assumes the functions vested in the State Governments.
• Furthermore, during a Financial Emergency under Article 360, the President can issue directions concerning the reduction of salaries for individuals serving in the state, including High Court Judges.

Key articles related to administrative relations include:

Article 256: Obligation of States and the Union.

Article 257: Control of the Union over States in certain cases.

Article 258: Power of the Union to confer powers, etc., on states in certain cases.

Article 258(A): Power of the States to entrust functions to the Union.

Article 260: Jurisdiction of the Union in relation to territories outside India.

Article 261: Public Acts, records, and judicial proceedings.

Article 262: Adjudication of disputes relating to waters of inter-state rivers or river valleys.

Article 263: Provisions for the inter-state Council.

Financial relations

• Financial relations between the Union Government and the States are delineated in Part XII, spanning Articles 268 to 293 of the Constitution of India. 
• This delineation ensures that both the Centre and the units have distinct revenue sources, enabling them to stand independently.
• The Constitution delineates the financial distribution between the Centre and the states. These provisions have undergone several amendments, with the latest being the 88th Constitutional Amendment Act, known as the Scheme of Devolution.
• The recent introduction of the goods and services tax is anticipated to further refine the financial relations between the Centre and the States.

Regarding the distribution of taxing powers:

• Parliament possesses exclusive authority to levy taxes on subjects listed in the Union List.
• State Legislatures hold exclusive power to levy taxes on subjects listed in the State List.
• Both the Union and the states can levy taxes on matters specified in the Concurrent List.
• The residuary power of taxation is vested in the Union.
• The Union List, which initially contained 97 subjects, has now expanded to 100 subjects. Similarly, the State List, previously comprising 66 subjects, now stands at 61 subjects. The Concurrent List has also seen an increase, now covering 52 subjects compared to the previous 47.

Lists	Subjects Mentioned
Union List	– Defence sector
	– Arms/Firearms/Explosives
	– Atomic Energy
	– Water and Peace
	– Citizenship
	– Railways/Shipping/Inland Waterways
	– Post, Telegraph
	– Inter-State Trade and Commerce
	– Currency, Coinage, Banking, and Insurance
State List	– Education
	– Forest
	– Weights and Measurement
	– Administration of Justice
	– Wildlife Protection
	– Agriculture
	– Police/Railway Police
	– Public Health and Sanitation
	– Taxes on lands and buildings
	– Local Government
Concurrent List	– Criminal Law and Criminal Procedure
	– Banking and Insolvency
	– Prevention of Cruelty
	– Civil Procedure, including all matters in the Code of Civil Procedure
	– Economic and Social Planning
	– Control of Price
	– Trade Unions
	– Trust and Trustees
Residual List	– Archaeological Sites
	– Adoption/Legal Heir
	– Subjects not included in any of the three lists, coming under the Residual List. (e.g., space technology, cyber laws, etc.)

• A state has the authority to levy taxes on the sale or purchase of goods (excluding newspapers). However, this power is subject to four restrictions:
  • No tax can be imposed on sales or purchases occurring outside the state.
  • No tax can be imposed on sales or purchases in the course of import or export.
  • No tax can be imposed on sales or purchases occurring in the course of inter-state trade and commerce.
  • A tax imposed on the sale or purchase of goods declared by Parliament to be of special importance in inter-state commerce is subject to the restrictions and conditions specified by Parliament.
• A state is not allowed to impose tax on the sale of electricity consumed by the Centre or sold to the Centre, consumed in the construction, maintenance, or operation of any railway by the Centre, or sold to the railway company for the same purpose.
• A state can impose tax on the sale of water or electricity sold to an authority established by Parliament for regulating or developing inter-state rivers.

Goods and Services Tax (GST)

• The 101st Amendment Act of 2016 provides for the establishment of a Goods and Services Tax Council (GST Council).
• GST is an indirect tax designed to replace existing levies such as excise duty, service tax, and Value Added Tax (VAT). Both states and the Union Government will impose the tax on almost all goods and services produced in India or imported.
• Producers will receive credits for tax paid earlier, eliminating multiple taxation on the same product or service. Direct taxes such as income tax, corporate tax, and capital gains tax will remain unaffected.
• The implementation of GST aims to simplify the tax structure, broaden the tax base, and create a common market across states and federally administered districts.
• The Goods and Services Tax Council, established under Article 279(A), is chaired by the Union Finance Minister for the effective implementation of GST.

Distributions of Tax Revenue 

Duties levied by the Centre, but collected and appropriated by the state (Article 268):

• Stamp duties and specified excise duties on medicinal and toilet preparations from the Union List are imposed by the Government of India but are collected by the states.
• The proceeds of these duties within a state for any financial year do not become part of the Consolidated Fund of India; instead, they are assigned to that specific state.

Taxes levied and collected by the Centre, but assigned to the states (Article 269):

• Certain duties and taxes are assigned to the states based on principles formulated by Parliament, including estate duty on property other than agricultural land, terminal taxes on goods or passengers transported by railway, sea, or air, and taxes on the inter-state sale or purchase of goods.

Taxation and collection of tax on Goods and Services (GST) (Article 269(A)):

• This article mainly addresses the taxation and collection of GST in the case of inter-state trade or commerce. Collected taxes are distributed between the states and the Union according to legislation passed by Parliament, guided by the recommendations of the GST Council.

Taxes levied and collected by the Union and distributed between the Union and the States (Article 270):

• Taxes on incomes, excluding agricultural incomes, are levied and collected by the Government of India and distributed between the Union and the states as prescribed by the President, considering the recommendations of the Finance Commission.

Surcharge on certain taxes and duties for the purposes of the center (Article 271):

• Parliament has the authority to increase certain duties or taxes by a surcharge for the Union’s purposes, notwithstanding Articles 269 and 270. The proceeds from such surcharge become part of the Consolidated Fund of India.

Taxes levied collected and retained by the states:

• Taxes exclusively belonging to the states, enumerated in the State List, such as taxes on agricultural income, excise duties on alcohol, and taxes on professions.

Distribution of Non-tax Revenues:

• For the Centre: Postal and telegraph services, railroads, banking, broadcasting, coinage, and currency.
• For the States: Irrigation, forests, fisheries, state public sector enterprises, and escheat and lapse.

Grants-in-Aid to the States:

• Statutory Grants (Article 275): Empowers Parliament to make grants to states in need of financial assistance, charged on the Consolidated Fund of India. Specific funds, like those for the welfare of Scheduled Tribes in Assam, are also provided based on Finance Commission recommendations.
• Discretionary Grants (Article 282): Gives the Centre and states the authority to award grants for any public purpose outside their legislative purviews, with the Centre providing discretionary grants without obligation.

Important Sources of Union Revenue

• Goods and Services Tax (GST)
• Currency, coinage, and legal tender, foreign exchange.
• Duties of customs, including export duties.
• Duties of excise on tobacco and certain goods manufactured or produced in India.
• Estate duty concerning property other than agricultural land.
• Fees in respect of any matters in the Union list, excluding fees taken in any court.
• Foreign loans and Lotteries are organized by the Government of India or the Government of a State.
• Post Office Savings Bank.
• Post and telegraphs, telephones, wireless broadcasting, and other forms of communication.
• Property of the Union, public debt of the Union, and railways.
• Rates of stamp duty concerning bills of exchange, cheques, promissory notes, etc.
• Reserve Bank of India.
• Taxes on income, excluding agricultural income.
• Taxes on the capital value of assets, exclusive of agricultural land, for individuals and companies.
• Taxes other than stamp duties on transactions in stock exchanges and future markets.
• Taxes on the sale or purchase of newspapers and on advertisements published therein.
• Terminal taxes on goods or passengers carried by railways, sea, or rail.

Articles	Subject Matters
Article 268	Duties levied by the Union but collected and appropriated by the states.
Article 269	Taxes levied and collected by the Union but assigned to the states.
Article 269(A)	Levy and collection of goods and services tax in the course of inter-state trade or commerce.
Article 270	Taxes levied and distributed between the Union and the states.
Article 271	Surcharge on certain duties and taxes for purposes of the Union.
Article 274	Prior recommendation of the President is required for bills affecting taxation in which states are interested.
Article 275	Grants from the Union to certain states.
Article 276	Taxes on professions, trades, callings, and employment.
Article 277	Savings
Article 279	Calculation of ‘net proceeds,’ etc.
Article 279(A)	Goods and services tax council.
Article 280	Finance Commission.
Article 281	Recommendation of Finance Commission.
Article 282	Expenditure defrayable by the Union or a state out of its revenues.
Article 283	Custody, etc., of Consolidated Funds, Contingency Funds, and money credited to the public accounts.
Article 284	Custody of suitors’ deposits and other money received by public servants and courts.
Article 285	Exemption of property of the Union from state taxation.
Article 286	Restrictions as to the imposition of tax on the sale or purchase of goods.
Article 287	Exemptions from taxes on electricity.
Article 289	Exemption of property and income of a state from Union taxation.
Article 292	Borrowing by the Government of India.
Article 293	Borrowing by states.

Commissions and Committees Aimed at Enhancing Centre-State Relations

• Numerous endeavors have been made to enhance Centre-State relations, with the Central Government establishing several commissions to periodically review and assess Federal Relations. Notable among them are.
• Administrative Reform Commission (ARC): Established in 1966 by the Central Government under the chairmanship of Morarji Desai (later K Hanumanthayya). 
• A study team, led by MC Setalvad, thoroughly examined Centre-State relations, resulting in 22 recommendations, including the establishment of an inter-state council under Article 263 and the transfer of more financial resources to states.
• Rajamannar Committee (1969): Formed by the Tamil Nadu Government in 1969, this three-member committee, led by Dr. P.V. Rajamannar, focused on Centre-State relations under the rule of the DMK.
• Key recommendations included allocating residuary powers to states and replacing the Planning Commission with a statutory body.
• Sarkaria Commission: Set up by the Central Government in June 1983, the Sarkaria Commission, headed by Justice Rajinder Singh Sarkaria, aimed to examine the balance of power between State and Central Governments. 
• The 247 recommendations included consulting state governments before enacting laws related to the Concurrent List, establishing an Inter-State Council, giving states the right to amend the State List, and addressing issues related to the appointment of governors and judges.
• MM Punchhi Commission: Established by the Government of India in April 2007, this commission, chaired by Madan Mohan Punchhi, a former Chief Justice of India, focused on Centre-State relations in light of significant changes in India’s polity and economy since the Sarkaria Commission’s last review over two decades ago.
• Some of the recommendations provided in its various reports are as follows:
• Propose higher central transfers to backward states to enhance their physical and human infrastructure.
• Advocate for a comprehensive review of transfers to states, aiming to minimize discretionary transfers, especially those through Centrally Sponsored Schemes (CSS).
• Suggest that all future central legislations with state involvement should include provisions for cost-sharing, similar to the Right to Education (RTE) Act.
• Recommend a clear delineation of responsibilities between the Central and State Governments for meeting the additional costs of implementing proposed food security legislation.
• Call for regular revision of royalty rates on major minerals every three years, with proper compensation to states for any delays.
• Endorse the 12th Finance Commission’s recommendation on sharing proceeds of service tax after the notification of the 88th Amendment to the Constitution.
• Propose the establishment of a commission in 2015 and regular reviews every five years to report on the status of local government devolution of powers.
• Suggest the creation of a separate administrative structure for the District Panchayat to relieve the overburdened collector.

Cooperation between the Centre and the States:

• Include provisions to secure cooperation and coordination between the Centre and the States, such as resolving disputes related to inter-state rivers, establishing an inter-state Council, ensuring mutual recognition of public acts, records, and court decisions, and appointing an authority for inter-state freedom of trade.
• Article 355 imposes two duties on the Centre: protecting states against external aggression and internal disturbance, and ensuring state governments adhere to the Constitution.

Alternative Scheme of Devolution (ASD):

• The Constitution designates taxes as shareable or non-shareable between the Union and the States.
• Emphasize the importance of improving elasticity in shareable taxes, like personal income tax and excise.
• The 80th Amendment Act of 2000, based on the recommendations of the 10th Finance Commission, amended Article 270 to make all taxes and duties in the Union List divisible between the Central and State Governments, except those under Article 271 and any cess levied for a specific purpose.
• Benefits of ASD:
  • States participate in the buoyancy of central taxes.
  • Encourages cooperation from states in union tax reforms.
  • Fosters conditions for cooperative federalism in various spheres.
  • Inter-State Relations are a vital aspect of the Indian federal system, playing a crucial role in the successful functioning of both centre-State interactions and Inter-State dynamics. 
• The Constitution of India incorporates specific provisions to facilitate the smooth operation of inter-state relations:

Adjudication of Inter-State Water Disputes:

• Article 262 addresses the adjudication of disputes related to the distribution of water in inter-state rivers.

Coordination through Inter-State Councils:

• Article 263 outlines provisions related to the establishment and functions of the Interstate Council, promoting coordination among states.

Mutual Recognition:

• Article 261 emphasizes mutual recognition of public acts, records, and judicial proceedings between different states

Freedom of Inter-State Trade, Commerce, and Intercourse:

• Article 301 guarantees freedom of trade, commerce, and intercourse among states, promoting economic cooperation.

Parliament’s Power to Impose Restrictions:

• Article 302 grants the Parliament the power to impose restrictions on trade, commerce, and intercourse to ensure regulatory control.

Restrictions on Legislative Powers:

• Article 303 places restrictions on the legislative powers of both the Union and States concerning trade and commerce.

Restrictions on Inter-State Trade, Commerce, and Intercourse:

• Article 304 delineates specific restrictions on trade, commerce, and intercourse among states, ensuring regulatory consistency.

Safeguarding Existing Laws and State Monopolies:

• Article 305 safeguards existing laws and those providing for state monopolies, ensuring continuity.

Appointment of Authority:

• Article 307 allows for the appointment of an authority to carry out the objectives outlined in Articles 301 to 304, contributing to effective implementation.
• These provisions collectively establish a comprehensive framework for managing inter-state relations, addressing disputes, and fostering cooperation. Additionally, the establishment of Zonal Councils by the Parliament serves to enhance inter-state cooperation and coordination, contributing to the overall synergy of the Indian federal system.
• Article Parayan empowers individuals to file a complaint regarding the use, distribution, or control of waters within state rivers, inter-state rivers, or river valleys. Parliament holds the authority, through legislation, to restrict the jurisdiction of any court, including the Supreme Court, concerning such disputes or complaints.
• In adherence to this provision, Parliament enacted two laws, namely the River Boards Act, of 1956, and the Inter-State Water Disputes Act, of 1956.
• The Inter-State River Water Disputes (Amendment) Act, 2017, aimed to enhance the resolution process for inter-state river water disputes.
• The Amendment Act introduced the establishment of a Dispute Resolution Committee (DRC) by the Central Government. 
• The DRC’s role is to facilitate amicable resolutions of inter-state water disputes within a specified timeframe, not exceeding one year and six months. Disputes unresolved through negotiations are referred to a tribunal for adjudication, and the tribunal’s decision is deemed final and binding on the involved parties.
• Additionally, the State Government holds the right to request the Central Government to refer an inter-state river dispute to a tribunal for adjudication.
• If negotiations fail and the Central Government concurs that the dispute cannot be settled amicably, it is obligated to establish a Disputes Tribunal within a year of receiving the complaint. The 2019 Bill aims to replace this mechanism, suggesting potential changes in the adjudication process for inter-state river water disputes.
• Central Government will set up a Disputes Resolution Committee (DRC), to resolve the dispute amicably after it receives a request from a state regarding any water dispute.

Names	Year	States Involved
Krishna Water Disputes Tribunal	1969	Maharashtra, Karnataka, Andhra Pradesh
Godavari Water Disputes Tribunal	1969	Maharashtra, Karnataka, Andhra Pradesh, Madhya Pradesh, Odisha
Narmada Water Disputes Tribunal	1969	Rajasthan, Gujarat, Madhya Pradesh, Maharashtra
Ravi and Beas Water Disputes Tribunal	1986	Punjab, Haryana, Rajasthan
Cauvery Water Disputes Tribunal	1990	Karnataka, Kerala, Tamil Nadu, Puducherry
Second Krishna Water Disputes Tribunal	2004	Maharashtra, Karnataka, Andhra Pradesh
Vansadhara Water Disputes Tribunal	2010	Odisha, Andhra Pradesh
Mahaday Water Disputes Tribunal	2010	Goa, Karnataka, Maharashtra
Mahanadi Water Dispute	2018	Odisha, Chhattisgarh, Maharashtra, Jharkhand, Madhya Pradesh

Inter-State Council:

• Article 263 establishes the Inter-State Council to ensure coordination between states and between the Centre and states.
• Constituted based on the recommendation of the Sarkaria Commission.
• The President of India establishes such a council for public interest when the need arises.
• The council is a recommendatory body with the following duties:
• Investigating and discussing subjects in which some or all of the states or the union and one or more states have a common interest.
• Making recommendations on such subjects, particularly for better coordination of policy and action.
• Deliberating upon other matters of general interest to the states as referred by the Chairman to the Council.
• The Inter-State Council includes the Prime Minister, several Union Ministers, Chief Ministers of all states and Union Territories, Administrators of Union Territories, and other authorities nominated by the Union Government.

Recommendations of Different Commissions:

• Sarkaria Commission recommended the establishment of a permanent Inter-State Council under Article 263 but suggested renaming it as an inter-governmental Council for differentiation.
• Punchhi Commission also recommended a continuing role for the Inter-State Council in managing matters in the concurrent list or overlapping jurisdiction.

Zonal Councils:

• Zonal Councils were established to enhance coordination among regional states.
• The Ex-officio Chairman of each council is the Union Home Minister, along with the respective Chief Ministers of the States.
• These councils are statutory bodies created by the State Reorganisation Act of 1956, enacted by Parliament.
• The Vice-Chairman of the Council is the Chief Minister from the zone, holding office for a year at a time.
• Council members include the Chief Minister, two other ministers nominated by the Governor of each state, and two members from the Union Territories within that zone.
• NITI Aayog also nominates members for each Zonal Council, including Chief Secretaries and another Development Commissioner nominated by the states in the zone.
• There are currently five Zonal Councils in operation.
• Objectives of Zonal Councils:
  • Promote national integration.
  • Counteract extreme state consciousness, regionalism, linguisticism, and particularism.
  • Facilitate cooperation and the exchange of ideas and experiences between the Centre and States.
  • Establish a cooperative atmosphere for the successful and rapid implementation of development projects.

Present Composition of Zonal Councils:

• Northern Zonal Council: States of Haryana, Himachal Pradesh, Punjab, Rajasthan, NCT of Delhi, and Union Territories of Jammu and Kashmir, Ladakh, and Chandigarh. Headquarters: New Delhi.
• Central Zonal Council: States of Chhattisgarh, Uttarakhand, Uttar Pradesh, and Madhya Pradesh. Headquarters: Prayagraj.
• Eastern Zonal Council: States of Bihar, Jharkhand, Odisha, Sikkim, and West Bengal. Headquarters: Kolkata.
• Western Zonal Council: States of Goa, Gujarat, Maharashtra, and the Union Territory of Daman and Diu and Dadra and Nagar Haveli. Headquarters: Mumbai.
• Southern Zonal Council: States of Andhra Pradesh, Telangana, Karnataka, Kerala, Tamil Nadu, and Union Territory of Puducherry. Headquarters: Chennai.
• North-Eastern Council: States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, and Sikkim. Headquarters: Shillong.

Prelims Facts

• Who referred to Indian federalism as Cooperative federalism? G. Austin (CGPSC Prelims 2008)
• Which part of the Constitution of India describes the financial relations between Centre and States? AC Wheare (ILAS Prelims 2010)
• Who stated that India is a quasi-federal state? Dr. B.R. Ambedkar (UPPSC Prelims 2008)
• Under which article of the Constitution of India are taxes levied and collected by the Centre but distributed between the Centre and the States? Seventh Schedule (APSC Prelims 2013, IPS Prelims 2014)
• Who recommends to the President the distribution between the Central and State Governments of net proceeds of taxes collected by the Centre? Finance Commission (Nagaland SC Prelims 2011)
• In which part of the Indian Constitution are legislative relations between the Centre and States given? Part XI (UP RO/ARO Prelims 2014)
• Which articles regulate the distribution of power between the Centre and States? Article 245 to 246 (UP UDA/LDA Prelims 2001, UPSC Prelims 2011)
• Subjects on which both the Centre and State can make laws are mentioned in which list? Concurrent List (UP UDA/LDA Prelims 2006)
• Which commission advocated the establishment of a permanent interstate council called the ‘Inter-Governmental Council’? Sarkaria Commission (JPSC Prelims 2013)
• Which article of the Constitution gives precedence to constitutional provisions over the laws made by the Union Parliament/State Legislature? Article 245 (BPSC Prelims 2002)
• In which year was the Sarkaria Commission empowered to recommend changes in Centre-State relations, and when did it submit its report? In 1988 (BPSC Prelims 2018)
• Which article of the Constitution deals with legislative powers of the Parliament with respect to subjects in the State List? Article 249 (UPPSC Mains 2009)
• Who is empowered to establish the Inter-state Council? President (CGPSC Prelims 2019, UPPSC Prelims 2019)
• The Parliament can make any law for the whole or any part of India for implementing international treaties without the consent of any state. Prime Minister (JPSC Prelims 2019, MPSC Prelims 2016)
• National Integration Council is chaired by: Prime Minister (JPSC Prelims 2019, MPSC Prelims 2016)
• Regional Councils are constituted by: Zonal Councils (MPSC Prelims 2017, UPPSC Prelims 2017)
• A resolution passed by the Rajya Sabha under Article 249 of the Constitution empowering Parliament to legislate on a state subject in national interest remains in force for a period not exceeding one year. Zonal Councils (MPSC Prelims 2017, UPPSC Prelims 2017)
• Under which article does the Constitution empower the President of India to set up an inter-state river water dispute tribunal? Article 262 (MPSC Prelims 2017)
• An extra-constitutional and extra-legal device(s) for securing cooperation and coordination between the states in India. National Development Council (UPPSC Prelims 1995)

UPSC NCERT Practice Questions

1. Which of the following statements regarding the Indian Federal System is/are correct?

(1) All the states have equal representation in the Rajya Sabha.

(2) Consent of a state is not required for altering its boundaries.

(3) There is no dual citizenship in India.

Select the correct answer by using the codes given below.

(a) All of these

(b) 2 and 3

(c) 1 and 3

(d) Only 2

2. Assertion (A) The primary objective of India’s Federal design was to weave a nation out of its many diverse parts and protect national integration.

Reason (R) Accomdation of diversities has built a stronger, not weaker, Indian Netionhood.

Codes

(a) Both A and R are true and R is correct ecxplation of A.

(b) both A and R are true, but R is incorrect explanation of A.

(c) A is true, but R is false.

(d) A is false, but R is false.

3. Which one of the following is not a feature of Indian Federalism? UPPSC OP 2017

(A) There is an independent judiciary in India

(b) Powers have been clearly divided between the Centre and the States

(c) The federal units have been given unequal representation in the Rajya Sabha

(d) it is the result of an agreement among the federal units

4. Which of the following statements regarding the residuary powers under the Constitution of India Is/are correct?

1. Residuary powers have been given to the Union Parliament

2. In the matter of the residuary power, the Constitution of India follows the Constitution of Australia

3. Seventh Schedule of the Constitution of India provides a list of residuary powers

4. The Government of India Act, 1935 placed residuary powers in the hands of the Governor-General

Select the correct answer by using the codes given below

(a) 1 and 3

(b) 2 and 3

(c) 1 and 4

(d) Only 4

5. Some features of the Indian Polity are not considered as conducive to Federalism. Consider the few given below. UPPSC (Pro 2014

1. Absolute Presidental Vesa over State Legislation in some cases

2 Emergency provisions.

3. Alteration in the boundaries of the states

4. Every power is subordinate to the Constitution,

Select the feature(s) that is/are not correct

(a) 1 and 2 (c) 1, 3 and 4 (b) 2 and 3 (d) 1, 2 and 3

Know the answers

1. (b) 2. (a) 3. (d) 4. (c) 5. (d)

Frequently Asked Questions (FAQs)

Q1: What is federalism, and how is it reflected in the Indian political system?

A1: Federalism refers to the distribution of powers and responsibilities between the central government and the states. In the Indian political system, federalism is enshrined in the Constitution, which divides powers between the Union (central government) and the states. The Seventh Schedule of the Constitution lists subjects under three lists – Union List, State List, and Concurrent List – indicating the exclusive, state, and shared powers, respectively. This reflects the cooperative federal structure in India.

Q2: How does the President of India play a role in the Indian federal structure?

A2: The President of India, as the ceremonial head of the state, plays a crucial role in the Indian federal structure. While the President’s powers are largely nominal, they become significant in certain situations. For example, the President has the authority to dismiss a state government in certain exceptional circumstances, as outlined in Article 356. This power ensures the maintenance of the federal structure by preventing any state from acting against the principles of the Constitution.

Q3: What are the mechanisms in place to resolve disputes between the Centre and States in India?

A3: To resolve disputes between the Centre and States in India, various mechanisms are established. One such mechanism is the Inter-State Council, as mandated by Article 263 of the Constitution. The council facilitates coordination and cooperation between states and the Centre. Additionally, the Sarkaria Commission and the Punchhi Commission recommendations have provided guidelines for improving centre-state relations. The Supreme Court also plays a pivotal role in resolving disputes through its jurisdiction, ensuring that the federal principles laid down in the Constitution are upheld.

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