Nature Of Indian Federalism

Author: LawSphereX

Category: General Law

Published: 2026-08-23T20:38:35.236028+00:00

Updated: 2026-08-26T17:10:23.871+00:00

NATURE OF INDIAN FEDERALISM

Dev Bhadiyadra, BBA LLB, Auro University, Surat, Gujarat

ABSTRACT

System of government in India has undergone various changes with the introduction of a centralized system in the early colonial period, to the adoption of elements of federalism through reforms such as the Montagu- Chelmsford Reforms of 1919 and the Government of India Act, 1935. These reforms formed the basis for the current system of government in the postindependence era, known as quasi federalism which was visualised by Dr. B. R. Ambedkar to ensure national unity with state autonomy. However, inclusion of certain provisions like Article 356 which was intended to protect the nation's unity and defend against the colonialists, remained political tools to maintain dominance in the political landscape. The Emergency of 1975 and the rise of coalition governments in the late 1980s marked critical shifts towards more cooperative federalism.

Governors' intervention in politics, and the dual accountability of All India Service remained a challenge even after gaining substantial leaning towards cooperative federalism. The constant tug of war between the centre's authority and the demand for more state autonomy has been observed since India's independence from the colonial era. States have often experienced imperial-like rule where state autonomy has often been in jeopardy by political maneuvers. However, the onset of coalition government and judicial intervention has strengthened the federal frame that Dr. B. R. Ambedkar envisioned. This paper aims to examine various historical events, political events, and constitutional provision to understand the complexities of Indian federalism.

Introduction Federalism is division of power between the national government and state governments, giving states higher authority over its jurisdiction, while national governments act as facilitator. India adopted a quasi-federal system, giving the central government more power so that the national unity is protected. The Constitution divides legislative powers between the centre and the state through union, state, and concurrent list. Indian federalism has been through many reforms to adapt to the growing needs. Indian was a collection of the princely states unified under British rule. Later British rule, with the growing demand of state autonomy, through Montagu-Chelmsford Reforms of 1919 and the Government of India Act, 1935 introduced the concept of federalism, with the British crown holding significant power than its states. Drafting Committee headed by B. R.

Ambedkar took inspiration from the Government of India Act, 1935, and constituted the Indian Federation that we know today. The Indian Federation was not the result of bottom to top agreement, like the United States of america. Therefore, provisions like article 356 were adopted into the constitution of india. According to the constituent assembly debate, provisions of article 356 was inspired by the American and Australian constitution wherein B. R Ambedkar contented that the use of article by the centre must not be arbitrary and otherwise, be remain “dead letter” only be invoked when it is absolutely necessary for central government, in case of external or internal aggression, to protect the states from invasion into their jurisdiction. However, Article 356 has been repeatedly misused over years after independence by the central government to impose the centre's control.

Moreover, independent authorities like the role of governors and All India Services also remain critical in balancing center-state relations. Structure of the Indian constitution is prone to exploitation, therefore, understanding these complexities is essential for understanding federalism in india. Historical Evolution of Indian Federalism The Role of British Rule in Shaping India’s Federal Structure India was a cluster of regional kingdoms at the time when the British arrived in india. Later, as the British Raj grew influence among this cluster of kingdoms, formed a centralized administration through a unitary system, making the British Crow the head of the state. Current India's federal structure was influenced at large by the British Colonial Administration. Due to

political pressure, demand for a certain degree of autonomy grew among the princely states, therefore, British authorities introduced gradual decentralisation through Montagu-Chelmsford Reform of 1919 which laid the groundwork for limited provincial autonomy where dual sets of government were introduced. Certain powers, such as health, education, local self government, were transferred to the Indian ministers who were responsible to the British crown, while the British held power in key areas of governance such as revenue collection and taxes. Despite these reforms, the Governor-General representing the British Crown held major power, the system lacked true federal characteristics. However, this form of government was introduced in only eight provinces.

The Government of India Act, 1935, as the Foundation of Indian Federalism In an attempt to create a true federal structure, the Government of India Act, 1935 was introduced where all the provinces would constitute an all-india-federation. This act introduced the concept of Provincial Government, and Bicameral legislature. It was an attempt to further dilute the power from the centre, that is, Governor-General, to the Provincial Government by abolishing the concept of dual government at the provincial level. However, the Governor- General retained overriding powers, reflecting continued central control. The act was never fully implemented but influenced the drafting of the Current Indian constitutional framework which included the concept of Union list, State List, and Concurrent lists. Constitutional Framework and Intent of the Founding Fathers Dr. B. R.

Ambedkar, the chairman of the committee who drafted the Indian constitution, brought the concept of quasi federalism. Dr. B. R. Ambedkar feared that after independence national unity would be destroyed through regional conflicts and differences1. He wanted to have a strong union of the states where both state autonomy and the national unity is not harmed2. Unlike the United States of America, Dr. B. R. Ambedkar wanted the centre to have an overriding authority over key aspects of the governance. He emphasized that the state should not have power to secede from the union, which he through the Article 356 (President’s Rule) and the strong role of the Union in financial and legislative matters, ensured strong union. 1 Nisha Parmar and Mehal Pandya (2024) ‘Dr.

B R Ambedakar’s vision of Federalism & its relevance in current Indian state-central relations’, International Journal For Multidisciplinary Research, 6(6). doi:10. 36948/ijfmr. 2024. v06i06. 32811.

2 ibid

Through the Seventh Schedule of the Indian Constitution, legislative power between the centre and states has been divided as Union List, State List, and the Concurrent List. Union List provides all the subjects where only the central government has the power to make the law such as defence, atomic energy, foreign affairs etc. State List includes all those subjects where only the state government has power to make law such as police, agriculture, public health etc. Concurrent list includes all those subjects where both central and state governments can make laws such as education, forest, etc, and in case of conflict central law prevails. However, the rajya sabha has power to legislate the state subject if it deems necessary.

Article 249, empowers rajya sabha to make laws regarding the subject reserved only for the state legislature if it is necessary for the national interest, but only after the total vote being not less than two thirds of the council of state (Rajya Sabha). However, because its members are chosen indirectly and the ruling party often has a lot of influence over who is in it, the Rajya Sabha's ability to limit the central government's power is limited. Early Trends in Federalism (1950–1990) The Dominance of the Congress Party and a Strong Centre After independence, from 1950 to late 1960s, Indian national Congress not only ruled the centre but also most states.

Because of its supremacy over the Indian political landscape, there was barely any conflict between state and centre as Prime minister and the union government had significant control over the state government, therefore, creating a highly centralised system, affecting state autonomy. In states where the ruling government at the centre was not in power, they would often use Article 356 (President’s rule) to dismiss state government. The Impact of the Emergency (1975–77) on Federalism Prime Minister Indira Gandhi by political maneuvering declared an emergency in 1975 which marked one of the significant events in the history of Indian politics. All the fundamental rights were suspended leading to the unfair arrests of the opposition leaders who were not in alignment with Indira Gandhi’s central government.

The State Government lost its governing autonomy as they were forced to comply with the centre by imposing president's rule. This event raised an important question against the concept of federalism by the Indian Constitutions which led to demands for greater state autonomy.

The Emergence of Coalition Politics in the Late 1980s and Its Impact on Centre-State Relations Late 1980s, marked the beginning of the coalition governments where for the first time single party rule at the centre was replaced by coalition government. This led to increased demand for state autonomy. Coalition governments mostly consisted of the parties representing different state governments. Without the support of any one party representing a state government would destroy the coalition and power at the centre, therefore, to avoid that, negotiations between centre and state became stronger and the misuse of article 356 was significantly reduced. Coalition governments like the National Front government (1989) and later United Front and NDA coalitions contributed in shaping a more cooperative federal model.

Article 356 Article 356 of the Indian Constitution was widely misused by the parties that came into power at centre. When the Janata party came into power in 1977, through article 356 of the Indian Constitution, it dismissed opposition-led state governments to retaliate against the Indian National Congress. Similarly, when Indira Gandhi returned to power in 1980, they used the same tactic by using article 356, dismissing nine opposition-led state governments to maintain parties' dominion in the country, with the view to get back to the Janata party. This constitutional provision empowers the President of India to impose President's Rule in a state deemed to have failed in constitutional government.

Indian National government reasoning behind imposing president rule (article 356) was that these administrations had lost public trust, however, opponents contended that it was a political maneuver to reestablish Congress's power in the states. B. R Ambedkar wanted this provision to be used during “rarest of the rare cases” to protect the unity of the states and only be used when the president has enough reason that this unity is endangered3. However, the emergency article, especially, article 356 was turned into a mere political tool for the ruling party at the centre to remain in power. Misuse of article 356 was widely criticised which brought the need for stronger judicial monitoring, thus, bringing SR

3 Hasnain, D. (no date) DYNAMICS OF ARTICLE 356 OF THE CONSTITUTION OF INDIA : A

TREPINDATION TURNS TRUE. Available at: https://ujala.uk.gov.in/files/ch11_1.pdf (Accessed: 15 March 2025).

Bommai case (1994). Indira Gandhi's dismissals in 1980 remain a prominent example of federal overreach, affecting arguments in India over state autonomy and central power. In S. R. Bommai v. Union of India (1994), court held that article 356 should be invoked only sparingly and subjected this article to judicial review to prevent arbitrary use by the central government. The judgment marked important progress towards strengthening the federal structure of India and ensuring the principles of cooperative federalism. The Role of Governor: An Agent of the Centre or a Constitutional Authority? Each state has a governor that represents the centre that acts as head of the state. Similarly, where the president has to act on the advice of the prime minister and its union cabinet, the Governor has to act on advice of the chief minister and its cabinet.

This raises an issue as governors are appointed by the president on the advice of the prime minister and its cabinet which often leads to the appointment of a governor that is politically aligned with the party ruling in the centre, thus creating political control over the states. It Can be historically observed in 1990, when Centre Government removed 18 governors who had been put in place by the previous government4. Using the governor as a political chess piece rather than being treated as an independent constitution. In case the state government has failed in governance, the Governor can impose the president's rule under article 356 after submitting an impartial report. Again, whether the state government is really failing in governance is subjective to the governor. There is a high chance of the report being biased.

However, in reality centers often bypass this process which was quite prevalent in 1970’s, 1980’s. Governor’s intervention in political matter Role of Governor is significant in ensuring continuity in governance during political unrest and constitutional crises. Governors act as a link between centre and states to ensure state government aligns with the national interest. In Hargovind Pant vs Dr. Raghukul Tilak & Ors5, Governor was held to be an independent office that acts according to the constitutional direction rather than on central government.

4 Krishna Tummala, India’s federalism under stress, 32 ASIAN SURVEY 538–553 (1992).

5 1979 AIR 1109, 1979 SCR (3) 972

Governor does not hold any wide discretion and must abide by the article 163 which signifies to act on the consent of the council of ministers. Moreover, in Nabam Rebia case (2016), court observed that governors discretion as to the summoning and dissolving of the legislature must be with consultation of the state government6. This decision reinforces the constitutional limit that the constitution has for the use of governors power7. Furthermore, In Pratap Gowda Patil vs State of Karnataka (2019) reiterated Nabam Rebia Case (2016) observations that the governor has power under article 174 to call for a trust vote at his own discretion if he feels the state government does not enjoy the confidence of the house. Recent political crises raised the questions regarding the Governor's discretionary power8.

According to the recent supreme court ruling Governor cannot move for trust vote solely on the basis of the internal dissent within the ruling government when the ruling government has majority support, especially on the request of the breakaway faction9 10. An official opposition motion is needed to move the Assembly to a trust vote11, as per rule 198 of the Lok Sabha or on the advice of the chief minister, or when the government has broken its alliance. Even the resignation of an MLA could be justified in calling for a trust vote. In the following case, the governor of Maharashtra called for a trust vote in the legislative assembly due to ongoing friction between two segments of the same parties with respect to its differences in its ideology12. Many are alleging centre had a role in political crisis of maharashtra to gain political dominance13.

Through writ petition, the case went to the Supreme Court where the court questioned the constitutional validity of the governor’s intervention in

6 Nabam Rebia And Etc. Etc vs Deputy Speaker And Ors (2016), AIR 2016 SC 3209

7 President’s Rule: Judgment Summary, Supreme Court Observer (Jul.13th, 2016),

https://www.scobserver.in/reports/nabam-rebia-deputy-speaker-arunachal-pradesh-presidents-rule-judgment-inplain-english/ 8 Mathew Idiculla, Maharashtra Political Crisis: The Limits of Supreme Court’s Expiations, Supreme Court Observer (May. 15th, 2023), https://www.scobserver.in/journal/maharashtra-political-crisis-the-limits-ofsupreme-courts-expiations/ 9Krishnadas Rajagopal, Governors cannot precipitate the fall of elected governments: Supreme Court, The Hindu (Mar. 16, 2023), https://www.thehindu.com/news/national/governors-cannot-precipitate-the-fall-ofelected-governments-supreme-court/article66623480.ece.

10 Manishsiq, Governor’s Role in Trust Vote, StudyIQ (Mar. 16, 2023),

https://www.studyiq.com/articles/governors-role-in-trust-vote/.

11 RULES OF PROCEDURE AND CONDUCT OF BUSINESS IN LOK SABHA, 1952, RULE 198

12 R. Sai Spandana & "Joyston D, Understanding the Shiv Sena Conflict, Supreme Court Observer (Mar. 31, 2023), https://www.scobserver.in/journal/understanding-the-shiv-sena-conflict/amp/. 13Manasi Phadke, Sushil Modi’s ‘BJP breaking Sena’ remark likely to cause storm in Maharashtra monsoon session, The Print (Aug. 17, 2022), https://theprint.in/politics/sushil-modis-bjp-breaking-sena-remark-likely-tocause-storm-in-maharashtra-monsoon-session/1084719/.

the internal conflict of the party to trigger a trust vote that led to the fall of government14. The Supreme Court held that conflicting ideology within the party cannot be the sole ground for the governor calling for a trustvote, when the ruling party had formed the majority government. Despites many such judgments, the governor has time and again crossed the line, questioning the federal polity of the country's democratic system. Reforms must be brought to keep a check on the governor's misuse of power by adhering to the Sarkaria Commission recommendations. The commission was set up in 1983 to review Centre-State relations, recommending that there should be consultation with the state’s chief minister when appointing the governor, and the candidate must be from outside the state.

It further recommends that the candidate for the governor must be free from any political affiliations to maintain the integrity of the constitution. All India Service All India Service was created to balance the centre-state relationship between the federal government and the states. All India Service looked for diversity in policy making, therefore, recruiting officers from various states and assigning them to different state and federal positions. To ensure the interests of both governmental levels, the Centre government looked after the recruitment and career progression of the officer, while the state government oversaw performance evaluation of the All India Service officers. Parliament through Article 312 can create additional all india service when required for the national interest. AIS acts as a bridge between regional diversities and national government imperatives.

All India Service officers are governed by the The All India Service Act 1951, wherein, section 3 of the act allows the central government to make any necessary laws or amendment as required with the consultation with the state government, however, state governments concurrence is not required. This raises an issue of possible misuse of All India Service for the benefit of the central government. AIS is intended to account for region specific needs and problems into national policy making. AIS officers bring their understanding of the state specific insight to ensure equal allocation of the resources so that national fragmentation can be avoided. However, dual accountability of the AIS officer could create inefficiency in the implementation of policy due to political strife 14 R. Sai Spandana & "Joyston D, Understanding the Shiv Sena Conflict, Supreme Court Observer (Mar.

31, 2023), https://www. scobserver. in/journal/understanding-the-shiv-sena-conflict/amp/.

between the centre and opposition-led state government. All India Service is divided into the civil services such as IAS, IPS and IFS whose cadre-controlling authorities are DoPT, Home Ministry and Environment Ministry respectively. Each year this cadre-controlling authority carries out cadre review where each state submits its officer requirements, upon which centre has the final determining authority. After the cadre review, the Union Public Service Commission (UPSC) recruits candidates through Civil Service Examination. Finally, the president appoints the officer, making the centre ultimately authority over recruitment. After recruitment and training, officers are assigned state cadre.

After a state has been assigned with an All India Service officer it has exclusive control over the district posting, transfers, promotions, and punishments which oftentimes affects the officers personal and professional lives. In 2015, AIS Rules were amended to limit suspension periods taking any consent of the centre, overshadowing central authority by the predominant state authority15. Central or State deputation of All India Services (AIS) officers from state cadres is governed by Rule 6 of the respective IAS, IPS, and IFoS Cadre Rules,1954, with the central government determining the proportion of officers available for central deputation through what is known as the Central Deputation Reserve (CDR). Centre often require AIS officers for policy making and programme implementation because of their experience at the local levels.

Usually, officers who have served their state government for a minimum of nine years can go for the central deputation through the offering by the state government wherein the centre, after reviewing the list sent by the state government selects appropriate officers. State governments is obliged to send officer for the deputation even though state government does not agree with the central government's demand, central government decision will always prevail All India Services (AIS) officers' central or state deputation from state cadres is managed through Rule 6 of the IAS, IPS, and IFoS Cadre Rules of 1954, with the central government establishing the Central Deputation Reserve (CDR) to determine how many officers can serve at the central level16.

After nine years of serving the state government, this officer can apply for the central deputation wherein the state government is obliged to relieve the officer, in case, there is a disagreement regarding an officer's deputation, the central government's decision is 15 Sanya Dhigra, Centre vs states, rules vs convention — who really controls IAS officers, The Print (June 7, 2021), https://theprint. in/india/governance/centre-vs-states-rules-vs-convention-who-really-controls-iasofficers/672013/.

16 THE INDIAN ADMINISTRATIVE SERVICE (CADRE) RULES, 1954, RULE 6

final. Most AIS officers begin their careers assigned to state cadres, particularly at the district level where state governments have complete control over their assignments and career advancement. The central government frequently needs experienced senior officers to assist with planning, policy development, and program implementation, finding their field experience particularly valuable. After completing their central deputation term, officers return to their state cadres, creating a beneficial exchange of perspectives on the operational challenges at both levels of government. On January 12, 202217. Centre proposed to remove the no objection certificate by the state government for relieving of the officer for central deputation, rather, on the fixed date decided by the centre, state government would be obliged to release the required officer.

Moreover, centre also proposed to make it compulsory for every state government to offer fixed number of officers for central deputation annually because of the decrease in the number of central deputations which centre blames state for not fulfilling their CDR obligation18. States, obviously opposed by contending that these amendments would affect state autonomy. But is it really a problem? What is wrong with the centre trying to compel the state government to offer fixed officers for central deputation. Does this really affect state autonomy ?. If an AIS officer is deputed to the centre without the concurrence of the state government there could be serious consequences which may negatively affect the governance in the state. For example, deputation of an IAS officer to the centre can significantly impact the efficiency of state administration.

Let say certain crucial Infrastructure projects need IAS officers constant supervision, if IAS is deputed, these projects could see delays costing state governments millions or billions of rupees. Deputation of an IAS officer arbitrarily could hinder policy implementation, policy making and state administration. Unlike elected representatives who are prone to political uncertainty to stay in government, IAS officers remain in their position providing continuity, expertise, and administrative stability in governance. In 2021, Centre ordered an IAS officer to report to Delhi before his retirement, but the state 17 Durai, Deputation of Cadre Officers and the Proposed Amendments – Explained, pointwise, ForumIAS (Jan. 20, 2022), https://forumias. com/blog/deputation-of-cadre-officers-and-the-recent-amendment/.

18 ibid.

refused the deputation order by reason of administrative needs19. Similarly in 2020, three IPS officers from West Bengal were recalled for the central deputation for 5 years. The Chief Minister strongly criticized the centre's move calling it "colourable exercise of power" and "blatant misuse" of IPS Cadre Rules. She further stated that is clear encroachment to the state autonomy and clear violation of federal principle. However, Minister of Home Minister cited rule 6(1) of the IPS Cadre rule, signifying the centre's authority over state authority20. Moreover, Minister of Home Minister, stated that the need for IPS officer is due to the security reasons, therefore, requiring urgent deputation21. In conclusion, the All India Service is prone to central government’s political maneuvering affecting the state's autonomy.

It is not anybody but the system, laws, rules, hierarchy etc that allows the misuse. Shared pool of officers between state government and central government, in addition to rule 6 of the IAS, IPS, IFS Cadre rule 1954 that endows greater authority to the central government over the deputation of officers could lead to disruption in the state governance. Countries like the United states of America, its federal government has its own federal service, like Office of Personnel Management (OPM) and state governments have its own civil administrative system, such as California State Civil Service. Even Germany and Australia have separate civil services at both levels. Though states in India have their own public services such as Gujarat administrative services or Maharashtra civil service, they do not enjoy power and exposure as All India service officers enjoy.

Having separate civil services for the centre and the state could limit the central government’s ability to interfere in the state’s administration. State government will be less prone to the political maneuvering of the central government. Economic State Autonomy Indian states do not have the economic autonomy as other federal nations. States often have to rely on the centre for its revenue and capital expenditure. States do not have flexibility in terms of collecting taxes to fund their social infrastructure, administration and development expenses of the states. India's economic autonomy could be understood through the concept of Market- 19 Rishabh Sharma, Explained: The controversy around Alapan Bandyopadhyay, and the action he may face for not reporting to Delhi, India Today (June 1, 2021), https://www. indiatoday.

in/india/story/alapanbandyopadhyay-west-bengal-chief-secretary-dopt-1809319-2021-06-01. 20 Sanchari Chatterjee, Centre asks 3 IPS officers to return from Bengal duty, Mamata says won't allow proxy control of Bengal govt, India Today (Dec. 17, 2020), https://www. indiatoday. in/india/story/mamata-attackscentre-abuse-of-power-over-ips-transfer-1750444-2020-12-17.

21 Ibid.

preserving federalism which is a form of federalism, developed by Barry R. Weingast, where the central or the federal government has very limited control over its economic activities and only acts as a policeman to preserve property rights, contracts etc. In Market preserving federalism, the federal government does not interfere with the economic policy making of its states, they are free to collect taxes, plan its revenue or capital expenditure as they like. Federal government will only interfere to facilitate inter-state trading. Market preserving federalism has five conditions to ensure decentralisation to promote economic efficiency, accountability, and prosperity. First condition is the presence of hierarchy of authority where national and subnational are divided, having their own jurisdiction for better autonomy22.

Second, in the case of India's hierarchy of authority where there is a concept of centre and state, each state must have fundamental authority over its own jurisdiction23. Third condition is that the central or federal government must have the authority to overlook smooth trade within the common market so that goods and services could be sold everywhere in the territory of the country24. Fourth condition is that the state government must not rely on the grants and loans from the federal government to ensure hard budget constraints25. Fifth condition is the presence of institutionalized degree of durability to ensure fair allocation of the authority and the responsibility to avoid any unilaterally alteration by the national government (centre) or changes driven by subnational governments26.

Each federal country in the world may fulfil all or any of the aforementioned conditions upon which their country's economy may function. India only fulfills the first condition and the third condition while ignoring the rest of the conditions. In India, States rely on the central government for the revenue, making central government regulatory authority of its economic landscape, violating second condition and fourth condition, respectively27. Central government may unilaterally change or remove the authority of its lower government28. 22 Barry R Weingast, The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development, 11 Journal of Law, Economics, & Organization 1-31 (1995).

23 ibid

24 ibid

25 ibid

26 ibid

27Barry R Weingast & Sunita Parikh, A Comparative Theory of Federalism: India, 83 Virginia Law Review 1593-1615 (1997).

28 ibid.

Subnational Economic Authority (F2) In India, Goods and Service Tax (GST) was introduced in 2017 making taxation easier in the country. This move further unified the Indian market as interstate tax barriers were removed contributing to India's economic integration. This reform shows how a well-designed federal system can boost economic efficiency while still staying true to the core principles that make the country's federal structure so unique. Though GST has reduced tax cascading, transaction cost etc, GST took states control over the taxation in its jurisdiction. This made revenue generation tough for the state government making them more reliant on the central government. Centralisation of the taxation has effectively curtailed the state's ability to make economic policies that are in consonance with the local needs, restricting their capacity to innovate fiscal strategies.

Recently, Airline companies were lobbying for the inclusion of Aviation Turbine fuel under the GST regime29. However, the state government opposed the inclusion as it would take away a source of revenue. Reduced source of revenue would make region specific projects impossible, slowing infrastructure development. Fiscal Discipline and Hard Budget Constraints (F4) States having less autonomy on revenue collection makes them rely on central transfer and grant. However, this has led to excess dependency over this transfer and grant. The Reserve Bank of India recently warned the state administration to enhance expenditure efficiency due to growing state public debt30. According to the report, the states are estimated to have a fiscal deficit at 3. 2%% of India’s GDP 2024-25, while the centre has 4. 2% of the GDP31.

This overdependence on the central transfers and grants could lead to inefficient fiscal management that could push state governments toward increased debts even though institutions like the Financial Commission and the laws regulating this state's fiscal activity such as Fiscal Responsibility and Budget Management (FRBM) Act are present. Having a mechanism of Hard Budget constraint could improve expenditure efficiency. However, another study states 29 Nikunj Ohri, India's tax panel rejects airlines' call to add aviation fuel to GST regime, Reuters (Dec. 21, 2024), https://www. reuters. com/world/india/indias-tax-panel-rejects-airlines-call-add-aviation-fuel-gst-regime- 2024-12-21. 30 Nikunj Ohri & Shubham Batra, India seeks to cut states' share of federal taxes from 2026, sources say, Reuters (Feb. 27, 2025), https://www. reuters.

com/world/india/india-seeks-cut-states-share-federal-taxes-2026sources-say-2025-02-27.

31 ibid.

that higher state dependency on the central grants results in the higher economic growth rate32. In some situations, such as natural disasters, it makes sense to seek assistance from the central government; however, overdependence on the grants must be put to halt to ensure that states do not mismanage this revenue. Institutional Durability (F5) Though the Indian Constitution mentions the division of powers between national and state, the centre has crossed those set boundaries time and again, repeatedly encroaching upon the state's authority through legislative and fiscal means. Political influences, constant shifts in funding structures, and centrally driven programs often give the central government the leverage to reshape authority, sometimes chipping away at state autonomy.

In the early years of independence, Nehru along with the socialist group wanted to implement central economic planning, which, according to them, would help in fortifying the industrial base. Even capitalist leaders supported this centralized control, believing that an open market, especially one accessible to foreign investment, would undermine burgeoning domestic sectors that had already been decimated by colonialism. They viewed government intervention as a necessary compromise for safeguarding India's economic interests. On January 1, 2015, NITI Aayog was established which marked a shift towards competitive cooperative federalism, emphasizing coordination and innovation over rigid central directives. NITI Aayog brought the concept of indices based on which centre allocated the funds accordingly among the states.

Indices such School Education Quality Index, Sustainable Development Goals Index, and State Health Index are measuring means based on which performance of each state is compared. Moreover, the concept of tagging the states who have performed well such as ‘top achievers,’ ‘achievers,’ or ‘aspirers’ was introduced through the Business Reform Action Plan to ensure competitiveness and improve the business environment. To strengthen the state economy, Gujarat's Vibrant Gujarat Summit, Maharashtra's Magnetic Maharashtra, and Karnataka's technology-focused campaigns were among the steps taken by states to compete for foreign direct investment. To create a unique value proposition, states 32 Shilpa Sindhu et al. , Fiscal Federalism and States’ Economic Growth in India- An Analytical Study, 9 Indian Journal of Science and Technology 1-7 (2016).

have reformed their business environment with the norms. However, this competition has generated political controversies. Many state governments have accused centre to divert the investments to the state ruled by the parties forming government in the centre. It has been claimed that the centre has diverted investment originally intended for a particular state33, alleging the centre for showing favoritism in investment allocation34. However, the central government has annulled any such claim, stating that this decision are based on the strict criteria of infrastructure readiness, and policy framework that support such investment needs35.

All in all, strong institutional durability ensures an efficient governance mechanism and upholds public trust; however, accusations by the state government of political favoritism by the Centre could affect the trust of investors, potentially leading to uncertainty in investment decisions and disrupting the competitive balance among states. Conclusion In summation, the underlying intentions behind creating a federal framework where the central government has higher authority over state authority was to ensure national unity and protect the nation from external aggression. Concept of National emergency and president’s rule was introduced to prevent state secession because of the possibility of internal as well as external aggression due to countries' diversity.

However, the central government has time and again misused the emergency provisions to maintain parties' hegemony in the country. Moreover, politicizing the governor and all india service for indirectly influencing the political landscape to get unfair advantage, in addition with economically biased policy has eroded the very spirit of federalism in the indian constitution. 33 Pooja Prasanna, How Modi govt is redirecting investments from other states to Gujarat, Newslaundry (Nov. 8, 2024), https://www. newslaundry. com/2024/11/08/how-modi-govt-is-redirecting-investments-from-other-statesto-gujarat? utm_source=chatgpt. com. 34 Team TOI, Ignored, bled yet again: Telanagana ministers slam Union Budget, say 'injustice to state', Times of India (Feb. 2, 2025), https://timesofindia. indiatimes.

com/city/hyderabad/ignored-bled-yet-again-telanaganaministers-slam-union-budget-say-state-injustice-to-state/articleshow/117849712. cms. 35India Semiconductor Mission, Press Information Bureau (Mar. 23, 2022), https://pib. gov. in/PressReleasePage. aspx? PRID=1808676.