Mains Practice Questions

Introduction:

Union Budget 2026-27 recently increased transfers to states by 12.2%, however functional reality is shifting toward a "Centrally Skewed" model.

• This evolution is marked by a unique paradox: while the rhetoric of "Cooperative Federalism" (Team India) is louder than ever, fiscal and administrative practices are increasingly gravitating toward a strong, uniform Centre, often described as "Coercive" or "Executive" federalism.

Body:

Constitutional Framework: The "Quasi-Federal" Design

The Indian Constitution provides a structural blueprint that balances national integrity with regional autonomy, often described as a "Federal structure with a unitary soul."

• Three-fold Distribution of Power: The Seventh Schedule divides subjects into the Union List, State List, and Concurrent List, with the Union holding primacy in case of conflict (Art. 254).
• Fiscal Architecture: The Finance Commission (Art. 280) acts as the institutional balancer to rectify vertical and horizontal imbalances by recommending tax revenue distribution.
• Administrative Integration: All India Services (Art. 312) and a unified judiciary ensure a cohesive administrative fabric across state boundaries.
• Unitary Safeguards: Provisions like Article 356 (President’s Rule) and the Union's power to reorganize states (Art. 3) underscore the "indestructible Union of destructible States."

Evolution Beyond the Constitution

Recent years have seen federalism evolve through extra-constitutional mechanisms, moving from a "Water-tight Compartment" model to an "Interdependent" one.

• Shift toward "Executive Federalism": Decision-making has increasingly shifted to executive forums rather than legislative debate.
  • The NITI Aayog replaced the top-down Planning Commission with a consultative platform, yet it lacks the constitutional or statutory power to allocate funds, making it a "persuasive" rather than "executive" body.
• The GST Council: The Goods and Services Tax (GST) Council (Art. 279A) is the most significant departure from the constitutional design.
  • It has created a "shared sovereignty" where states sacrificed independent indirect taxation for a collective, consensus-based voice.
• Competitive Federalism as a Tool: The Centre now uses indices (e.g., SDG India Index, Fiscal Health Index) to encourage states to compete for investments.
  • While this drives efficiency, it risks favoring already-developed states, leading to regional divergence.

Emerging Challenges

• Fiscal Centralization (Cess & Surcharge): The Centre’s increasing reliance on cesses (which are not shareable with states) has effectively reduced the divisible pool, creating a "vertical fiscal imbalance."
• Delimitation Dilemma: The upcoming delimitation based on the 2026 Census poses a risk of penalizing southern states for successful population control, potentially reducing their parliamentary representation relative to northern states.
• Digital Centralization: Platforms like Gati Shakti and the India Stack allow the Union to directly monitor and influence state-executed projects, often bypassing traditional state administrative layers.
• Asymmetric Strains: Recent alterations in special status arrangements (e.g., J&K) and uniform policy drives (e.g., One Nation, One Election) have raised questions about how regional diversity is protected.
• Issues over Role of the Governor: In several states (e.g., Tamil Nadu, Kerala), the Governor's use of discretionary powers under Article 200 (withholding bills) has led to what experts call "Coercive Federalism," where the legislative will of states is stalled.

Suggested Measures for Rebalancing

• Rationalizing CSS: Reduce the number of Centrally Sponsored Schemes to allow states more "untied" funds to address contextual regional needs (the "one-size-fits-all" trap).
• Activating the Inter-State Council: Strengthen Inter-State Council as a permanent forum for mandatory consultation on major national policies and bills affecting states.
• Capping Cess and Surcharge: Amend the fiscal framework to include a portion of cesses and surcharges in the divisible pool if they exceed a specific percentage of gross tax revenue.
• Reforming the Role of Governor: Clearly define timelines and limits on the discretionary powers of Governors, especially under Article 200, to prevent undue delays in assenting to state bills.
  • Consider implementing recommendations of commissions like the Punchhi Commission to ensure that the Governor’s office functions as a neutral constitutional link rather than an instrument of the Union, thereby reducing instances of “coercive federalism.”

Conclusion

Federalism is no longer just a legal doctrine, it is a dynamic negotiation. While the constitutional framework remains the skeleton, the "flesh and blood" of Indian federalism now lies in cooperative-competitive bargains. India must ensure that the drive for national efficiency does not come at the cost of the Principle of Subsidiarity, where states remain the primary laboratories of innovation and governance.