Context
- Federalism has been a critical instrument of nation-building since India’s Independence. Recently defeated Constitutional Amendment Bill has reignited the federalism debate sharply. Debates persist on vertical and horizontal devolution in fiscal federalism continuously.
Meaning Of Federalism
- Federalism refers to a system where powers are constitutionally divided between the Centre and states.
- In India, federalism is a work in progress — never set in stone since Independence.
- It requires periodic adjustments to ensure equal citizenship, fiscal equity and political representation.
- True federalism demands wide consultation, accommodation, compromise and self-restraint from all stakeholders.
- India’s federal design had a centralisation bias built into the Constitution after the horrors of Partition.
Challenges Associated With Federalism
- Rising Democratic Deficit
- Constitutional amendments of 1976 and 2002 froze political representation based on the 1971 Census.
- Southern states (AP, Kerala, TN, Telangana) would have had 23 fewer Lok Sabha seats based on actual 2024 population.
- Northern states (Bihar, MP, Rajasthan, UP) would have received 31 additional seats based on population.
- South is at or below replacement fertility rates while Hindi heartland fertility remains significantly higher.
- This creates a perception of penalising demographic achievers and rewarding laggards politically.
- Rising Fiscal Transfers
- By 2023, Hindi heartland received 90% more Finance Commission resources relative to its economic contribution.
- South and West received 44% and 58% less respectively than their actual economic contribution.
- Biggest donor states are Gujarat, Maharashtra and Haryana — not exclusively Southern states.
- Open-ended and continuously rising redistribution is an invitation to resentment and discontent.
- Finance Commission transfers have created a wedge between contributors and beneficiaries over six decades.
- Divergent State Performance
- Since 1980, per capita GDP of South, West and Haryana has grown almost as rapidly as China.
- Contributing states feel penalised for over-performance on both demography and economics.
- Receiving states are perceived to be rewarded for under-performance — deepening the trust deficit.
- Sharp growth divergence makes reconciling political representation and fiscal redistribution extremely difficult.
- Erosion of Democratic Sensibility
- From demonetisation to farm laws, CAA 2019, BNS and the recent Constitutional Amendment Bill — Centre acted unilaterally.
- Politics is increasingly treated as an existential battle to vanquish enemies rather than electoral competition.
- Mounting grievances visible in Kashmir, Ladakh, Manipur, the South and among religious minorities.
- Biggest casualty is the erosion of trust — among citizens, between Centre and states, and between states themselves.
Case Study: GST Council
- Around 2018, Kerala Finance Minister T M Thomas Isaac found himself in a minority of one on gambling taxation in the GST Council.
- The Centre and 28 states could have easily overridden Kerala’s objection given the clear majority.
- Instead, Union Finance Minister Arun Jaitley went out of his way to cajole Kerala back and accommodate its position.
- Kerala came on board; unanimity was preserved — demonstrating the power of democratic sensibility.
- This example illustrates that accommodation and self-restraint by the dominant party can resolve even difficult federal disputes.
- The GST Council itself represents a model of cooperative federalism — consensus-driven, not majority-imposed.
Way Forward
- Centre must engage states through wide consultation, accommodation, compromise and self-restraint.
- Reform Finance Commission devolution criteria to better balance equity with performance incentives.
- Address delimitation concerns through a consultative constitutional process respecting demographic achievements.
- Treat politics as electoral competition, not an existential battle — rebuild institutional trust urgently.
- Revive the spirit of cooperative federalism through regular, meaningful Centre-State consultations.
- Ensure Inter-State Council and Zonal Councils are used effectively as platforms for dispute resolution.
Conclusion
- Democratic sensibility prevents a dominant government from becoming domineering over federal partners. With it, workable solutions are possible for even the most difficult challenges of Indian federalism. Without it, even simple problems risk spiralling into crises threatening national unity and cohesion. India’s federal future ultimately depends on rebuilding trust, the most potent force of nation-building.
