7.8 The Constitution Designs an Unequal Partnership

It is generally accepted that the Indian Constitution has created a strong central government. India is a country of continental dimensions with immense diversities and social problems. The framers wanted a federal constitution that would accommodate diversity, but they also wanted a strong centre to stem disintegration and bring about social and political change. It was necessary for the centre to have such powers because India in 1947 was not only divided into provinces created by the British — there were more than 500 princely states which had to be integrated into existing States or new States that had to be created. Besides this concern for unity, the framers also believed that India's socio-economic problems — poverty, illiteracy and inequalities of wealth — needed to be handled by a strong central government cooperating with the States.

7.9 Two Sets of Government, Two Sets of Powers

Two sets of government are created by the Indian Constitution: one for the entire nation called the Union government (or central government) and one for each unit, called the State government. Both have constitutional status and a clearly identified area of activity. If there is any dispute about which powers belong to which level, this is resolved by the judiciary^? on the basis of the constitutional provisions. The Constitution clearly demarcates subjects under the exclusive domain of the Union from those under the States. One important feature of this division is that the economic and financial powers are concentrated in the hands of the central government — the States have immense responsibilities but very meagre revenue sources of their own. We will return to this fiscal asymmetry later in this part.

7.10 Schedule VII — The Three Lists That Run India

The legal address of Indian federalism is Article 246 read with Schedule VII. Schedule VII contains three Lists. Each subject mentioned in any of the Lists is called an “entry”. Together these Lists cover every conceivable matter on which a law may be made.

7.10.1 Residuary Powers — Article 248

What about a subject that the framers never imagined — say Cyber Laws, online gaming, drone regulation, or artificial intelligence? The Constitution closes this gap with residuary powers^?. Article 248 says any matter not enumerated in any of the three Lists falls to the Union Legislature alone. In a coming-together federation like the United States, residuary powers traditionally belong to the States. Indian federalism reverses that; another tilt towards a strong centre.

7.11 The Federal Features of Our Constitution

India ticks every standard federal box, even though Article 1 avoids the word.

7.12 The Unitary Tilt — Why India is Federal “With a Difference”

Side by side with these federal features, the Constitution embeds several powerful unitary features that make the centre much stronger than its counterparts in classic federations like the USA. We will look at the most important ones.

The framers were honest about the unitary tilt. The Constitution gives the Parliament the power to form a new State by separation of territory from any State or by uniting two or more States — in effect, the very existence of a State is in the hands of Parliament. It can also alter the boundaries or the name of any State. There are some safeguards (the views of the State legislature are sought) but the final decision is Parliament's.

7.12.1 Single Citizenship — One Identity, Many Loyalties

In some federal countries (the United States and Switzerland, for example), there is a system of dual citizenship — a citizen is at once a citizen of the federation and of a particular state. India deliberately rejected this. Under Articles 5 to 11, India recognises only a single citizenship. People still have two sets of identities and loyalties — we are Gujaratis or Jharkhandis as well as Indians — but in law citizenship is one. The framers chose this arrangement to forge a sense of unity in a partitioned country.

7.12.2 All-India Services — The Steel Frame

Officers of the All-India Services — the IAS, the IPS and the IFS — are common to the entire territory of India. An IAS officer who becomes the District Collector or an IPS officer who serves as the Commissioner of Police is under the control of the central government. States can neither take disciplinary action against these officers nor remove them from service. This is a structural feature that gives the Union enormous influence over how the States are administered on the ground.

7.13 Centre–State Relations — Three Channels

The Constitution organises centre–State relations under three broad heads — legislative, administrative and financial. We have already covered the legislative side via the three Lists. Let us now look at the administrative and (especially) the financial side, because this is where most of today's centre–State politics actually takes place.

7.13.1 Legislative Relations

Beyond the three Lists, the Constitution allows the centre to legislate even on State subjects in special situations. The central government may legislate on a State List subject if the move is ratified by the Rajya Sabha by the required majority. The Constitution also clearly states that the executive powers of the centre are superior to the executive powers of the States. The Union may even give specific directions to the State governments.

7.13.2 Administrative Relations

The Governor — who is appointed by the central government — has the power to reserve a Bill passed by the State Legislature for the assent of the President. This gives the central government an opportunity to delay State legislation or even veto it. Combined with the All-India Services and Article 257, the executive lever-pull from Delhi to a State capital is significant.

7.14 Fiscal Federalism — Where the Money Lives

Even in normal circumstances the central government has very effective financial powers. Items generating revenue are mostly under Union control: customs and corporate taxes flow to Delhi. The States have many constitutional responsibilities — police, public health, agriculture — but limited revenue sources of their own. As a result the States are heavily dependent on grants and financial assistance from the centre. India also adopted planning as the instrument of rapid economic progress after Independence, which led to considerable centralisation of economic decision-making. The Planning Commission appointed by the Union government was the coordinating machinery that controlled and supervised the resource management of the States — and the Union government used its discretion to give grants and loans to States. This distribution of economic resources has been called lopsided and has periodically led to charges of discrimination against States ruled by an opposition party.

7.14.1 The Finance Commission — Article 280

To formalise tax-sharing, the Constitution creates the Finance Commission^? under Article 280. Every five years, the President appoints a Finance Commission to recommend (a) the share of the States in the centre's tax revenues (the “vertical devolution”); (b) the formula by which this State pool is divided among the States (the “horizontal devolution”); and (c) the principles governing grants-in-aid to needy States. The commission's recommendations are typically accepted by the Union government and form the backbone of fiscal federalism.

7.14.2 The GST Council — Cooperative Federalism in Action

The 101st Constitutional Amendment Act, 2016 introduced the Goods and Services Tax (GST) — a single national indirect tax replacing the patchwork of central excise and State VAT. To negotiate GST rates and rules, the Constitution sets up the GST Council^? under Article 279A. It is chaired by the Union Finance Minister and has the Union Minister of State for Finance plus the finance ministers of all States as members. Decisions need a 3/4 majority — the Union has 1/3 of the votes and all States together have 2/3. No State can be ignored; no State can dictate alone. The GST Council is often called the most striking example of cooperative federalism^? in modern India.

7.15 The State's Existence in Parliament's Hands

Recall the most striking unitary feature of the Indian Constitution: the very existence of a State, including its territorial integrity, is in the hands of Parliament. Article 3 empowers Parliament to:

• form a new State by separation of territory from any State, or by uniting two or more States or parts of States;
• increase the area of any State; diminish the area of any State; alter the boundaries of any State; alter the name of any State.

The Constitution provides some safeguards by way of obtaining the views of the concerned State legislature, but the final word rests with Parliament. This is the constitutional basis on which Andhra Pradesh was bifurcated to create Telangana in 2014, on which Madhya Pradesh, Uttar Pradesh and Bihar were divided to create Chhattisgarh, Uttarakhand and Jharkhand in 2000, and on which the special status of Jammu and Kashmir was reorganised in 2019 (covered in Part 3).

7.16 Wrap-Up — Federalism with a Difference

India's Constitution is federal in form and unitary in spirit when it needs to be. Schedule VII and Article 246 set up an honest division of powers; Articles 131 and 132 give the Supreme Court real teeth to police that division. At the same time, residuary powers under Article 248, single citizenship, the All-India Services, and the integrated administrative system steer power decisively towards Delhi. The Finance Commission under Article 280 and the GST Council under Article 279A are how the system tries to soften the resulting fiscal imbalance. In Part 3 we ask the political question that follows naturally from this design: when the centre is constitutionally so strong, what happens when the centre and a State are run by different parties? That is where Article 356, the Sarkaria and Punchhi Commissions, and the special provisions for J&K and the North-East come in.