An emerging national federalism


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THE Union model of Indian federalism1 has six systemic properties: (i) Autonomy (of polities, institutions and communities); (ii) Integration (coalescing people, polity and region into a federal nation); (iii) Centralization (contextualized and authorized transfer of authority from lower units to federal/central government, facilitating national governance in many macro areas of national development, public welfare, and national security); (iv) Decentralization (demos enabling paradigm of promoting self-governance and community/ethnic governance. It is also a measure of promoting institutional autonomy and decongesting governance down to the lower levels.); (v) Nationalization (of natural resources and economy with stated objective of promoting equity and justice among people and regions); and (vi) Regionalization (a measure of state formation and cultural accommodation).

However, during the last seven decades, India continued to be a case of centralized federalism. A recent study2 has concluded that India and Australia qualify as the world’s most centralized federations. A decadal mapping of dynamic de/centralization in India shows that the degree of centralization has been much higher especially since 1980 – moving from a measured mean of 3.29 to 2.86 in 2010.3 Mean value has further declined, calculably to less than 2.50 during the Modi government (2014-2019). Centralization during this period is qualitatively different from previous regimes. It is excessively marked by verticalization of power almost akin to a pyramid. Federalism has no considerable independent value except as measure of nationalism and national governance. The emerging federalism can aptly be termed as national federalism.

When Prime Minister Modi entered office, he ‘pledged to push power away from Delhi and back down towards the people. [His catch slogan was minimum government and maximum governance.] Yet in practice he has proved to be an archcentralizer, drawing decisions upwards to the PMO, as if measuring himself against the complexities of running so vast a nation.’4 His governmentality has two distinct aspects – saving and serving his image as the indomitable leader. Accordingly, centralization is pushed towards concentration of power in the PM and PMO. For him, federalism has no better value than as a means to nationalism. His ‘signature initiative’ of cooperative – collaborative – competitive federalism is structurally designed to create a framework of a national state (one nation, one state, one government) where constituent units/states serve as disaggregated sites of national governance.

Building further upon the constructions of Gluck5, Gerken6 and Bulman-Pozen7, national federalism is not federalism in the conventional-constitutional sense of the term. In this form of federalism, sovereignty and autonomy of units have no intrinsic value. Units are viewed as partners in the national governance agenda of the federal government. For national federalism, the term ‘cooperative federalism’ acts as signifier of collective governance.


Conceptually, national federalism exhibits the following core characteristics: (i) it is federalism without any specific doctrine; (ii) promoted generally through federal statutory design; (iii) locus of power shifts from constitution to national parliament, and subsequently from parliament to neo-institutional architectures and executive/administrative offices; (iv) in its constructed discourse, sovereignty and autonomy of units take a backstage; the Centre and states are viewed not as distinct and separate structures but as parts of one integral national whole; (v) as units serve as ‘disaggregated sites of national governance’, new roles of states are generally invented, in other words, putting states always in a national mission mode; (vi) seeks merger of varied interests of people, polities and nation into one uniform policy; and, (vii) degree of decentralization is critically determined by the imperatives of nationalism and common nationality.

Almost all the above-mentioned characteristics of national federalism can be conveniently located within the current phase of Indian federalism. Of crucial importance are: (a) new institutionalism, be it NITI Aayog, or GST Council, or the creation of new regulatory institutions; (b) considerable shift of power from people to state, and from state capitals to national capital; (c) significant shift in the centre-state tax relations under the new GST regime, leading to loss of states’ autonomy; (d) considerable decline in the decisional autonomy of ministries and ministers. The cabinet system has undergone a crucial transformation. Now decisions flow and end with the PM and PMO; (e) new national flagship programmes, many of which encroach upon states’ jurisdictions; and (f) loss of autonomy of statutory institutions. We will now restrict our analysis to structural changes effecting a shift in the power dynamics of centre-state relations.


As a successor to the Planning Commission, NITI Aayog was set up through a cabinet resolution on 1 January 2015. It has been institutionally designed to serve as the national planner, even on behalf of the states. Its mandate includes (i) formulation of ‘credible plans at the village level and aggregate these progressively at higher levels of government’; (ii) development of long-term strategy of development and its monitoring; (iii) resolution of ‘inter-sectoral and inter-departmental’ issues for smooth implementation of the development agenda; and (iv) ‘advocacy of state perspectives with central ministries.’8 NITI Aayog qualifies more as a think tank of the Government of India than as a federal agency. Unlike the Planning Commission, it has no resource and grant distribution authority. As a consequence, ‘fiscal federalism stands only on one pillar, viz. the union finance commission.’9 Its focus is mainly on the preparation of policy papers, and to provide ‘policy guidance to the states.’


A range of issues that are addressed include judicial reform (originally a mandate of the Law Commission of India), civil service reforms (looked after by DoPT), electoral reforms (exclusive responsibility of the Election Commission of India), federalism (originally a competence of the Inter-State Council), education reform (a shared jurisdictions of the Centre and states), agriculture and related activities (jurisdictionally belonging to states), water, health and sanitation, regional development, transport and communication, corruption and black money, taxation policy and administration, including direct and indirect taxes, sustainable development, flagship programmes of the Centre and several other areas of development administration.

Rao and Rao point out that ‘the scope and the remit of NITI Aayog has been expanded and its stature reduced, with the result that there is little evidence of a focus in its working. This has resulted in a vacuum of institutional and procedural arrangements for inter-action between the Union and the states. This vacuum has unfortunately been occupied by ministries in the Union government.’10 They further point out that the Aayog has not brought any qualitative difference in the working of centre-state relations. States’ perceptions about the Centre have hardly changed. They still feel that the Centre continues to encroach upon their jurisdiction, ‘imposing its own priorities while funding… taking credits for schemes that are jointly funded; and continuing to advocate a one-size-fits-all approach in administration.’11


India has moved from the initial constitutional regime of sales tax to Value Added Tax (VAT) in 2005 and to GST on 1 July 2017. Being a unifier and as the principal instrument of national federalism, GST seeks to create ‘a single national market, common tax base and common tax laws for the Centre and states. This suggests that states, in particular, have lost some fiscal flexibility…’12

There has been a substantial erosion in tax revenue of the states, and in their fiscal autonomy: ‘…the GST has subsumed around 31 per cent of the gross tax revenue of the Centre. It has subsumed an even larger proportion of the states’ own tax revenue, of around 47 per cent. This suggests that the states, in particular, have lost some fiscal flexibility, and will need some help in dealing with major shocks, such as crop failures.’13 The initial hope of buoyant revenue capacity of states seems to be gradually diminishing. Any shortfall in GST collection is likely to have an adverse impact on the states’ capacities. This is due to the faulty design of GST. ‘ …design of GST is such that the states stake claim to half the tax that is paid by taxpayers, this immediately implies that the states too have collectively lost an amount of a similar magnitude.’14

While the Centre can compensate its losses by recourse to cesses and duties, the states have no option but to depend on the Centre. As GST is consumption based, states with lower consumption are likely to lose revenue once the compensation period of five years is over. Reddy and Reddy point out another lacunae. They write that ‘the decision making power of the GST Council seems to be loaded in favour of the Union, as it can veto any proposal before the GST Council. (This is based on the weightage of one-third of the total votes cast assigned to it.) Also, it only needs the support of 19 states to introduce the change.’15

But most importantly, the GST Council, in contravention of the principle of parliamentary supremacy, has been conceived as a supra legislature. Its recommendations and decisions are binding on Parliament. In its 8th meeting, the chairman of the council stated that ‘Parliament or the state legislature could not legislate contrary to the recommendation of the council.’16 Of late, we also find politics of rates. Ideally, GST is not only revenue neutral but also apolitical. In the ultimate analysis, GST adds more to the power of the Centre than pushing up the revenue and resource capacity of the states.


In the past, few governments if any, have attempted to dilute the scope of the Finance Commission (FC) as a constitutionally autonomous and politically independent grant agency. At the most, they communicated the economic priorities of the government. ToRs were more or less in tune with the constitutional provisions on the FC. For the first time the present government has tweaked the ToR to promote more and more centralization. Some of the predetermined riders by way of performance incentives which could have an adverse impact on revenue (on account of division and share) of the states, include ‘achievements in implementation of flagship schemes of government of India, disaster resilient infrastructure, sustainable development goals, and quality expenditure’, besides ‘control or lack of it in incurring expenditure on populist measures.’17

In all probability, states are likely to lose out due to the central government advisory that while making a recommendation the FC would have to give due consideration to ‘the impact on the fiscal situation of the Union government of substantially enhanced tax devolution to states following recommendations of the 14th Finance Commission, coupled with the continuing imperative of the national development programme including New India – 2022.’18 Of great concern as far as the borrowing autonomy of the states is concerned, is the rider seeking the FC to give consideration to ‘the conditions the GoI may impose on the states while providing consent under Article 293(3) of the Constitution.’19 Further, the population weightage (generally assigned a high weightage in grant devolution) determined on the basis of population figure of 2011 (previously 1971) is likely to have an adverse impact on the grants share of the southern states which performed high on population control and stabilization measures. This is likely to further perpetuate a North-South divide.


Acting un-federally, the government took the route of the finance/money bill to bring about statutory changes. In other words, it short-circuited the usual parliamentary procedure. To illustrate this: the Finance Act 2015 amended the Forward Contracts (Regulation) Act 1952, Securities Contracts (Regulation) Act 1956, Foreign Exchange Management Act 1999, and Prevention of Money Laundering Act 2002. Given the extra-constitutionality of this new mechanism of amendments, one of the members of Parliament commented that ‘these are drastic amendments and the bundle of amendments are equivalent to that of new bill. These are separate legislations and cannot be part of a money bill.’20


The Finance Bill 2016 sought to dilute the authority of the Reserve Bank of India over its monetary policy. The central government assumed the power to determine the inflation target, besides constituting a monetary policy committee to determine the ‘policy rate required to achieve the inflation target.’ Most importantly, the decision of the committee was binding on the Reserve Bank of India (RBI). The composition of the committee (three persons to be appointed by the central government), gave the central government the dominant say in controlling decisions on monetary policy, originally an autonomous ‘reserve’ of the RBI. The Finance Bill 2016 introduced many significant changes in the Central Sales Tax Act 1956, Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act 1976, Narcotic Drugs and Psychotropic Substances Act 1999, and Central Road Fund Act 2000.

The Finance Bill 2017 introduced far-reaching structural changes in the composition and jurisdictions of the tribunals – a quasi-judicial authority having powers and functions similar to that of a high court. Noticeably, as Mandira Kala writes, ‘tribunals affected by the finance bill include those before which the central government could be a party to disputes – such as those related to income tax, railways, administrative and armed forces tribunals.’21 The Copy Right Act was amended to substitute the Copyright Board by an appellate tribunal. Jurisdiction of the Telecom Dispute Settlement and Appellate Tribunal was extended to include the works and functions of the Cyber Appellate Tribunal and also the Airports Economic Regulatory Authority of India. Competition Appellate Tribunal was replaced by National Company Law Appellate Tribunal, and the bill further extended the jurisdictions of the Industrial Tribunal to the Employees’ Provident Fund.


Under Section 184 of the Finance Bill, the central government assumed exclusive authority to frame rules and regulations determining appointments and service conditions of the members, including chairpersons, of the tribunals. By controlling appointments, the central government influenced the decisions and outcomes of tribunals related to industries, copyright and trademarks, railways claims, foreign exchange management, airports and highways, telecom and information technology, competition and companies, cinematography, income tax, customs, administrative tribunal, consumer protection, securities and exchange, banks and financial institutions, electricity, armed forces, and environmental tribunals. By making Aadhaar a compulsory instrument of income tax returns, for financial transactions and receiving governmental benefits, and as a mark of national identity, it has further armed the state to control the freedom and identity of the people.

The Finance Bill 2018 was not an exception to this. It introduced several important changes in the National Housing Bank Act 1987, Securities and Exchange Board of India Act 1992, Depositories Act 1996, Central Road Fund Act 2000, Prevention of Money laundering Act 2002, Fiscal Responsibility and Budget Management Act 2003, and Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015.


The Modi government has not been at ease with the RBI. Since the beginning it has attempted to dilute its autonomy. This was the first ever government to invoke the hitherto little known Section 7 of the RBI Act 1934 to issue direction to the RBI. The attitude of the government is best summed up by Arun Jaitley’s reply to Viral Acharya’s (deputy governor of the RBI) remark of ‘economic fire’, when he said, ‘the nation that is India is higher than any institutions.’22 About the recent controversy The Economist writes, ‘the government, facing a general election [2019] …wants the RBI to loosen its monetary policy. It wants the bank to pay it a bigger dividend from seigniorage profits, to spend on pre-election giveaways.’23

This reflects a general tendency of the government to control resources and revenue in any form and anywhere in order to feed partisan political goals and cultural populism, and also to provide sufficient leeway to industrialists and capitalists of choice. From this one can safely conclude that the Modi government is un-federally federal. It has cultivated a specific form of national federalism, marked by excessive centralization and singularization of power; unionization of centre-state relations, intended to add further to the power and authority of an overarching national state; the autonomy of institutions is subjected to qualifying tests of political and cultural determinism; statutory and non-statutory changes are effected in order to add to the monopolies of the Centre; pyramidal model of power distribution is being followed and practiced, and in the process, federalism is lost to new narratives of nationalism, developmentalism and state power.



1. A.K. Singh, Union Model of Indian Federalism. CFS & Manak Publications, New Delhi, 2009; and, ‘Constitutional Semantics and Autonomy within Indian Federalism’, in Francesco Palermo and Elisabeth Alber (eds.), Federalism as Decision Making: Changes in Structures, Procedures and Policies. Brill Nijhoff, Leiden & Boston, 2015.

2. A.K. Singh, ‘Dynamic De/Centralization in India, 1950-2010’, Publius: The Journal of Federalism 49(1), Winter 2019, pp. 112-137.

3. Ibid., Table 1, p. 120.

4. James Crabtree, The Billionaire Raj: A Journey Through India’s New Gilded Age. HarperCollins, Noida, 2018, p. 284.

5. Abbe R. Gluck, ‘Our [National] Federalism’, The Yale Law Journal 123(6), April 2014, pp. 1996-2043.

6. Heather K. Gerken, ‘Federalism as the New Nationalism: An Overview’, The Yale Law Journal 123(6), April 2014, pp. 1889-1918.

7. Jessica Bulman-Pozen, ‘From Sovereignty and Process to Administration and Politics: The Afterlife of American Federalism’, The Yale Law Journal 123(6), April 2014, pp. 1920-1957.

8.For details visit web-folios at

9.Vijay Kelkar, ‘Towards India’s New Fiscal Federalism’, Working Paper No. 252, 25 January 2019, National Institute of Public Finance and Policy, New Delhi, p. 7.

10. Y.V. Reddy and G.R. Reddy, Indian Fiscal Federalism. Oxford University Press, New Delhi, 2019, p. 218.

11. Ibid., p. 215.

12. accessed on 15-02-2018.

13. Arvind Subramanian, Of Counsel: The Challenges of the Modi-Jaitley Economy. Penguin Viking, Gurugram, 2018, p. 305.

14. V. Sridhar, ‘Election Manifesto in Disguise’, Frontline, 1 March 2019, p. 7.

15. Reddy and Reddy, op. cit., pp. 172-173.

16. Minutes of the 8th GST Council Meeting, 3-4 January 2017, p. 25.

17. Paras 7 (iii) & (vii) of the ToR, 15th FC, The Gazette of India: Extraordinary, part II-Sec. 3(ii), 25 November 2017, p. 4.

18. Ibid., para 6(iv).

19. Ibid., para 6(vi).

20. Mandira Kala, ‘How Finance Bill Amendments Affect Tribunals’, The Indian Express (New Delhi), 27 March 2017, p. 9.

21. Ibid.

22. The Economist, 3 November 2018, p. 63.

23. The Economist, 15 December 2018, p. 66.