Centre-State Relations for UPSC: Federalism, Conflicts & Cooperation

"The strength of Indian democracy lies in the delicate balance between the Centre and the States—a relationship that defines governance, policy execution, and national unity."

India’s governance structure is built on the principles of federalism, yet Centre-State relations remain a dynamic and evolving aspect of our polity. The Constitution provides a well-defined framework for power-sharing, but in practice, tensions and cooperation between the Centre and States shape the nation’s political and economic landscape. For UPSC aspirants, mastering Centre-State relations is crucial, as it influences multiple subjects like Indian Polity, Governance, and Current Affairs. This topic is a recurring theme in the Prelims, Mains, and Interview stages. In this blog, we will delve into the constitutional provisions, conflicts, cooperative mechanisms, financial relations, and evolving trends of Centre-State relations. 

Let’s decode this vital pillar of Indian polity! 

Center-state relations form the foundation of India’s federal structure, ensuring a balance between national unity and regional autonomy. Federalism in India is designed to accommodate the diversity of languages, cultures, and administrative needs while maintaining the sovereignty of a unified nation. However, unlike the classical federal model in countries like the United States, the Indian Constitution establishes a quasi-federal structure—where the Centre holds a dominant position while ensuring autonomy for the States. Effective centre-State relations helps in:

• Ensuring Effective Governance
• Strengthening Cooperative Federalism
• Economic & Financial Stability
• Managing Political and Regional Stability

The concept of Centre-State relations is broadly classified into three dimensions:

1. Legislative Relations: Division of law-making powers between the Centre and the States.
2. Administrative Relations: Distribution of responsibilities for policy implementation and governance.
3. Financial Relations: Allocation of financial resources and taxation powers between different levels of government.

Let’s examine each of them in detail. 

1. Articles 245 to 255: Territorial Extent and Legislative Powers

a) Article 245 – Extent of Laws Made by Parliament and State Legislatures

• Parliament can make laws for the whole or any part of India, including Union Territories.
• State legislatures can make laws only for their respective States.

b) Article 246 – Distribution of Legislative Powers

• Divides legislative subjects between Union and State governments through the Seventh Schedule. In case of conflict, Union law prevails (Article 254).

c) Articles 247–255: Special Provisions on Legislative Powers

• Article 247: Parliament can create additional courts for better administration.
• Article 248: Parliament has exclusive power over residuary subjects (matters not mentioned in any list, e.g., Cyber Laws).
• Article 249: Parliament can legislate on a State subject if Rajya Sabha approves with a two-thirds majority.
• Article 250: During a National Emergency, Parliament can make laws on State List subjects.
• Article 252: States can voluntarily surrender legislative powers on a subject to the Centre.

2. Distribution of Legislative Subjects: Union, State, and Concurrent Lists

The Seventh Schedule of the Indian Constitution provides a clear division of legislative authority:

Parliament’s law prevails over State law in the Concurrent List if a conflict arises (Article 254).

3. Conditions for Centre's Legislative Power Over State Subjects

a) Article 249 – Rajya Sabha Resolution

• If Rajya Sabha passes a resolution with a two-thirds majority, Parliament can legislate on a State List subject for the national interest.
• Example: The Prevention of Terrorism Act (POTA), 2002, was enacted under this provision.

b) Article 250 – During National Emergency

• Parliament gains the power to make laws on State List subjects when a National Emergency (Article 352) is declared.

c) Article 252 – When Two or More States Request Parliament to Legislate

• If two or more States pass a resolution, Parliament can make laws on a State subject.
• Example: The Water (Prevention and Control of Pollution) Act, of 1974 was enacted following resolutions by several States.

d) Article 253 – International Agreements

• Parliament can override State laws to implement international treaties, agreements, and conventions.
• Example: The Environment Protection Act, 1986, was enacted under this provision after India signed the Stockholm Declaration on the Environment (1972).

e) Article 356 – President’s Rule

• If constitutional machinery breaks down in a State, the President can assume legislative powers of the State legislature.
• The Governor administers the State on behalf of the Centre.

4. Centre’s Control Over State Legislation

a) Governor’s Assent and Presidential Review

• Article 200: The Governor can withhold assent to a bill passed by the State legislature or reserve it for the President's approval.
• Article 201: The President can reject or approve bills reserved by the Governor.
• Example: The National Eligibility-cum-Entrance Test (NEET) Bill passed by Tamil Nadu was withheld by the Governor for Presidential assent.

b) President’s Rule (Article 356) and Legislative Control

• If a State fails to comply with constitutional provisions, the President can assume control and dissolve the State Assembly.
• Parliament then legislates for that State.
• Example: President’s Rule was imposed in Maharashtra (2019) due to political deadlock.

Also watch: Complete Preamble in 10 minutes | Polity | UPSC CSE 

Effective governance in a federal structure like India depends on a clear distribution of executive powers between the Centre and States. While both have distinct responsibilities, the Constitution grants the Centre overriding authority in certain situations to ensure national unity and efficient administration. 

1. Articles 256 to 263: Distribution of Executive Powers Between Centre and States

The Indian Constitution ensures a functional division of executive authority between the Centre and States, as outlined in Articles 256 to 263.

a) Article 256 – Compliance with Union Laws

• The executive power of every State must be exercised to ensure compliance with laws made by Parliament.
• The Centre can issue directives to States to ensure uniform policy implementation.

b) Article 257 – Centre’s Control Over State Executive Powers

• State governments must follow Union directions, especially on subjects concerning national security, infrastructure, and communication.
• If a State fails to comply, the Centre can intervene through financial penalties or direct action under Article 356 (President’s Rule).

c) Articles 258 & 258A – Delegation of Powers

• Article 258: The President can delegate Union executive functions to States.
• Article 258A: State governments can entrust their executive functions to the Centre.

d) Articles 261 to 263 – Coordination Among States

• Article 261: Public acts, records, and judicial proceedings must be recognized across all States.
• Article 262: The Centre has the authority to resolve inter-state water disputes (e.g., the Cauvery Water Dispute).
• Article 263: Provides for an Inter-State Council to improve Centre-State and State-State coordination.

2. Centre’s Directions Under Articles 256 and 257

The Centre can direct States to comply with Union laws and take corrective measures in case of failure.

a) Situations Where the Centre Can Issue Directives

• Implementation of Union Laws (Article 256)
• Example: Environmental laws like the Environment Protection Act (1986) must be enforced by States under Central directives.
• National Interest and Security (Article 257)
• Example: Maintenance of highways and railways, as these fall under Central jurisdiction.
• Protection of Scheduled Castes & Tribes and Minorities
• The Centre can direct States to enforce laws related to SC/ST protection, human rights, and law enforcement.

b) Consequences of Non-Compliance

• If a State refuses to implement Union laws or comply with directives, the President can assume control of the State government under Article 356 (President’s Rule).
• Example: Dismissal of the State government in Punjab (1987) and Jammu & Kashmir (2018) due to law-and-order breakdowns.

3. Integrated Judicial System and Law Enforcement

Although India follows a federal system, its judiciary and law enforcement remain integrated and unified, ensuring consistency across the country.

a) Single Judiciary with Hierarchical Authority

• The Supreme Court (SC) is the apex body, ensuring uniformity in the interpretation of laws.
• High Courts supervise both State and lower courts, ensuring consistency in judicial procedures.
• Example: Article 141 states that SC decisions are binding on all courts in India.

b) Centre’s Role in Law Enforcement

• All-India Services (IAS, IPS, IFoS)
• Officers in these services are recruited by the Centre but serve under States, ensuring national integration.
• Example: IAS and IPS officers are appointed by UPSC but serve across States, ensuring federal unity.
• National Emergency Powers
• Under Article 352 (National Emergency), law and order come under Central control.
• Example: During the 1975 Emergency, policing and administration were under direct Union supervision.
• Central Agencies Overriding State Law Enforcement
• Agencies like the CBI, NIA, and ED operate under Central jurisdiction but can intervene in State matters.
• Example: CBI investigations often require State consent but can be mandated by the Supreme Court or High Courts.

Confused about any key terms or definitions in Polity? Just ask it and SuperKalam AI will explain it in the simplest words. You can even try different prompts to make it more customized for yourself.

Must read: India's Electoral System: Evolution, Challenges, and the Path to Reform | UPSC Current Affairs

The financial relationship between the Centre and States plays a crucial role in maintaining the balance of power in India’s federal system. They form the backbone of fiscal federalism and influence policies like GST, fiscal devolution, and Centre-State financial disputes.

1. Articles 268 to 293: Allocation of Taxing Powers Between Centre and States

The Constitution divides the power of taxation between the Centre and States to ensure financial stability and accountability. The key provisions are:

a) Article 268 – Duties Levied by the Centre but Collected by States

• Certain duties on stamp papers and excise duties on medicinal and toilet preparations are levied by the Centre but collected by the State where they are applicable.

b) Article 269 – Taxes Assigned to States

• Taxes on the sale of goods (before GST) and consignment of goods in inter-state trade are levied by the Centre but assigned to States.

c) Article 270 – Taxes Levied and Collected by the Centre but Shared with States

• Income tax (except corporate tax) and certain other taxes are distributed between the Union and States based on Finance Commission recommendations.

d) Article 271 – Surcharge on Certain Taxes for the Centre

• The Centre has the power to levy surcharges on income tax and certain duties, and the revenue from these surcharges is not shared with States.

e) Article 272 – Abolished After GST Implementation

• Earlier, excise duties were shared with States, but post-GST, this system was discontinued.

2. Distribution of Tax Revenues and Non-Tax Revenues

The financial structure of India ensures that both the Centre and States have their own sources of revenue. However, the Centre enjoys more taxing power, making the States financially dependent on Central transfers.

a) Sources of Revenue for the Centre

• Direct Taxes: Income tax (excluding agriculture), corporate tax
• Indirect Taxes: GST (on inter-state trade - IGST), customs duties, excise on petroleum and liquor
• Non-Tax Revenue: Dividends from PSUs, interest on loans to States

b) Sources of Revenue for the States

• State GST (SGST) and State Excise Duties
• Property Tax, Land Revenue, Stamp Duty
• Taxes on Vehicles, Electricity, Entertainment, and Betting
• Non-Tax Revenue: Mining royalties, state-run lotteries

c) Role of GST in Centre-State Financial Relations

• GST (introduced in 2017) subsumed multiple indirect taxes and is collected under a dual structure (CGST & SGST).
• IGST (Inter-State GST) is levied and collected by the Centre but shared with States based on consumption.
• The GST Council ensures cooperation between the Centre and States in tax matters.

Example: After the COVID-19 pandemic, States demanded GST compensation from the Centre due to a revenue shortfall.

3. Grants-in-Aid to States: Statutory and Discretionary Grants

To bridge financial imbalances between rich and poor States, the Constitution provides for two types of grants from the Centre to States:

a) Statutory Grants (Article 275)

• These grants are mandatory and recommended by the Finance Commission to help States with financial shortfalls.
• Example: Grants for the development of tribal areas, rural infrastructure, and backward regions.

b) Discretionary Grants (Article 282)

• These grants are not obligatory and are provided at the discretion of the Centre for specific projects or emergencies.
• Example: Central aid for disaster relief (floods, droughts, cyclones) or for infrastructure projects like metro rail expansion.

c) Special Grants and Recommendations by the Finance Commission

• Every five years, the Finance Commission (Article 280) reviews financial relations and recommends tax-sharing formulas and grants-in-aid.
• The 15th Finance Commission (2021-26) recommended 41% devolution of net Central taxes to States.

Master COMPLETE Fundamental Rights in 1 Video| UPSC Prelims| Indian Polity | SuperKalam

Despite the constitutional framework defining Centre-State relations, various challenges continue to emerge, affecting governance and cooperative federalism. These issues stem from financial imbalances, legislative conflicts, and administrative interventions, creating tensions between the Union and State governments.

1. Fiscal Imbalances and Resource Allocation Disputes

The financial relationship between the Centre and States has long been a contentious issue, especially after the implementation of GST in 2017. While GST was meant to streamline taxation, it has also reduced States’ autonomy over indirect taxes, making them more dependent on Central devolution.

Key Concerns:

• Delayed GST Compensation: The Centre had promised to compensate States for revenue losses post-GST for five years (2017-22). However, delays in payments have created friction.
• Unequal Resource Allocation: Richer States (like Maharashtra, Tamil Nadu, Karnataka) contribute more to tax revenues but feel they receive less in return, while poorer States depend heavily on Central aid.
• Surcharge and Cess Issues: The Centre levies surcharges and cesses (on fuel, education, health, etc.) that are not shared with States, reducing their financial independence.

Example: In 2020, several States (Punjab, Kerala, West Bengal) demanded an extension of GST compensation, citing revenue shortfalls due to COVID-19. The Centre, however, asked them to borrow instead, leading to protests.

2. Legislative Conflicts and Overreach of Central Authority

The distribution of legislative powers is designed to balance autonomy with national unity, yet disputes often arise when the Centre intervenes in State matters or expands its authority into State List subjects.

Key Concerns:

• Use of Article 249 and 252: The Centre can legislate on State List matters if the Rajya Sabha passes a resolution (Article 249) or if two or more States request it (Article 252). This has led to concerns about the erosion of federalism.
• Central Laws on State Subjects: The farm laws of 2020 were criticized for interfering in agriculture (a State subject) without consulting State governments.
• Tensions Over the Concurrent List: While both the Centre and States can legislate on subjects in the Concurrent List, Parliamentary laws override State laws in case of conflict, often leading to disputes.

Example: In 2020, Punjab and Chhattisgarh passed State laws rejecting the Central farm laws, arguing they infringed upon their legislative rights. However, the Supreme Court later stayed the farm laws, highlighting the legal complexities.

3. Misuse of Article 356 (President’s Rule in States)

Article 356 allows the President to dismiss a State government and impose Central rule if the State fails to comply with constitutional provisions. While meant as a safeguard, it has often been used as a political tool by ruling Central governments.

Key Concerns:

• Political Motivations: Article 356 has been misused multiple times to topple opposition-led State governments under the pretext of constitutional breakdown.
• Judicial Safeguards: After the S.R. Bommai case (1994), the Supreme Court restricted the arbitrary use of Article 356, stating that judicial review is applicable, and the Centre must prove real breakdown of governance.

Example: In 2016, the President’s Rule was imposed in Uttarakhand after opposition-led protests, but the Supreme Court restored the government, terming the action unconstitutional.

Also cover: Lok Sabha passes 3 Criminal Law Amendment Bills | IPC, CrPC & Indian Evidence Act | UPSC CSE

4. Role of Governors: Neutral Authority or Political Agent?

Governors, appointed by the President, are meant to act as representatives of the Centre in States. However, their role has often been questioned due to allegations of bias in favor of the ruling party at the Centre.

Key Concerns:

• Delay in Giving Assent to Bills: Governors have been accused of withholding or delaying approval of State government bills, creating legislative deadlocks.
• Interference in Government Formation: In case of hung assemblies, Governors sometimes invite parties with weaker mandates to form governments, leading to accusations of favoritism.
• Misuse of Discretionary Powers: Governors can recommend President’s Rule (Article 356), and in some cases, this power has been used against opposition-led States.

Example: In Maharashtra (2019), the Governor invited BJP to form the government despite unclear numbers, leading to a major political crisis. The Supreme Court later intervened and ordered a floor test.

5. NITI Aayog vs. Planning Commission: A Shift in Centre-State Economic Coordination

The replacement of the Planning Commission with NITI Aayog in 2015 was meant to increase cooperative federalism, but concerns remain.

Key Concerns:

• No Financial Allocation Power: Unlike the Planning Commission, NITI Aayog cannot allocate funds, making States dependent on Finance Commission recommendations.
• Dominance of the Centre: While NITI Aayog promotes collaboration, States argue they have limited decision-making authority in economic planning.
• Concerns Over Special Status: Some States (Andhra Pradesh, Bihar) have demanded Special Category Status for additional financial aid, but the Centre has denied these requests.

Example: In 2018, Andhra Pradesh threatened protests after the Centre refused Special Category Status, citing NITI Aayog’s role in rationalizing financial distribution.

6. Emerging Conflicts in Law Enforcement and Investigations

Law and order is a State subject, but Central agencies like the CBI, NIA, and ED often intervene in State matters, leading to friction.

Key Concerns:

• CBI and ED Jurisdiction Issues: Many States have withdrawn general consent for CBI investigations, accusing it of misuse for political targeting.
• NIA’s Powers Under the 2019 Amendment: The National Investigation Agency (NIA) can now investigate state-level offenses, reducing the role of State police.
• Use of Central Forces in State Affairs: Deployment of paramilitary forces in opposition-ruled States without consultation has been a sensitive issue.

Example: In 2020, the Maharashtra government withdrew general consent for CBI probes, citing excessive Central interference in State matters.

7. Water Disputes Between States and Centre’s Role

Inter-state river disputes have been a longstanding issue, with the Centre playing a mediator’s role through tribunals under Article 262. However, States often challenge tribunal decisions, delaying conflict resolution.

Key Concerns:

• Delayed Tribunal Verdicts: Cases often drag on for decades, worsening tensions between States.
• Centre’s Role in Dispute Resolution: Some States argue that the Centre favors politically aligned States in water-sharing agreements.
• Legal Battles Over River Boards: Disagreements over Centre-controlled river management boards have led to legal challenges.

Example: The Cauvery River dispute between Karnataka and Tamil Nadu has seen multiple legal battles, with the Supreme Court modifying tribunal awards in 2018.

Must watch: Article 370 - What to know for UPSC 2024? | Learn with MindMap Expert - Arpita Sharma

India’s federal structure is dynamic, requiring continuous reforms to maintain a balance between the Centre and States. Over the years, various commissions and expert panels have suggested critical measures to address disputes and enhance cooperative federalism. Below are key recommendations that can improve Centre-State relations and foster better cooperation.

1. Recommendations of Sarkaria and Punchhi Commissions

The Sarkaria Commission (1983) and Punchhi Commission (2007) were established to examine Centre-State relations and suggest improvements. Their key recommendations include:

• Limited Discretionary Powers for Governors: Governors should act as impartial constitutional authorities rather than political appointees. Their role should be clearly defined to prevent misuse.
• Strengthening the Inter-State Council: The Council should meet regularly and function as a forum for dispute resolution and policy coordination.
• Restricting Article 356 Misuse: President’s Rule should only be imposed as a last resort, following judicial review, and with strict adherence to Supreme Court guidelines.
• Greater Financial Autonomy for States: The Commission recommended increasing States' share in central taxes and reducing discretionary grants to enhance fiscal federalism.
• Clearer Division of Legislative Powers: The Union should avoid encroaching upon State List subjects, ensuring a more balanced distribution of power.

2. Strengthening Centre-State Institutions

For cooperative governance, Centre-State institutions must be empowered to handle conflicts effectively. Key measures include:

• Revamping the Inter-State Council: Making it a permanent constitutional body with regular meetings to resolve disputes and promote policy coordination.
• Enhancing Zonal Councils: Strengthening regional cooperation through Zonal Councils to address local development challenges efficiently.
• Greater State Participation in National Policy-Making: States should have a more significant say in NITI Aayog’s decision-making to ensure regional priorities are addressed.

3. Promoting Fiscal Federalism and Financial Autonomy

Financial relations play a crucial role in ensuring effective governance. To promote fiscal federalism, the following reforms are necessary:

• Transparent and Predictable Tax Devolution: Implementing recommendations of the Finance Commission to ensure a fair distribution of resources between the Centre and States.
• Reforming GST Compensation Mechanism: Establishing a structured compensation framework to support States facing revenue losses post-GST implementation.
• Increasing Untied Grants to States: Reducing conditional transfers and allowing States more flexibility in fund allocation for developmental projects.
• Empowering States in Financial Planning: Providing States greater autonomy in economic and infrastructure planning, with reduced central interference in fund utilization.

4. Resolving Legislative and Administrative Disputes

To avoid conflicts in governance, legislative and administrative measures should be improved:

• Defining Powers on Concurrent List Subjects: Clear guidelines should be established to prevent conflicts between Union and State laws.
• Strengthening Dispute Resolution Mechanisms: Setting up independent arbitration bodies for resolving financial, legislative, and administrative disputes.
• Ensuring Fair Appointment of Key Officials: Transparency in appointing Governors, Chief Secretaries, and other key officials to prevent political bias.

5. Boosting Cooperative Federalism for Sustainable Development

Cooperative federalism ensures that both the Centre and States work as partners in governance. Key strategies include:

• Encouraging Joint Policy Initiatives: Collaborating on education, healthcare, infrastructure, and social welfare programs.
• Enhancing State Participation in National Missions: Strengthening the role of States in centrally sponsored schemes through more flexible implementation frameworks.
• Expanding the Role of Regional Councils: Addressing specific regional concerns through enhanced coordination among neighboring States.

Also prepare this topic: Understanding the Implications of India's Uniform Civil Code

Share your handwritten Mains answers with SuperKalam, receive detailed feedback, and model answers in seconds. Discuss your answers LIVE with expert mentors – all for FREE!

To master directive words for UPSC Mains, read: Understanding Directive Words in the UPSC Mains Exam.

A well-balanced Centre-State relationship is the backbone of India’s federal structure, ensuring both unity and autonomy in governance. Understanding its complexities is crucial for UPSC aspirants, as it directly impacts constitutional provisions, policymaking, and governance.

As India evolves, so do the dynamics of Centre-State relations, shaping administrative, legislative, and financial interactions. Aspirants must analyze this topic not just for the exam but also to grasp how governance adapts to emerging challenges. 

Don't miss out on the most repeated Polity questions in UPSC! Watch now to master the most important topics, decode PYQ trends, and boost your Prelims preparation. 

Take your UPSC Preparation to the Next Level with SuperKalam!

Meet SuperKalam! Your Super Mentor provides a comprehensive learning ecosystem, you can benefit from focused and disciplined preparation strategies. 

Start Now—it's FREE and take advantage of personalized guidance to crack the UPSC with confidence and clarity.

Explore SuperKalam's Resources and set yourself on the path to success!