India’s federal architecture, described by K.C. Wheare as “quasi-federal”, has witnessed continuous realignment between national policy coordination and state autonomy, driven by fiscal changes, regulatory centralisation, and institutional transitions.

Recent Changes Introduced by the Union Government

• Shifts in Fiscal Transfers:
  • The 15th Finance Commission set the vertical tax devolution to states at 41% (adjusted after the reorganization of Jammu & Kashmir into Union Territories).
  • Increased reliance on cesses and surcharges—which bypass the net divisible pool of taxes under Articles 270 and 271—has reduced the untied fiscal share received by states.
  • The conclusion of the guaranteed five-year GST compensation period in 2022 created fiscal adjustments for states with narrower revenue bases.
• Expansion of Centrally Sponsored Schemes (CSS): Programs like PMAY and Jal Jeevan Mission require tied state matching funds, which states argue constrains regional developmental budgeting.
• Regulatory and Legislative Interventions:
  • Central laws enacted in areas intersecting with the State List (e.g., earlier farm laws under Entry 33 Concurrent List, electricity reform guidelines, and urban cooperative bank oversight) generated federal debates.
  • Amendments to the GNCTD Act regarding administrative service control in the National Capital Territory led to constitutional litigation.
• Institutional Transitions: Replaced the Planning Commission with NITI Aayog to encourage cooperative federalism through state consultations, though states often request dedicated financial allocation powers.
• Simultaneous Elections Proposal (ONOE): The initiative to align legislative and parliamentary election cycles has drawn varying perspectives regarding regional party competition.
• Office of the Governor: Contentious delays in granting gubernatorial assent to state bills (Article 200) have prompted judicial review in Punjab, Tamil Nadu, and Kerala.

Measures to Build Trust and Strengthen Federalism

• Revitalising the Inter-State Council (Article 263): Mandate regular biannual meetings of the Inter-State Council as recommended by the Sarkaria and Punchhi Commissions to build policy consensus before major national legislations are introduced.
• Capping Non-Divisible Cesses and Surcharges: Amend tax sharing frameworks to ensure all cesses and surcharges are either integrated into the divisible tax pool or capped at a defined share of gross tax revenues.
• Flexibility in Centrally Sponsored Schemes: Allow states greater flexibility to customize 25% to 30% of CSS funds to regional agro-climatic and socioeconomic priorities.
• Codifying Timelines for Gubernatorial Assent: Establish clear timeframes for Governors under Article 200 to grant assent, return bills, or refer measures to the President, consistent with Supreme Court rulings on constitutional propriety.
• Institutionalising Dispute Resolution: Strengthen regional river water dispute tribunals and ensure prompt implementation of awards through negotiated river-basin authorities.

As Dr. B.R. Ambedkar noted, federalism is an organic constitutional partnership. Sustaining federal balance requires moving from transactional politics toward shared consultation and fiscal equity.