Centre-State Relations in India - Legislative, Administrative, Financial Relations and Federalism

Centre–State Relations in India (Indian Federalism) for UPSC

Centre–State relations are the "working rules" of Indian federalism—how powers, responsibilities, money, and administrative control are shared between the Union and the States. For UPSC, this topic repeatedly appears in Polity (federal structure, legislative lists, Governor, emergencies, Finance Commission, GST Council) and in Governance (cooperative federalism, fiscal federalism, dispute resolution, centrally sponsored schemes). A good answer must combine constitutional provisions + institutions + practical friction points + reform recommendations.

1. Why Centre–State Relations Matter in UPSC

Indian federalism is not only a "division of powers"; it is also a system of coordination. Most public services (police, health, agriculture, local governance, law and order) are delivered by States, while the Union has major responsibilities for national unity, macroeconomy, external affairs, defence, and nationwide standards. Therefore, friction or cooperation between the two levels directly affects governance outcomes.

Prelims Angle

• Articles related to Centre–State relations: 245–255 (legislative), 256–263 (administrative), 268–293 (financial), 352/356/360 (emergencies), 279A (GST Council), 280 (Finance Commission), 131 (SC original jurisdiction).
• Seventh Schedule: Union List, State List, Concurrent List; residuary powers with the Union.

Mains Angle

• Cooperative federalism vs competitive federalism.
• Fiscal federalism, devolution, and "vertical/horizontal imbalances".
• Governor's role, President's Rule, and constitutional morality.
• Dispute resolution mechanisms (SC, Inter-State Council, tribunals).

2. Federalism in India: Nature and Core Features

2.1 India as a "Union of States"

Article 1 describes India as a "Union of States". This signals that the Indian federation is not the result of a compact among sovereign states (as in some classical federations), but a constitutionally created Union. This explains why the Constitution grants the Union a stronger position in certain matters—especially unity, integrity, and national emergencies.

2.2 Why the Constitution Tilted Towards a Strong Centre

• National unity and integrity in a diverse society.
• Partition experience and security concerns.
• Need for uniform standards in key areas (macro-economy, national markets, infrastructure, citizenship).
• Planned development and resource mobilisation (historically a major reason).

2.3 Key Federal Features

• Written Constitution with division of powers (Seventh Schedule).
• Dual polity: Union and States with separate executive/legislature.
• Independent judiciary to interpret federal disputes.
• Bicameralism at the Union level (Rajya Sabha represents States).

2.4 Unitary Features within Federalism

• Residuary powers with the Union (Article 248; Union List Entry 97).
• Single citizenship.
• Integrated All-India Services.
• Emergency provisions that can convert federal features into a unitary mode.
• Parliament's power to reorganize States (Article 3).

Concept Note (UPSC language)

India is often described as a "quasi-federal" or "federal with a unitary bias" system. In practice, it is better understood through the lens of cooperative federalism (working together) and competitive federalism (healthy competition for investments, reforms, and outcomes).

3. Constitutional Basis: Distribution of Powers (Seventh Schedule)

3.1 The Three Lists

The Constitution divides law-making subjects into:

• Union List: National importance (defence, foreign affairs, currency, banking, railways, etc.).
• State List: Local/regional matters (police, public order, public health, agriculture, etc.).
• Concurrent List: Shared space (criminal law, marriage, contracts, forests and wildlife after amendments, education, etc.).

3.2 Articles Governing Legislative Distribution

• Article 245: Extent of laws made by Parliament and State legislatures.
• Article 246: Subject-matter of laws (Union/State/Concurrent lists).
• Article 246A: Special provision for GST (both can legislate; Parliament has exclusive power over inter-State supply).
• Article 248: Residuary powers of Parliament.
• Article 254: Repugnancy in Concurrent List (Union law prevails; State law can prevail with President's assent under Article 254(2)).

3.3 Doctrine of Repugnancy (Article 254)

When both Parliament and a State legislature make laws on the same Concurrent List subject and there is a conflict, Union law prevails. However, if a State law on a Concurrent subject has been reserved for the President's consideration and receives President's assent, it can prevail in that State (Article 254(2)). Parliament can still override later by making another law.

Prelims Pointers

• Repugnancy applies mainly to the Concurrent List.
• Union List has priority in normal circumstances; in emergencies, Union can legislate on State subjects.

4. Legislative Relations (Part XI): Who Can Make Laws and When?

4.1 Normal Distribution

• Parliament makes laws on Union List.
• State legislatures make laws on State List.
• Both can legislate on Concurrent List (Union law prevails on conflict).

4.2 When Parliament Can Legislate on State List

(A) Rajya Sabha Resolution – Article 249

If the Rajya Sabha passes a resolution by a special majority that it is necessary in the national interest for Parliament to legislate on a State subject, Parliament can do so for the period specified (subject to renewals as per constitutional scheme).

(B) During National Emergency – Article 250

When a National Emergency is in operation, Parliament can legislate on State List subjects for the whole or any part of India.

(C) When States Consent – Article 252

If two or more States request Parliament to legislate on a State subject, Parliament may do so; other States can later adopt that law.

(D) To Implement International Agreements – Article 253

Parliament may make laws on any subject (including State List) to implement international treaties/agreements/decisions of international bodies. This is important for climate commitments, global conventions, etc.

(E) During President's Rule – Article 356

When President's Rule is imposed in a State, Parliament can legislate for that State on State List matters.

4.3 Centre's Role in State Bills: Governor and President

• Article 200: Governor's assent, withholding, or reservation for the President.
• Article 201: President's decision on reserved bills (assent/withhold/return if permissible).

In practice, reservation of bills can become a major Centre–State friction point when political parties differ.

4.4 Importance of the Concurrent List (UPSC focus)

The Concurrent List is the biggest "shared space" where policy overlap is common: criminal law, procedural law, education, forests, social welfare, labour-related aspects, etc. Hence, the quality of Centre–State relations often depends on consultation, coordination, and clarity in this list.

5. Administrative Relations: Union–State Executive Coordination (Articles 256–263)

5.1 Obligation of States and Union Directions

(A) Article 256: Compliance with Union Laws

States must ensure compliance with laws made by Parliament and do not act in a manner that impedes Union executive power. The Union may give directions to a State for this purpose.

(B) Article 257: Directions for National or Strategic Importance

The Union can give directions to States for the construction and maintenance of means of communication of national or military importance, and to ensure that State actions do not impede Union functions.

5.2 Delegation of Functions

• Article 258: Union can entrust functions to States (with consent).
• Article 258A: States can entrust functions to the Union (with consent).

This delegation is the practical foundation of cooperative federalism—tasks are often performed by the level best placed to execute them.

5.3 Inter-State Coordination Provisions

• Article 261: Full faith and credit to public acts, records, and judicial proceedings across India.
• Article 262: Adjudication of inter-State river water disputes (Parliament can provide for exclusion of courts in certain ways through law).
• Article 263: Inter-State Council (coordination, investigation, and recommendation).

5.4 All-India Services (AIS) as an Integrating Link

All-India Services (like IAS, IPS, and IFoS) are constitutionally supported (Article 312) and are designed to maintain administrative unity and common standards. They provide:

• Policy continuity and uniform administrative ethos.
• Coordination capacity between Union and States.
• Support during crises and national programmes.

At the same time, debates often arise over cadre control, deputation, and balancing State autonomy with national needs.

5.5 Governor as a Constitutional Link (and Flashpoint)

The Governor is formally the constitutional head of the State (Articles 153 onwards) and is appointed by the President. The office is intended to act as a neutral constitutional bridge. In practice, it becomes controversial when:

• Discretion is perceived as politically influenced (e.g., inviting parties in hung assembly, handling floor tests).
• Reservation/assent to State bills becomes contentious.
• Public statements by Governors create political friction.

Mains Note

In answer-writing, always distinguish between constitutional design (neutral link) and political practice (contestation), then propose reforms grounded in commissions and constitutional morality.

6. Financial Relations: Fiscal Federalism (Articles 268–293 and Beyond)

Financial relations are the most frequent source of Centre–State contestation because responsibilities are large at the State level while major buoyant tax handles are often at the Union level. Therefore, the Constitution provides multiple channels: tax distribution, grants, and borrowing frameworks.

6.1 Allocation of Taxing Powers

The Constitution demarcates taxation powers so that both levels have assured sources.

6.2 The Finance Commission (Article 280)

The Finance Commission is a constitutional body set up periodically to recommend:

• Vertical devolution: share of States in the divisible pool of central taxes.
• Horizontal distribution: distribution among States based on criteria (population, area, income distance, forest cover, etc. as per commission design).
• Grants-in-aid to States (Article 275) and other fiscal recommendations.

6.3 Grants-in-Aid: Articles 275 and 282

• Article 275: Grants-in-aid to States in need of assistance (constitutional grants).
• Article 282: Discretionary grants for any public purpose (Union and States). This becomes relevant for centrally sponsored schemes and special-purpose funding.

6.4 Borrowing: Articles 292 and 293

• Article 292: Union borrowing power.
• Article 293: State borrowing power, with conditions—especially where State has outstanding loans or guarantees from the Union (this creates a coordination-and-control framework).

6.5 GST and the GST Council (Article 279A)

The GST constitutional framework created a unified national market with shared taxation powers. Key UPSC points:

• GST is an example of cooperative federalism because both Union and States coordinate tax decisions through the GST Council.
• Article 246A provides concurrent power for GST; Parliament has exclusive power over inter-State supply.
• The Council is a major platform for negotiation on rates, exemptions, compliance, and compensation-related debates.

Common Fiscal Federalism Issues (Answer-ready)

• Vertical imbalance: revenue capacity concentrated at the Union level while expenditure responsibilities are large at States.
• Horizontal imbalance: unequal fiscal capacity among States due to different economic bases.
• Conditional transfers: Centrally Sponsored Schemes and tied grants may reduce policy autonomy.
• Borrowing constraints: tensions between fiscal discipline and developmental needs.

7. Inter-State Relations and Dispute Resolution

7.1 Supreme Court's Original Jurisdiction (Article 131)

Article 131 allows the Supreme Court to decide disputes:

• Between the Union and one or more States.
• Between the Union and any State(s) on one side and other State(s) on the other.
• Between two or more States.

UPSC Tip: Article 131 is a high-value provision because it is a direct constitutional method to resolve federal disputes judicially.

7.2 Inter-State River Water Disputes (Article 262)

River water disputes are among the most sensitive inter-State issues because they impact agriculture, drinking water, and regional politics. Article 262 empowers Parliament to provide for adjudication of such disputes and can limit the jurisdiction of courts as provided by law. Even when tribunals exist, implementation and compliance remain governance challenges.

7.3 Freedom of Trade and Commerce (Articles 301–307)

A common market is essential for economic unity. Article 301 provides freedom of trade, commerce, and intercourse throughout India, subject to reasonable restrictions under the constitutional scheme (e.g., public interest, taxation, and regulatory frameworks). This is relevant to federalism because States may impose regulations/taxes that affect national market unity.

7.4 Inter-State Council (Article 263)

The Inter-State Council is meant to:

• Investigate and discuss issues of common interest.
• Make recommendations for better coordination.
• Reduce friction by institutional dialogue.

It represents the "cooperative federalism" approach—solve politically, not only legally.

7.5 Zonal Councils

Zonal Councils are regional coordination forums that help with:

• Border disputes, transport and communication issues.
• Inter-State crime, migration, and resource-sharing concerns.
• Sharing best practices and reducing regional tensions.

8. Emergency Provisions and Centre–State Relations: The Unitary Turn

8.1 National Emergency (Article 352)

During a National Emergency, the federal balance shifts towards the Union. Parliament gains the ability to legislate on State List subjects (Article 250), and the Union's executive power expands in practice. For UPSC answers, link this to the constitutional intent: protecting national unity during extraordinary situations.

8.2 President's Rule (Article 356) and Article 365

Article 356 permits the Union to impose President's Rule if there is a breakdown of constitutional machinery in a State. Article 365 supports this by stating that failure to comply with Union directions can be a ground for such action.

Key exam point: The constitutional power exists, but its misuse has historically been a major criticism. The Supreme Court's jurisprudence (especially the Bommai principle set) is often used as the "constitutional safeguards" angle.

8.3 Financial Emergency (Article 360)

Financial Emergency enables stronger Union control over State finances and salaries, though it is generally discussed as an unused but significant constitutional provision. Mention its potential impact on fiscal autonomy.

Mains Framing

• Balance: Emergency provisions are necessary for unity, but require strict constitutional discipline.
• Safeguards: Judicial review + floor test principles + proportional use.

9. Major Institutions Shaping Centre–State Relations Today

9.1 NITI Aayog and the Governing Council

In the cooperative federalism narrative, policy platforms where States participate in national strategy matter. NITI Aayog's Governing Council (Chief Ministers/LGs + Prime Minister) is often referenced as a forum for national development coordination. For UPSC, present it as a consultative platform rather than a constitutional authority like the Finance Commission.

9.2 Centrally Sponsored Schemes (CSS)

CSS reflect a practical reality: many national priorities are implemented through States using shared funding. Key exam points:

• Benefits: national minimum standards, scale, focus on outcomes, support to poorer States.
• Challenges: reduced State autonomy, one-size-fits-all design, administrative burden, fiscal stress from matching share.

9.3 GST Council as a Federal Negotiation Platform

GST Council is frequently cited as a model of cooperative federalism because it institutionalizes negotiation and consensus-building for tax policy. For Mains, discuss both its success (common market) and debates (fiscal autonomy and compensation disputes).

10. Key Areas of Friction in Centre–State Relations (Answer-ready Themes)

10.1 Governor's Role

• Assent/reservation of State bills.
• Discretion in hung assemblies (invitation to form government).
• Timing and neutrality of constitutional actions.

10.2 Use of Central Agencies and Administrative Control

In federal debates, States often raise concerns about investigations, deployment of forces, and administrative actions that affect law and order (a State subject) while the Union highlights national security, inter-State crime, and economic offences. For UPSC, treat this as a coordination problem needing clear rules and institutional consultation.

10.3 Fiscal Stress and Devolution Debates

• Demand for greater predictable transfers.
• Concerns over non-shareable levies/surcharges.
• Borrowing constraints vs developmental needs.

10.4 Centrally Sponsored Schemes and Policy Autonomy

States argue for flexibility and local adaptation; the Union argues for national priorities and minimum standards. A balanced answer suggests outcome-based design, flexibility in implementation, and strengthened consultation.

10.5 Inter-State Disputes (Water, Borders, Resources)

These disputes test both inter-State relations and the Union's role as a neutral coordinator. A good UPSC approach combines legal mechanisms (tribunals/SC) with political negotiation (ISC/Zonal Councils).

11. Landmark Supreme Court Themes (Federalism Jurisprudence)

UPSC does not require writing full case briefs; instead, use cases to support arguments on federal balance.

• S.R. Bommai principle set: strengthened judicial review over President's Rule; emphasised floor test logic and limits on arbitrary dismissal.
• Federalism as part of basic structure: helps argue that both Union and States have constitutionally protected space.
• Repugnancy and legislative competence disputes: courts interpret lists and resolve overlap.

How to use in Mains: Mention the theme in 1–2 lines, connect it to the question, and move to reform suggestions.

12. Commissions on Centre–State Relations: Sarkaria and Punchhi (High-Value UPSC Content)

12.1 Sarkaria Commission (Core Themes)

Sarkaria Commission is the most cited reference in UPSC answers on Centre–State relations. You can use it to justify:

• Cooperative federalism through consultation and Inter-State Council strengthening.
• Article 356 as a last resort, not a routine political tool.
• Need for neutral Governor functioning within constitutional limits.
• Better use of Article 263 (Inter-State Council) for coordination.

12.2 Punchhi Commission (Core Themes)

Punchhi Commission is often used for "modernising federalism" themes:

• Clarifying Governor's role and limiting discretionary misuse.
• Strengthening institutional mechanisms for dispute resolution and dialogue.
• Improving fiscal relations and transparency in transfers.

Answer Tip

In any federalism question, adding one line referencing Sarkaria/Punchhi improves credibility—then convert it into a concrete reform proposal.

13. Cooperative Federalism: The Way Forward

13.1 What a Good Federal Balance Looks Like

• Union: national unity, macro-stability, standards, national market, external affairs, security.
• States: local needs, social sector delivery, policing and public order, local economy, welfare innovation.
• Institutions: regular dialogue, predictable finances, transparent rules, quick dispute resolution.

13.2 Practical Reforms (Write-ready Points)

• Strengthen Inter-State Council as a regular policy conflict-resolution forum (not occasional).
• Clear, time-bound processes for assent/reservation of bills to reduce constitutional friction.
• Fiscal predictability: transparent, rule-based transfers; reduce excessive dependence on ad-hoc grants.
• Flexible scheme design: outcome-based funding, greater State innovation space.
• Dispute resolution upgrade: early negotiation + mediation + faster adjudication for water/resource disputes.
• Respect constitutional roles: Governor neutrality, legislative competence clarity, and constitutional morality.

Ethics + Governance Line (Good in Mains)

Federalism is not only a legal design; it is also a practice of trust, consultation, and constitutional restraint.

14. Quick Revision Notes (One-Page Ready)

• Legislative: Articles 245–255, Seventh Schedule, Article 254 (repugnancy), Parliament on State List via 249/250/252/253/356.
• Administrative: Articles 256–263 (directions, delegation, ISC), Article 312 (AIS), Governor as constitutional link.
• Financial: Articles 268–293, Finance Commission (280), grants (275/282), borrowing (293), GST Council (279A).
• Disputes: SC original jurisdiction (131), river disputes (262).
• Emergencies: 352/356/360 shift balance towards Union.
• Commissions: Use Sarkaria and Punchhi for reforms and balanced arguments.

15. UPSC PYQ-Style Questions (Practice)

16. Prelims Practice MCQs (with Answers and Explanations)

1. Which of the following provisions allows Parliament to legislate on a matter in the State List when two or more States consent?

   (A) Article 249
   (B) Article 250
   (C) Article 252
   (D) Article 254

   Answer: (C) Article 252. Explanation: Article 252 permits Parliament to legislate on a State subject if two or more States request it; other States may adopt it later.

2. The doctrine of repugnancy is primarily associated with:

   (A) Union List conflicts
   (B) State List conflicts
   (C) Concurrent List conflicts
   (D) Residuary powers

   Answer: (C) Concurrent List conflicts. Explanation: Article 254 deals with repugnancy when Union and State laws conflict on Concurrent List subjects.

3. Which Article provides for the Inter-State Council?

   (A) Article 262
   (B) Article 263
   (C) Article 280
   (D) Article 312

   Answer: (B) Article 263. Explanation: Article 263 empowers the President to establish an Inter-State Council for coordination and recommendations.

4. Parliament's residuary legislative power is derived from:

   (A) Article 246
   (B) Article 248
   (C) Article 254
   (D) Article 263

   Answer: (B) Article 248. Explanation: Article 248 gives Parliament power over subjects not enumerated in any list.

5. Which of the following best describes Article 246A?

   (A) It deals with repugnancy in Concurrent List.
   (B) It provides special power for GST to both Union and States.
   (C) It establishes the Finance Commission.
   (D) It provides for Inter-State river disputes.

   Answer: (B). Explanation: Article 246A provides concurrent legislative power for GST (with special role for Parliament in inter-State supply).

6. Which institution is a constitutional body for recommending tax devolution to States?

   (A) GST Council
   (B) Inter-State Council
   (C) Finance Commission
   (D) NITI Aayog

   Answer: (C) Finance Commission. Explanation: Finance Commission is mandated under Article 280 to recommend devolution and grants.

7. During a National Emergency, Parliament can legislate on State List subjects under:

   (A) Article 249
   (B) Article 250
   (C) Article 252
   (D) Article 253

   Answer: (B) Article 250. Explanation: Article 250 enables Parliament to legislate on State List subjects during National Emergency.

8. Article 131 of the Constitution relates to:

   (A) Election disputes
   (B) Advisory jurisdiction of SC
   (C) Original jurisdiction of SC in federal disputes
   (D) Review jurisdiction of SC

   Answer: (C). Explanation: Article 131 provides original jurisdiction to SC for disputes between Union and States or among States.

17. Model Mains Questions (Ready to Practice)

• "Indian federalism is dynamic and continuously negotiated." Discuss with reference to legislative, administrative, and financial relations.
• Examine the constitutional mechanisms that ensure a balance between national unity and State autonomy.
• Critically evaluate Centrally Sponsored Schemes as instruments of cooperative federalism.
• Discuss how the GST regime has reshaped fiscal federalism in India.
• Analyse the role of the Inter-State Council and Zonal Councils in reducing federal conflicts.
• "Emergency provisions are both necessary and risky for federalism." Comment.
• Explain the working of Article 254 and how it affects Centre–State relations in the Concurrent List.
• Discuss the significance of the Finance Commission in addressing vertical and horizontal imbalances.

18. Conclusion: The UPSC Takeaway

Centre–State relations in India are designed as a balanced federal system—strong enough to maintain national unity, yet flexible enough to allow States to govern local priorities. The Constitution provides multiple coordination mechanisms (Inter-State Council, Finance Commission, GST Council, delegation provisions) and also emergency tools for extraordinary situations. In practice, the quality of federalism depends on consultation, fiscal trust, institutional dialogue, and constitutional restraint. For UPSC, high-scoring answers combine articles + institutions + friction points + commission-based reforms in a balanced tone.