96. Federalism, Centre-State Relations

CORE Key Points at a Glance

1. 1

   Union of States — Not a Federation

   • Article 1 describes India as "Union of States" — not "Federation of States"
   • Signals no compact between states; states cannot secede
   • Parliament can create new states or alter boundaries by simple majority (Articles 2, 3)
2. 2

   7th Schedule — Three Legislative Lists

   • Union List (List I): 100 subjects — exclusive Parliament
   • State List (List II): 61 subjects — exclusive State Legislatures
   • Concurrent List (List III): 52 subjects — both; Centre prevails on repugnancy
   • Residuary powers vest with Parliament (Article 248) — unlike USA/Australia where residue is with states
3. 3

   Centre's Five Overriding Legislative Powers

   • Article 249 — RS resolution by 2/3 majority: Parliament legislates on State List (national interest)
   • Article 250 — during National Emergency
   • Article 252 — on request by two or more states
   • Article 253 — to implement international treaties
   • Article 356 — Parliament makes laws for state during President's Rule
4. 4

   Financial Federalism — Finance Commission

   • Finance Commission (Article 280) recommends Centre–State tax division
   • 15th Finance Commission (2020–26): recommended 41% of divisible pool to states
   • Cesses and surcharges excluded from divisible pool — a persistent state grievance
5. 5

   Sarkaria Commission (1983–87)

   • Set up by Rajiv Gandhi government to review Centre–State relations
   • Recommended against misuse of Article 356; emphasised cooperative federalism
   • Called for a more effective Inter-State Council
   • Governor should be an eminent person from outside the state
6. 6

   Punchhi Commission (2007–10)

   • Article 356 should be a last resort; "Constitutional breakdown" defined more precisely
   • CM should be consulted before appointing Governor
   • Proposed Lokpal at state level
   • Favoured giving constitutional status to the Inter-State Council
7. 7

   S.R. Bommai v. Union of India (1994)

   • Landmark 9-judge bench ruling restricting misuse of Article 356
   • Floor test in assembly must be done before dismissing government
   • President's Rule proclamation is subject to judicial review
   • Assembly placed under suspended animation — not dissolved — until Parliament approves
8. 8

   GST — Landmark Cooperative Federalism

   • GST (101st Amendment 2016) subsumed 17+ central and state taxes
   • Created GST Council (Article 279A): joint Centre–State decision-making body
   • Decisions require 3/4 weighted majority — Centre: 1/3 weight; States: 2/3 collectively
   • First time Constitution directly created a joint Centre–State policy body
9. 9

   NITI Aayog (2015) — Replacing Planning Commission

   • Operates on cooperative federalism principles — no direct fund allocation
   • All Chief Ministers on its Governing Council
   • Facilitates bottom-up planning through state-level development plans
   • Key difference: Planning Commission allocated funds; NITI Aayog only advises
10. 10

    Inter-State Council — Article 263

    • Consultative body for disputes and matters of common interest between states
    • President may establish it; constituted in 1990, reconstituted in 2016
    • Punchhi Commission: recommended mandatory meetings and constitutional body status
11. 11

    Governor's Role in Centre–State Relations

    • Articles 153–167: constitutional head of state + Centre's representative
    • Can reserve bills for Presidential consideration
    • Sends reports to President about constitutional breakdown (basis for Article 356)
    • Appointment by President on PM's advice — area of consistent friction
12. 12

    Competitive Federalism — NITI Aayog Indices

    • States compete for investment and ranking through NITI Aayog performance indices
    • Key indices: Ease of Doing Business State Rankings, SDG India Index, Water Management Index
    • Performance-based incentives replace passive waiting for central allocations