Is Indian Federalism Changing?
Understanding the Shift from Cooperative Federalism to Negotiated Centralisation
Part 1: When the Constitution Stays the Same but Federalism Changes
“The most profound constitutional transformations are often the ones that occur without changing a single word of the Constitution.”
When India adopted its Constitution in 1950, it described itself as a “Union of States.” The phrase reflected a carefully designed balance. The Union would remain strong enough to preserve national unity, while the States would retain sufficient autonomy to govern according to their own social, economic and political realities.
For decades, this balance survived political disagreements. There were disputes over language, river waters, taxation and economic policy, but the assumption remained unchanged: the Union and the States were constitutional partners.
Today, that assumption appears to be under strain.
Interestingly, the constitutional framework has changed very little. Articles governing taxation, the Finance Commission, the Governor, Parliament and the Supreme Court remain largely the same. Yet almost every major federal institution seems to be experiencing friction. States increasingly complain of shrinking fiscal autonomy, Governors are accused of delaying legislation, debates over delimitation have intensified, and the Supreme Court is repeatedly called upon to settle disputes that were once resolved politically.
This raises an important question.
If the Constitution has not fundamentally changed, why does Indian federalism feel different?
The usual explanation is straightforward. Centre-State conflicts have always existed, and what we are witnessing is simply another phase in a long constitutional journey.
There is truth in that argument.
But looking at each controversy in isolation misses a much larger pattern.
Viewed separately, cesses and surcharges appear to be a fiscal issue. Delimitation seems like an electoral exercise. The Governor’s office looks like an administrative controversy. Judicial intervention appears to be a constitutional debate.
Viewed together, however, these developments tell a single story.
They suggest that Indian federalism is gradually moving away from cooperative federalism, where disagreements were primarily resolved through political consultation, towards what may be described as negotiated centralisation, where power is increasingly negotiated through fiscal leverage, administrative discretion and constitutional litigation.
The Constitution has remained remarkably stable.
Its operating system has not.
The Wallet Changed First
Every federal system ultimately rests on one simple reality.
Governments can exercise only those powers they can afford to finance.
This is why the changing nature of Indian federalism first becomes visible in the Union Budget rather than in the courtroom.
Under Article 280, the Finance Commission recommends how Union taxes should be shared with the States, while Article 270 governs the distribution of the divisible pool. The Sixteenth Finance Commission retained the headline figure of 41% tax devolution, suggesting continuity in India’s fiscal arrangement.
Yet many States argue that this headline conceals a deeper transformation.
The reason lies in the divisible pool itself.
Over the past decade, the Union has increasingly relied on cesses and surcharges, revenues that remain outside the divisible pool and therefore are not shared with the States. The constitutional formula has remained unchanged, but the amount passing through that formula has steadily declined.
As one observation captures succinctly:
“The divisible pool is not gross tax revenues.”
This distinction changes the federal conversation.
The issue is no longer only about how much States receive.
It is about how much remains available to be shared in the first place.
The first shift in Indian federalism, therefore, is not political.
It is fiscal.
And once fiscal capacity changes, everything else gradually begins to change with it.
From Shared Welfare to Shared Burden
The second transformation is visible in welfare governance.
For decades, many flagship programmes reflected a model of shared responsibility. The Union designed national schemes while bearing a substantial part of the financial burden.
That balance is gradually evolving.
Newer welfare frameworks increasingly retain centralized policy design while transferring a larger share of implementation costs to State governments.
The proposed VB-G RAM G framework illustrates this shift. Moving away from the earlier employment guarantee architecture, it changes the financial relationship between the Union and the States by requiring significantly greater State participation in funding rural employment.
The larger significance goes beyond one programme.
It reflects a broader institutional change.
The Union increasingly determines national priorities.
The States increasingly finance implementation.
Several analysts therefore describe the emerging model as one where States act as implementers of priorities set in New Delhi.
Whether or not one agrees with this characterization, it raises an important constitutional question.
Can federal autonomy remain meaningful if policy authority and financial responsibility begin to move in opposite directions?
That question naturally leads to another.
If States are expected to spend more while their fiscal flexibility becomes narrower, how do they continue to govern?
The answer lies in debt.
When Debt Replaces Devolution
Governments cannot suspend salaries, pensions, healthcare or education because revenues become constrained.
They borrow.
Traditionally, borrowing financed future growth through roads, irrigation projects and infrastructure.
Increasingly, however, borrowing is financing routine governance itself.
State Development Loans (SDLs) have become the principal mechanism through which many States absorb fiscal stress. Rather than serving only developmental purposes, debt increasingly supports welfare commitments and committed expenditure.
This represents an important structural shift.
As one observation from the research notes,
“If debt, rather than devolution, becomes the primary shock absorber in India’s federal system, fiscal sustainability itself comes under strain.”
Debt is gradually replacing tax devolution as the mechanism that keeps State finances functioning.
The implications extend beyond economics.
Financial dependence inevitably affects political bargaining power. A government with limited fiscal flexibility possesses fewer options when negotiating national priorities.
Fiscal dependence slowly becomes political dependence.
And once questions of money begin influencing questions of power, the debate naturally shifts towards political representation itself.
That brings India to perhaps the most sensitive federal debate of the coming decade.
Delimitation.
Part 2: From Political Voice to Constitutional Litigation
If fiscal dependence changes the balance of power, the next question is inevitable.
Who gets to shape national decisions?
In a federal democracy, money is only one source of influence. The other is political representation. States may disagree over taxation or welfare, but their ability to negotiate ultimately depends on the strength of their voice in Parliament.
That is why the debate over delimitation has become far more than a technical exercise in redrawing constituency boundaries.
For nearly five decades, the allocation of Lok Sabha seats has remained frozen on the basis of the 1971 Census. The arrangement was designed to ensure that States implementing population control policies were not politically disadvantaged. In effect, India accepted a temporary compromise: demographic equality would be moderated to preserve the federal balance.
That compromise is now approaching its end.
Once delimitation resumes after the first Census conducted post-2026, parliamentary representation will once again be linked to population. States with faster population growth are expected to gain seats, while several southern States that stabilized their populations decades ago may see their relative political influence decline.
This has transformed delimitation into one of the defining constitutional debates of contemporary India.
Supporters argue that democracy requires the principle of “one citizen, one vote, one value.” If populations have changed significantly over fifty years, representation must also change.
Critics ask an equally compelling question.
Should States that successfully implemented national population policies now lose political influence because they achieved the very objective encouraged by the Union?
This is what many describe as a “performance penalty.”
Success in population control and human development increasingly appears disconnected from political reward.
Whether or not that perception ultimately proves correct, it reveals an important shift in the federal conversation. The debate is no longer simply about representation. It is about whether India’s federal compact can continue balancing democratic equality with regional equality.
When States begin to worry simultaneously about their wallet and their voice, disagreements inevitably spill into the functioning of constitutional institutions.
When Administration Becomes the Battlefield
Federal systems are sustained not only by constitutional provisions but also by constitutional conventions.
One of those conventions has long concerned the office of the Governor.
The Constitution envisages the Governor as the constitutional head of the State who ordinarily acts on the aid and advice of the elected Council of Ministers. The office was intended to function as a bridge between the Union and the States, ensuring constitutional continuity rather than political competition.
Increasingly, however, that office has become one of the principal sites of federal confrontation.
Across several States, Governors have been accused of delaying assent to Bills passed by elected legislatures. The Constitution, under Article 200, requires the Governor to act “as soon as possible,” but it does not prescribe a specific timeline.
The constitutional silence has become the centre of a much larger debate.
Does the absence of a timeline imply unlimited discretion?
Or does it impose a constitutional obligation to act within a reasonable period?
What initially appeared to be an administrative issue has therefore evolved into a question of legislative sovereignty.
Can an unelected constitutional authority indefinitely delay legislation passed by an elected Assembly?
The Supreme Court answered that question by observing that the Governor cannot stifle the democratic process of law-making by arbitrarily withholding assent to Bills. In another significant observation, the Court reminded that the Constitution envisions the Governor as “a link that connects two tiers of a layered system, not as a wedge that divides them.”
These observations reveal a deeper concern.
The real issue is no longer merely the powers of the Governor.
It is whether constitutional offices continue to facilitate democratic governance or increasingly become arenas of institutional confrontation.
When political disagreements begin affecting routine governance itself, litigation becomes almost inevitable.
The Court Becomes the Federal Referee
Perhaps the clearest indication of India’s changing federal landscape is the expanding role of the Supreme Court.
Traditionally, courts examined whether laws violated the Constitution.
Increasingly, they are being asked to ensure that constitutional institutions perform their duties.
The April 2025 judgment prescribing a three-month timeline for Governors and the President to decide pending Bills illustrates this transformation. The Court was no longer reviewing legislation; it was addressing executive inaction that threatened the functioning of elected legislatures.
The Union responded through an equally significant constitutional mechanism.
Invoking Article 143, the President referred 14 questions to the Supreme Court, asking whether the judiciary could prescribe timelines for constitutional authorities when the Constitution itself remains silent.
The disagreement goes far beyond one judgment.
At its heart lies a fundamental constitutional dilemma.
How far can judicial review extend before it begins to reshape the separation of powers?
Supporters of the judgment argue that constitutional silence cannot become an excuse for indefinite executive delay. Critics counter that allowing courts to prescribe operational timelines risks permitting the judiciary to enter domains traditionally reserved for the executive.
Ironically, both sides claim to be defending the Constitution.
The judiciary seeks to preserve democratic accountability.
The executive seeks to preserve institutional autonomy.
This explains why the current moment represents not merely a legal dispute but a conversation between constitutional equals.
The Supreme Court is increasingly functioning as India’s federal referee—not because the Constitution explicitly assigned it that role, but because political institutions are finding it increasingly difficult to resolve disputes through consultation alone.
The judicialization of federalism is therefore not the cause of institutional stress.
It is a symptom of it.
Beyond Cooperative Federalism
Taken individually, each of these developments appears manageable.
A dispute over tax sharing.
A welfare programme.
Rising State debt.
A delimitation exercise.
A Governor delaying legislation.
A Supreme Court judgment.
Together, however, they reveal a coherent structural transformation.
Fiscal autonomy is becoming more constrained.
Implementation responsibilities are becoming more decentralized.
Debt is replacing devolution as the stabilizer of State finances.
Political representation is becoming uncertain.
Administrative discretion is becoming increasingly contested.
And constitutional courts are increasingly replacing political negotiation.
This is why the idea of “negotiated centralisation” is useful.
It does not suggest that India is abandoning federalism or becoming a unitary State. Rather, it captures a more subtle reality: the Constitution continues to distribute powers, but the practical exercise of those powers is increasingly shaped by financial dependence, administrative discretion and constitutional litigation rather than cooperative political bargaining.
Perhaps that is the most important lesson emerging from the recent debates on Indian federalism.
The Constitution has changed very little.
The incentives operating within it have changed considerably.
Federalism has never depended only on constitutional text. It also depends on trust between institutions, predictable fiscal arrangements and a shared willingness to resolve disagreements through dialogue rather than confrontation.
Rebuilding that trust will not necessarily require constitutional amendments. It may instead require strengthening the very institutions that were designed to make a diverse Union function through cooperation rather than conflict.
Ultimately, the question facing India is not whether it should have a strong Union or strong States.
The Constitution envisioned both.
The real challenge is preserving the balance between them as the political, fiscal and administrative realities of the twenty-first century continue to evolve.
For federalism is not a fixed constitutional destination.
It is a continuous constitutional negotiation.
And the future of the Indian Union will depend not only on how powers are distributed, but on how faithfully that negotiation continues.