When the Centre Sets the Rules, What Room Do States Have?
Education Federalism Through Funding, Exams and Standards
A national education system promises something attractive: the same standards, the same opportunities and, ideally, the same quality of education regardless of where a student lives.
But education has an awkward federal reality.
The Centre can design national frameworks. It can set common standards. It can create national examinations. It can attach conditions to funding.
Yet the State is often the government that actually has to make education work.
It runs schools. It pays teachers. It builds classrooms. It implements schemes. It carries much of the expenditure. And it must adapt national policies to students who speak different languages, follow different school boards and live in very different social and economic conditions.
This creates a question deeper than any individual dispute between Delhi and a State:
When education is nationally standardised but locally implemented, where does policy authority actually reside?
The answer is increasingly found not in a simple division of constitutional powers, but in the mechanisms through which national policy becomes difficult for States to ignore.
The Centre does not need to run schools to shape education
India’s education system does not require the Union government to directly administer State schools for national policy to have powerful effects.
There is another route.
The Centre can establish a national objective, create a common framework around it and connect implementation to institutions that States depend upon.
Funding is one such instrument. Examinations are another. Regulatory standards are a third.
Together, they create a form of influence that is more subtle than direct administration.
The Union does not necessarily tell a State how every classroom must function. Instead, it can make certain national frameworks consequential enough that States must either adopt them, negotiate around them or absorb the costs of refusing them.
That distinction changes the nature of federal bargaining.
Formal authority is only part of the story. The other part concerns the conditions under which that authority can actually be exercised.
Funding turns national policy into a federal bargain
The Samagra Shiksha–PM-SHRI dispute makes this mechanism visible.
Samagra Shiksha is a Centrally Sponsored Scheme covering school education from pre-primary through senior secondary levels. Its official framework says it is aligned with NEP 2020 and incorporates a range of NEP-linked interventions. PM SHRI, meanwhile, is implemented through the existing Samagra Shiksha administrative structure, and its memorandum of understanding requires participating States and Union Territories to implement the provisions of NEP 2020 in entirety.
That changes the character of the disagreement.
A State may disagree with aspects of a national education policy. But if a programme finances essential school functions, disagreement can acquire a fiscal consequence.
Tamil Nadu has argued that the non-disbursal of Samagra Shiksha funds affected its school education system. In a Lok Sabha response on 17 March 2025, however, the Union government stated that Samagra Shiksha had been aligned with NEP 2020 and gave details of funds released to Tamil Nadu. The parliamentary record establishes the Union government’s position on the linkage; it does not by itself establish that every State refusing PM SHRI automatically forfeits every Samagra Shiksha payment.
The important point is not simply that Centre and States disagree.
Funding can convert a policy preference into a practical choice with unequal costs.
For the Union, linking funding to a national framework can be a way of ensuring that national programmes are implemented consistently.
For States, the same arrangement can reduce the space to pursue a different policy pathway while still accessing the resources required to run the system.
Neither side needs to abolish the other’s formal authority for the balance of power to shift.
Why would the Centre want standardisation in the first place?
The federal argument becomes incomplete if national standardisation is treated only as an attempt to centralise power.
There is a genuine administrative problem behind it.
India has an enormous and diverse education system. Different States have different curricula, school boards, administrative capacities and policy priorities. A national framework can establish common objectives across this fragmented landscape.
The three-language formula, for instance, emerged partly from the idea that multilingual education could serve national integration while giving students access to more than one Indian language.
NEP 2020 retained the three-language formula but stated that languages would be chosen by States, regions and students, provided at least two were native to India.
That qualification matters.
It means the policy cannot simply be reduced to a claim that every national framework automatically imposes a single model on every State.
The federal tension emerges elsewhere: how much flexibility remains when a national objective is attached to a programme, funding arrangement or institutional expectation?
That is where standardisation stops being merely an educational principle and becomes a question of federal design.
NEET reveals the same problem without a funding lever
The logic becomes clearer when the mechanism changes from money to examinations.
NEET created a common national gateway for medical admissions. Its supporters presented national testing as a way to reduce multiple entrance examinations, curb capitation and commercialisation, and create a common measure for merit.
But a common examination does more than standardise assessment.
It also changes what counts as the relevant preparation for admission.
Tamil Nadu’s opposition to NEET has focused on precisely this question. The Justice A.K. Rajan Committee examined the consequences of the examination, while the State argued that students from government schools, rural areas, State Boards and regional-language backgrounds could face different constraints in a coaching-intensive admission system.
The argument does not establish that NEET itself caused every disparity associated with these groups. Socioeconomic differences existed before the examination.
But it does reveal the federal trade-off.
A national examination can reduce fragmentation by creating one common admission gateway. At the same time, it can reduce the ability of States to design admission systems around the characteristics of their own school systems.
The national character of that gateway is not merely theoretical. NTA’s official NEET framework continues to provide a common examination and national ranking mechanism for admissions governed by the relevant regulatory bodies.
That is why the NEET debate is not simply about whether one examination is technically better than several examinations.
It is also about who gets to define the pathway from school to professional education.
Uniformity can solve one problem while creating another
This is the hidden tension inside national standardisation.
Suppose every State uses a different admission system.
Students face multiple examinations. Institutions operate under different criteria. Comparability becomes difficult. Opportunities can depend heavily on where a student studies.
National standardisation can address some of these problems.
But the opposite risk is equally real.
If one national mechanism becomes the dominant gateway, differences between States do not necessarily disappear. They may simply move upstream.
Students who cannot adapt to the new mechanism must adapt their preparation.
Schools may have to adjust teaching.
Families may seek private coaching.
States may lose some room to use their own school-board assessments or admission criteria.
The system therefore becomes more uniform at one point while potentially becoming more unequal in the preparation required to reach that point.
That is why the question of standardisation cannot be settled simply by asking whether uniform rules are desirable.
Uniform for whom, at what stage, and at whose cost?
The State’s paradox: it implements more than it controls
The financial structure of education makes this tension sharper.
Official Ministry of Education analysis puts total public expenditure on education at 4.64% of GDP in 2020-21. The same analysis shows that State expenditure accounted for a substantially larger share of education spending than Union expenditure, underscoring the importance of State-level financing even within a system shaped by national programmes and frameworks.
The precise division varies by programme and level of education. But the underlying institutional reality is important.
The State remains indispensable to implementation even when national policy increasingly shapes the framework.
The Centre can define a national architecture. The State must make that architecture function on the ground. When the architecture does not fit local circumstances, the State bears much of the practical responsibility for adaptation.
This explains why disputes that appear to be about individual policies repeatedly become disputes about autonomy.
A State is not merely asking whether it likes a particular programme. It is asking whether it can still make meaningful choices about how education should be organised while remaining financially and institutionally connected to national systems.
The real bargaining power lies between the rules and the implementation
This is why education federalism cannot be understood simply through the Union List, State List and Concurrent List.
Formal allocation of powers tells us who is constitutionally responsible. It does not fully tell us who can shape the conditions under which that responsibility is exercised.
Funding creates leverage because implementation requires money.
National examinations create leverage because professional admission depends on them.
Common standards create leverage because institutions and students increasingly operate across State boundaries.
Policy frameworks create leverage because States may need to coordinate with national institutions to access programmes, recognition or resources.
The result is a layered system.
The Centre does not necessarily replace State governments. Instead, national frameworks can narrow the range of choices available to them.
At the same time, States are not passive recipients.
They can resist, negotiate, selectively adopt, seek exemptions or adapt national frameworks to local conditions. The experience of NEP implementation itself has shown that States do not uniformly choose either complete acceptance or outright rejection; some selectively adapt reforms to their own political and administrative contexts.
Describing the relationship simply as “centralisation” therefore misses part of the story.
The more interesting development is negotiated standardisation.
The strongest federal systems are not necessarily the least standardised
There is a temptation to frame the choice as binary:
National uniformity versus State autonomy.
But education does not require such a simple choice.
A national system needs some common standards.
Medical qualifications need comparability.
Schoolchildren should not face completely different expectations simply because they cross a State border.
National programmes can help address unequal capacity between States.
At the same time, education is unusually sensitive to local language, school systems, social structures and administrative capacity.
The problem begins when a common national objective becomes inseparable from one particular method of achieving it.
A national goal may be broadly shared. The route to that goal need not be identical everywhere.
This distinction is visible in the language debate. NEP 2020 formally leaves language choice to States, regions and students within its three-language framework, while Tamil Nadu continues its two-language policy.
It is also visible in the NEET debate, where the question is not whether medical education requires standards, but whether a single national examination should become the decisive mechanism through which those standards are enforced.
And it is visible in Samagra Shiksha, where the objective of improving school education can coexist with disagreement over the conditions attached to participation in particular national programmes.
The distinction is crucial:
A common destination does not necessarily require an identical route.
What happens when financial dependence meets policy disagreement?
This is where the federal bargain becomes most consequential.
If States had unlimited fiscal capacity, they could reject a national programme and build an alternative.
If the Centre had complete control over education implementation, it could simply impose the same system everywhere.
India has neither condition.
Instead, States remain responsible for large parts of education expenditure while depending, to varying degrees, on central transfers and programmes.
That creates a bargaining space.
The Centre can use resources to encourage alignment.
States can use implementation capacity and political legitimacy to resist or negotiate.
Students and schools ultimately sit between the two.
This is why funding disputes can become educational disputes very quickly.
The question is no longer only:
Who gets the money?
It is also about who determines the conditions attached to it.
And once those conditions shape curriculum, language, school models or admission pathways, fiscal federalism begins influencing educational policy itself.
The deeper transformation is from control to conditionality
Centralisation does not always arrive as the Centre taking over an institution.
It can arrive through conditions.
A national framework can remain formally voluntary while becoming practically difficult to avoid.
A national examination can leave States free to run their schools while determining the gateway through which their students enter professional education.
A centrally sponsored programme can leave implementation with States while giving the Union influence over the terms on which resources flow.
This is a different architecture of power from direct administration.
It is more distributed—and therefore more difficult to see.
The Centre sets the framework. The State implements it. The student experiences the outcome.
The resulting policy can appear national even though its consequences are deeply local.
That is why education is an important laboratory for understanding India’s changing federalism.
The federal question is moving beyond who governs to who sets the conditions under which governance takes place.
The room States have is real—but it is not unlimited
States still possess substantial policy space.
They can adapt national frameworks.
They can negotiate implementation.
They can maintain distinct approaches where national policy permits flexibility.
They can challenge central decisions politically and constitutionally.
But the effective size of that policy space depends increasingly on the architecture surrounding education: funding arrangements, national examinations, regulatory standards and the institutional capacity of States to finance alternatives.
That produces a federal bargain more complicated than either side of the usual debate suggests.
National standardisation can address genuine problems of fragmentation.
State autonomy can preserve the ability to respond to India’s enormous diversity.
The challenge is not to choose one and eliminate the other. It is to determine where uniformity creates genuine national value and where uniformity merely transfers decision-making upward.
That distinction may ultimately matter more than whether a particular education policy is labelled national or State-driven.
Because in a federation, autonomy is not simply the absence of central control.
It is the ability to make meaningful choices after the national rules have been written.
And India’s education debate is increasingly about how much of that choice remains.