INTRODUCTION

The word federalism has its roots from the word foedus meaning agreement. Hence federalism is
nothing but an agreement between the two types of governments in which they decide on the
areas of power control of each. Thus, it can be said that federalism is a system of local and
national governments grouped under the same sovereignty.1
A system of government in which the power is separated between the state and the central
government is known as federal government. The primary objective behind such form of
government is that it distributes the responsibilities between the two governments so that the
burden of each is reduced and clashes and redundancy is avoided.
Indian constitution is a federal structure such that it clearly demarcates the boundaries between
the departments of center and the state. The structure is similar to that of United States. The
essential features of a federal state are:
1. Division of powers between the center and the state.
2. Both, the state and the center lack the power to shift the legislative departments of each
other such that the rigidity of the structure is maintained.
3. It is based on a written constitution.
4. None of the two is more powerful than the constitution. Infact, the center and the state
derive their power from the constitution.
5. The judiciary is unprejudiced and just.
6. Enactment of laws happen on both the level by the parliament at the union and the State
Legislative Assemblies at the State.
A constitution with federal character establishes a dual polity in which the Union government is
in the center while States are at the fringe each having their own uncontrolled powers in their
respective fields. Both of these co-ordinate with each other and are yet independent of each
other.
FEDERALISM IN INDIA
“the Indian model of federalism may be one of the most interesting typologies in the world. It is
characterized as it is by a paradox that of being a centralized federalism.”
Philip Mahwood who is a famous political scientist has stated that in developing nations like in
India which are culturally diverse, federalism in not just a tool of administrative requirements but
also a tool for the survival of nation’s cultural diversity. Despite being aware of the cultural
disparity and the multi-dimensional nature of India, the makers of the constitution did not make
it a standard or complete federal structure because of the fear that this might lead to further
disunity and secession of an India which has already seen a painful partition.
Quoting Pandit Jawaharlal Nehru, the first prime minister in one of the debates of constitutional
assembly

1
George Anderson, Federalism: An Introduction, (Newyork: Oxford, 2008)
“it would be injurious to the interests of the country to provide for a weak central authority
which would be incapable of ensuring peace, of coordinating vital matters of common concern
and of speaking effectively for the whole country in the international sphere.2”
There exists and inherent bias in the Indian Constitution such that it places the Union at par with
the States. The central government stays at a superior position in the number of ways which are
as follows:
1. Article 1 defines India as the Union of States and not as a federation of States due to the
reason that India was not formed due to an agreement between the states which is an
essence of federal States.
2. Also, the states do not have the power to separate themselves from the union.
3. The union has the liberty to re-construct and re-define the boundaries of the states.
4. Union list is more exhaustive on the number of matters which come within the power of
the state.
5. On concurrent laws, the say of the Union prevails.
6. During emergency, the matters of state list become the subjects of Union List3
THE THREE PHASES OF FEDERALISM
Phase 1
The growth of the linguistic autonomy movement and the prominence of regional leaders within
the "Congress System" marked the regional assertion over national politics, which consolidated
the federal spirit right from the moment of Indian independence. The following paragraphs
describe the political dynamics that allowed India's polity to decentralise despite the Congress
party's dominance.
Phase 2
Various scholarly publications have interpreted this phase of Indian federalism in vastly
divergent terms. Morris Jones coined the term "bargaining federalism" to describe Indian
federalism in 1971, while Haqqi and Sharma coined the term "centralised federalism" in 1977.
The Congress party's power in many states was beginning to wane at this time, though it was
deeply ingrained in national politics. The 1967 elections were significant for Indian federalism
because the ruling Congress party suffered significant electoral losses in both the national and
state polls. Many regional parties and anti-Congress coalitions formed state governments,
ushering in a new period of "expressive" and more active and directly conflictual federal
dynamics between the Congress-dominated centre and state governments led by opposition
parties. Another development was the power struggle within the Congress, which resulted in the
party's split in 1969 and the concentration of power in Congress' hands.
Phase 3

2
Constituent Assembly Debates, Volume V, 20 August 1947
3
Mohit Bhattacharya, “The mind of the founding fathers,” in Federalism in India: Origins and Development, ed. N.
Mukarji & B. Arora (Vikas Publishing House, 1992), 87–104.
A variety of growing political, economic, and institutional elements resulted in the
"reconfiguration of Indian politics" in the late 1980s. "The level of politics seemed to have
altered from all-India to the states," Yadav and Palshikar observe during this period. These shifts
have been matched by a shift in political jargon." The emergence of a number of regional parties
ushered in a new age in India's multi-party system.
COOPERATIVE FEDERALISM
The system of government in which the responsibility of governance of people is shared by the
Union government, the State Government and the Local Governments is known as cooperative
federalism. The system is a structure wherein the type of the government functioning in that area
is determined and accordingly, the policies are drafted. It makes the two forms of government,
namely the state and the union, partners while discharging there functions. It is also known as
new federalism.
COMPETITIVE FEDERALISM
As the word suggests, this form of government refers to the existence of a competition between
the governments and jurisdictions in a state. Competition is basically a rivalry in which one
government either desires a bit more of resources or wants to avoid a certain cost. Such
competition occurs in a system in which the power is non-centralized despite the existence of a
central government or where the system of self governance exists.
There exists two types of competition between the government in a federal structure.
1. Intergovernmental
2. Interjurisdictional
The class of competition which occurs between the two types of governments is known as
intergovernmental competition. Such type of competition happens between the two state
governments, between the state and the center, between two nations or even between two local
governments. It is often termed as vertical competition.
The competition between the governments which have comparable power is known as
interjurisdictional competition. The primary cause of such type of competition is the issue of
mobility which means that people actually move their votes (shift) from one state to another or
one locality to another which creates a stress on the States to retain their existent voters.
COMPETITIVE VERSUS COOPERATIVE FEDERALISM
In a cooperative form of federalism, the relation between the center and the state is horizontal in
nature such that they collectively work in the larger interest of the public. It is a strategic tool
which ensures the participation of states in the formation and implementation of the policies.
Further, the Union and the State is bound to cooperate with each other by virtue of Schedule VII
of the Constitution of India.
In a competitive form of federal structure of State, the relation between the center and the state is
vertical in nature while the relation among the state governments is horizontal. The idea of this
type of federalism arose after the economic reforms of 1990s. the availabilities os resources in a
free market foster a sense of competition among states.
CONSTITUTIONAL MANDATE
"India, that is Bharat, shall be a Union of Declares," states Article 1 of the Constitution. While
the term "federal" is not used in the Constitution, it does provide for a governing framework that
is largely federal in form.
It establishes distinct governments at the federal and state levels. It also describes and
demarcates the two governments' authorities, functions, and domains. Finally, it discusses the
Union's legislative, administrative, and financial interactions with the states.
The Union List, the State List, and the Concurrent List are the three lists that split legislative
authority. The Union List is the longest, containing the "vital interests of the State."
Parliament has sole legislative powers under the Union List. While the state has exclusive
authority to legislate on the State List, Parliament can also do so in certain circumstances.
The problem is more complicated, according to the Concurrent List.
Whenever there is a dispute between state and federal legislation, the union legislation will take
the superior position. This, along with the fact that the Union has residuary legislative powers,
makes India's federalism a "unitary" slant. Since 1950, there has been an unusual trend. Many
people these days are questioning the legitimacy of federal forms of government. The same has
been because a number matters from the state list have become the subjects of union list.
FURTHERANCE OF COMPETITIVE FEDERALISM IN INDIA
Apart from the significant increase in the devolution (devolution of 42 percent of the divisible
pool to states from 2015-16 to 2019-20, compared to 32 percent suggested by the previous
commission), the acceptance of the 14th Finance Commission's recommendations allows states
to design and implement programs that are better according to their needs.
Not all states have accepted the concept of competitive federalism. However, there are some
states which are taking actions to improve their business climates, these actions include the
implementation of challenging reforms in land acquisition and flexibility in labor laws.
Federalism is not anymore, a point of contention in Centre and State relations, rather it is the
definition of a new team India relationship. The central government has promised
decentralization of power and minimal meddling in domestic issues.
The implementation of the GST has solidified the the federal system even further.
The Planning Commission has been abolished, and NITI Aayog has been established in its place.
The NITI Aayog's mandate includes developing competitive federalism. State governments
would no longer look on the federal government for policy guidance and fiscal resources under
it.
The financial commission recommended that states' share of central tax revenue be increased
from 32 percent to 42 percent. States have the ability to arrange their spending according to their
own priorities. States and the center would collaborate on a shared vision of national goals.
Schemes that are subsidized by the government are being restructured.
Under the UDAY scheme, the financial sector will be bailed out. The Swachh Bharat Ranking
System is a system for determining how clean a country is. The majority of states now host
investor meetings to promote their state's facilities in order to attract business and investment. As
a result, the business climate in numerous states has improved.
ROLE OF NITI AAYOG IN PROMOTING COMPETITIVE FEDERALISM
In a conclave in 2017, the NITI Aayog has called for a competitive co-operative federalism. The
main reasoning behind the same was to redefine and strengthen the relationship between the
center and the state. Mr. Arvind Panagariya, the former chairman of the NITI Aayog, has put a
burden on the States to redefine and reimagine brand India. There are several instances in the
meetings of NITI aayog where the states have shown a competitive tendency highlighting how
they have promoted governance initiatives in the letter and spirit of co-operative federalism.
The objective of NITI Aayog is to establish a system in which the individuals outside the
government policy making system may also contribute in policy making. The Aayog is very
clear on its policies of clean and green India, make in India and other 66 central schemes
focusing majorly on skill development.
The NITI Aayog craftly puts the onus on the heads of the state (the Chief Ministers) to fasten the
implementation of projects in their respective states but also aims at making the state an
attractive destination for State investment. This is the clean example of competitive federalism.
Thus, it is clearly evident that the NITI Aayog has always been a promoter of competitive
federalism. The idea behind the policies like smartest city, least polluted city, cleanest city etc.
speaks for the same very loudly.
HINDERANCES IN THE ESTABLISHMENT OF COMPETITIVE FEDERALISM
Several difficulties affect the Centre and State relations which include a trust imbalance and the
reduction of divisible pools. They make the entire cooperation difficult when they work together.
There is an expansion in the trust between the federal government and the state governments.
Most of state administrations believe that the acceleration for federalism is just about high
concepts and more speeches. Many states have expressed their discontent with the inequality that
the federal government has dealt with them.
On one hand, the Centre has increased the portion of the state of divisible pool, while states are
receiving a smaller amount in reality. The amount of money allocated to various social assistance
initiatives has also decreased which has led to hurting the health of the states.
It is very early to tell if the current inter-state competition for recruiting investment will actually
create competitive investment patterns on a long-term basis.
All states in India have their own socio-economic features and development. There are a few
which have made significant growth in terms of literacy, employment, and providing a suitable
atmosphere for doing business and investing on the other hand, there are many which lag behind.
Different states have varied economic tendencies. There are debt-ridden states, backward
regions, and states we zero or almost none resources. Such states should not be treated the same
as the wealthy ones and required provisions should be made for them.4
States like West Bengal, Odisha, Assam, and Bihar have condemned the standard funding
method due to the reason that they have unique circumstances, which require specific assistance
from the federal government. These states cannot dream of participating in competitive
federalism without special funding from the federal structure.5
Though states are given sufficient financial autonomy, it is wrong to think that all states would
perform equally good in the development process, because there are some states which have
advantages such as trained labor, infrastructure, and capital, there are many which lag behind in
terms of such resources
The unwillingness of a few wealthy states to revenue loss as a result of the GST system's
introduction demonstrates a lack of will to participate in the competitive federalism process.
SUGGESTIONS
The following are the suggestions for the enhancement of federal structure of India.
1. There is a need of efforts both from center and the state to strengthen cooperative and
competitive federalism in India.
2. NITI Aayog manages the competitive framework of federalism in a broad sense.
However, there is also a need to concentrate on micro resource-allocated functions. Some
steps are required in this regard.
3. Under Article 263, the Center-State Council is responsible for inquiring and advicing on
disputes, discuss subjects common to all states and make recommendations for the
coordination in policy-making. Though, NITI Aayog cannot replace the council in its
functions as it is only a constitutional body for harmonizing State-Center Relations, it can
still be utilized effectively to lend legitimacy to cooperative federalism.
4. The state should promote best practice on issues like labor, land and natural resources.
This practice will boost investment and economic activities in States which have
favourable regulatory framework. The policies of the States pertaining to such
contentions should be approved expeditiously by the center.
5. The recent statics of the World Bank’s Ease of Doing Business Index has shown that
people in India are more inclined in working at places when there is a competition
between the states. The same practice should be further encouraged.

4
Peter Ronald deSouza, “The Struggle for Local Government: Indian Democracy’s New Phase”, Publius: The
Journal of Federalism, Vol 33, No. 4, (2003): 99-118.
5
Ashutosh Varshney, “How has Indian Federalism done?”, Studies in Indian Politics I(I), (2013): 43-46.
The crux of the entire evaluation done above is that India needs a mixture of both cooperative
and competitive federalism for further growth and development. The future is basically an
amalgamation of competitive and cooperative federalism in the sense that competitive federalism
provides for the dynamic enaction of policies while cooperative federalism keeps a check on the
former. The idea of one nation one tax will bring and evolutionary change in the coming times of
federalism.
THE FUTURE OF FEDERALISM
It is impossible to have a federal structure which has only competitive or only cooperative
regime. The idea behind the entire system is simple: the wholesome growth of the country
Both of them are two sides of the same coin, it is well established that competition alone can not
produce the best results but in collaboration with cooperation it would. many states might need
the support of the federal government to participate in competitive federalism and grow
efficiently. “Strong states build strong nations”, and to realize this objective, India's development
requires a "Team India" attitude.
The introduction of GST Bill has brought a revolutionary change in the fiscal federal policy of
the State. The same has also increased the political support for economic growth of the States
and the Center. There have been structural changes especially in the changes in the areas of
labour and land reforms. Both of these sectors are seen as crucial tools for boosting economic
growth.
The idea of the economists and the policy makers is that cooperative federalism is the right key
to go. They are of the belief that the center’s initiative to include states in the decision making
process shall be beneficial in the long run.
The majority of state finance ministers believe that the Centre's fund distribution to states should
be more careful.
BIBLIOGRAPHY
BOOKS
S.R Maheshwari, Comparative Government and Politics, Lakshmi Narain Agarwal.
Durga Das Basu, Comparative Constitutional Law, Lexis Nexis
P.M. Bakshi, The Constitution of India, (Universal Law, 14th Edition, 2017).

JOURNALS
1. Ambar Kumar Ghosh, “the paradox of centralized federalism: an analysis of the
challenges to India’s federal design”, 17th Sep, 2020