Centre-State Relations: Cooperative or Coercive Federalism?

The issue

Whether India is federal is a settled Prelims question: quasi-federal by design, with federalism held to be part of the basic structure in S R Bommai v Union of India (1994). The Mains question is different. It asks how the balance is working in practice, and whether the last decade looks more like partnership or pressure. That is why the same theme keeps returning in GS2, set in some form in every paper from 2022 to 2026: national versus regional parties, the decline of Article 356, trust after recent Union moves, fiscal federalism after the planning era, and the Governor's role in assent to State Bills.

Three labels do most of the work in an answer, and examiners reward candidates who keep them apart:

• Cooperative federalism: the Union and the States act as partners through shared institutions, such as the GST Council, the NITI Aayog Governing Council, the Inter-State Council and the zonal councils.
• Competitive federalism: States compete with each other for investment, rankings and talent, with the Union as scorekeeper.
• Coercive or centralising federalism: the Union uses its constitutional and fiscal levers (the Governor, non-shareable levies, conditional schemes, central agencies, reorganisation of a State) to narrow the choices of elected State governments.

All three exist at once. The analytical skill is to attach each label to a named institution or episode rather than to "Indian federalism" in general.

Constitutional scheme

The Prelims notes on this site cover the articles one by one. For answer writing, it helps to see each centralising lever beside the federal counterweight that limits it.

The design is deliberate. The framers wanted a Union strong enough to hold a new and divided country together, so the levers are in the text. The real debate is about how they are used, which is why most of the evidence below comes from practice and case law rather than from the Constitution itself.

Dimensions

The money question is where most marks are won or lost. The Sixteenth Finance Commission (Chair: Arvind Panagariya), constituted on 31 December 2023 for the five years from 1 April 2026 to 31 March 2031, submitted its report to the President on 17 November 2025. The Union announced on 1 February 2026 that it had accepted the recommendation to keep the States' share of the divisible pool at 41 per cent, the same as the Fifteenth Commission. The States had pushed hard for more: by the Commission's own count, eighteen of the twenty-eight States asked for 50 per cent.

The States' central complaint is about the pool, not the percentage. Cesses and surcharges are kept out of the divisible pool by Articles 270 and 271, so when the Union relies more on them, a constant share yields less. The Sixteenth Commission's report puts numbers on this. The divisible pool averaged 89.2 per cent of gross tax revenue in the Thirteenth Commission's period, 82.1 per cent in the Fourteenth's and 78.3 per cent in the Fifteenth's. The Commission then gave the Union's side its due: the claim that cesses had wiped out the Fourteenth Commission's jump in devolution (from 32 to 42 per cent) was, in its words, "unsupported by data", and States' total Finance Commission transfers stayed well above the pre-2015 level. It also held that capping cesses or pooling them would need a constitutional amendment it did not favour.

The horizontal formula is the second front. The Sixteenth Commission used per capita GSDP distance, a measure of how far a State's income lies below the richest (42.5 per cent weight), population as per the 2011 Census (17.5), a redefined demographic performance criterion based on population growth from 1971 to 2011 (10), area (10), forest (10), and a new criterion, contribution to GDP (10), which replaced tax and fiscal effort. Southern and more prosperous States argue that equity formulas penalise success; poorer States argue that equalisation is the point of the exercise. This is a State versus State dispute mediated by a constitutional body, which an answer should not lazily label as "Centre versus States".

GST is the third front. States gave up most of their own indirect taxes when GST began on 1 July 2017, in return for compensation for five years, guaranteed by Section 18 of the 101st Amendment Act, with revenue protected at 14 per cent annual growth over 2015-16. That guarantee ended on 30 June 2022, the cess was kept going to repay the loans raised to meet the pandemic shortfall, and the Union Budget for 2026-27 carries no compensation cess receipts. The Sixteenth Commission rejected the claim that GST had cut State revenues in aggregate: the States' own tax revenue stood at 6.4 per cent of GDP in 2023-24, against a six-year average of 6.2 per cent up to 2016-17. The Council's September 2025 decision to move to two main rates (5 and 18 per cent, with a 40 per cent rate for a few goods) was taken collectively, which supports the cooperative reading, but it also showed how little independent indirect-tax room States now have.

Committees and reforms

Sarkaria on the Governor and Article 356. It wanted Governors to be eminent, from outside the State, detached from its politics, and not recently active in politics generally; it added that a ruling party politician at the Union should not be sent to a State run by another party. On Article 356 it recommended use "very sparingly", in extreme cases, as a last resort. It recorded that the article had been used 75 times by then, only 12 of them up to the end of 1967.

Sarkaria on reserved Bills. It proposed that the President dispose of a reserved Bill within four months, as a convention.

Punchhi on the Governor. It asked the Union to follow Sarkaria's selection criteria "in letter and spirit", and went further on security of tenure: a fixed five-year term, deleting "during the pleasure of the President" from Article 156, impeachment by the State legislature on the lines of the President's impeachment as the route to removal, and a time limit of six months for the Governor to decide on a Bill. It also set out the earlier suggestion of the National Commission to Review the Working of the Constitution that a committee of the Prime Minister, the Home Minister, the Lok Sabha Speaker and the Chief Minister should select Governors.

Punchhi on emergencies and the Inter-State Council. It proposed a framework for "localised emergency" under Articles 355 and 356, so that the Union could act in a troubled district without dismissing a whole State government. It wanted the Inter-State Council to meet at least three times a year, with a statutory basis to follow up its decisions.

The pattern worth stating in an answer: both commissions reached broadly similar conclusions twenty years apart, and the Governor-related proposals in particular remain unimplemented.

Where it stands now

Governors and State Bills. In State of Tamil Nadu v Governor of Tamil Nadu (8 April 2025), a two-judge bench (Pardiwala and Mahadevan JJ.) found that ten Bills, two dating back to 2020, had been kept pending, and that reserving them for the President after the Assembly re-passed them was not open to the Governor. It set outer limits (one month where the Governor acts on ministerial advice, three months where he acts against it, one month for a re-passed Bill), asked the President to decide on reserved Bills within three months, and used Article 142 to treat the ten Bills as having received assent.

The President then referred fourteen questions to the Court under Article 143 on 13 May 2025. A five-judge bench led by Chief Justice B R Gavai gave its opinion on 20 November 2025. It held that courts should not prescribe timelines that the Constitution does not contain, that Article 142 cannot produce "deemed assent", and that in choosing among his options under Article 200 the Governor is not bound by ministerial advice. It also held that prolonged, unexplained and indefinite inaction can be met with a limited direction to decide within a reasonable time, without the Court reviewing the merits. For an answer, the position is: a Governor cannot sit on a Bill forever, but the enforcement tool is a narrow writ, not a fixed deadline.

Delhi. A Constitution Bench held on 11 May 2023 that the elected government controls services in Delhi other than public order, police and land, building on a 2018 ruling that the Lieutenant Governor must ordinarily act on the advice of the Council of Ministers. Within days the Union issued an ordinance, replaced by the Government of National Capital Territory of Delhi (Amendment) Act, 2023, which created a National Capital Civil Services Authority in which two Union-appointed officers sit alongside the Chief Minister and the Lieutenant Governor's view prevails on disagreement. Delhi is a Union territory, so this is asymmetric federalism rather than Union-State relations proper, but examiners have set it twice (2016 and 2018) and it is the cleanest example of Parliament reversing the practical effect of a federal ruling.

Forums that meet and forums that do not. The NITI Aayog Governing Council has met eleven times since 2015, most recently on 11 June 2026. The Inter-State Council, a constitutional body, has also met eleven times, but over 36 years, and not once since 16 July 2016. No 2025 or 2026 meeting appears on the Secretariat's own record. That contrast is itself an argument: the forums the Union chairs and sets the agenda for are active, the one designed to resolve disputes is dormant.

Article 356. Bommai made the President's satisfaction reviewable and the floor of the House the test of majority, and Rameshwar Prasad v Union of India (2006) held the 2005 dissolution of the Bihar Assembly unconstitutional. Nabam Rebia v Deputy Speaker (2016) quashed an Arunachal Pradesh Governor's advancing of an Assembly session without ministerial advice and restored the earlier position. Together these explain why Article 356 has faded as the main instrument of friction (the 2023 question), even as the Governor's other functions have become the new battleground.

Arguments on both sides

The case that federalism has become more centralised

• The shareable pool has shrunk relative to gross tax revenue, so a constant 41 per cent buys less, and fiscal space is increasingly decided in Delhi through conditional schemes rather than untied devolution.
• GST pooled the main State indirect taxes, compensation has ended, and States now depend on a Council where the Union's one-third vote can block any proposal.
• Governors have used delay as a veto; the November 2025 opinion confirms they are not bound by advice on Article 200 choices, and no Sarkaria or Punchhi safeguard on appointment or removal has been adopted.
• The Inter-State Council has not met for a decade; Delhi's services ruling was overridden within days by ordinance; a full State was turned into two Union territories in 2019.

The case that cooperative and competitive federalism are working

• Devolution as a share of gross tax revenue is still higher than before 2015 (32.1 per cent on average in the Fifteenth Commission's period against 27.9 in the Thirteenth's), and after devolution the States held 57 per cent of general government tax receipts in 2023-24, although the Union collects roughly 63 to 64 per cent of them.
• The GST Council has taken every major decision, including the 2025 rate overhaul, collectively, and Union of India v Mohit Minerals (2022) held its recommendations are not binding on Parliament or the States, preserving room for disagreement. States' own tax revenue has not fallen as a share of GDP since GST.
• Courts remain an effective umpire: Bommai, Rameshwar Prasad, Nabam Rebia, the Delhi rulings and the Tamil Nadu case all checked the Union side.
• Article 356, invoked 75 times by the time Sarkaria reported, has been disciplined by judicial review since 1994, and the Finance Commission continues on its five-year cycle with a formula States can contest openly.

A balanced conclusion can argue that the constitutional design is unchanged and the courts still defend it, while practice has drifted towards the centre in two specific places, money and the Governor's office. The remedy is therefore institutional rather than constitutional: revive the forums that already exist and honour conventions the commissions spelled out decades ago.