Centre-State Relations in India: Federalism, Conflicts & Reforms
UPSC Prelims
Current affairs
Latest Update
Gajendra Singh Godara
Oct 12, 2025
20
mins read
Centre–State relations in India describe how power and responsibilities are shared between the Union (national) government and the State governments under the Constitution. These relations form the core of Indian federalism, encompassing legislative, administrative, and financial interactions. Understanding this topic is fundamental for UPSC Polity and Governance, as questions on federal structure and inter-governmental dynamics often appear in the exam.
What is the Constitutional Basis of Centre–State Relations?
Indian federalism is cooperative yet asymmetric. The Constitution calls India a “Union of States” (Article 1) and gives the Centre significant authority to maintain national unity.
Legislative powers are divided by the Seventh Schedule into three lists (Union, State, Concurrent), but the Centre has residuary lawmaking power for any subject not in the State or Concurrent Lists. Articles 245–263 (Part XI) outline legislative and administrative relations, and Articles 268–293 (Part XII) cover financial ties. Article 280 establishes the Finance Commission (every five years) to recommend how Central taxes should be shared with states. This scheme reflects the framers’ intent: a quasi-federal system where a strong Union coexists with state autonomy.
For example, taxes in the Union List (like income tax, customs, excise) are levied by Parliament, while those in the State List (like land revenue, state excise) are levied by State legislatures. Both levels may tax concurrent subjects (like education, forests). The 2017 introduction of the Goods and Services Tax (GST) through the 101st Amendment partly shifted revenue to the Union’s domain in exchange for an equal sharing formula.
Centre-State Legislative Relations in India
India’s Constitution sets up a detailed structure to govern the legislative relations between the Centre (Union) and States, aiming to balance national unity with state autonomy. These relations matter not just in legal theory, but in real-life governance, interstate disputes, federal finance, and public policy—an area every UPSC aspirant encounters in both Prelims and Mains.
1. Constitutional Framework – Where Are the Rules?
Part XI (Articles 245–255): These articles lay the foundations for legislative relations.
The approach is two-fold: Territorial (which area laws apply to) and subject matter (what subject can laws address).
2. How are Powers Actually Divided?
The Three Lists (Seventh Schedule):
Union List: 99 subjects (e.g., defence, railways, foreign affairs) only Parliament can legislate.
State List: 61 subjects (e.g., police, public health, agriculture) mainly for states.
Concurrent List: 52 subjects (e.g., education, forests, marriage laws) where both can make laws.
Parliament can make laws for the whole country or parts of it (even for Union Territories or Indians abroad), while states’ laws are normally limited to their territory.
3. When Can Parliament Act in the State List?
Certain situations allow Parliament to legislate on State List subjects:
Rajya Sabha Resolution (Article 249):
If the Rajya Sabha passes a two-thirds majority resolution that a subject is of national interest, Parliament can temporarily make laws on that state subject (valid for one year, extendable while the resolution is in force).
National Emergency (Article 250):
During a Proclamation of Emergency under Article 352, Parliament can legislate on State List subjects.
States’ Consent (Article 252):
If two or more states pass resolutions, Parliament can legislate for those states on a state subject.
International Obligations (Article 253):
Parliament can make any law to implement international treaties, even on state matters.
President’s Rule (Article 356):
If a state is under President’s Rule, Parliament assumes the authority to legislate for that state.
4. Tackling Conflicts – What if There’s a Clash?
Concurrent List Clashes (Article 254):
If both Parliament and a state legislature pass laws on the same Concurrent subject, the central law prevails if there is any inconsistency, and the state law becomes void where it conflicts.
Exception: If a state law (on a Concurrent subject) gets the President’s assent, it can prevail within that state—unless Parliament later enacts a law overriding it.
Laws Under National Interest/Emergency (Articles 249/250/251):
During national interest or emergency scenarios, Parliament’s law always prevails over conflicting state legislation.
5. Residuary Powers
Any subject not mentioned in any of the three lists (a ‘residuary’ subject, like digital currencies or new-age tech) is automatically under Parliament’s lawmaking jurisdiction (Article 248).
6. Centre’s Control & Presidential Reservation
Some bills passed by state legislatures (e.g., those affecting inter-state trade) must be reserved for the President’s consideration; the President can approve, withhold, or direct amendments.
This mechanism keeps a balance, ensuring state laws do not contradict national interests.
7. Territorial Reach – Extra-Territorial Laws
Only Parliament can pass laws that may apply to Indian citizens outside India. State laws only apply within the state’s territory.
8. Doctrine of Pith and Substance
When there’s confusion over whether a law fits a Union, State, or Concurrent List subjects, courts use the doctrine of pith and substance: If the true intent ("pith and substance") of a law fits one list, it’s valid—even if it incidentally affects another list.
Several Supreme Court cases, like State of Bombay v. F.N. Balsara, have cemented this approach.
9. Landmark Judgments & Evolving Practice
In Rajasthan v. Union of India (1977), the Supreme Court clarified the extent of the centre's authority in exceptional situations, upholding the federal balance.
The use of Article 249 (national interest resolutions) remains rare but is a powerful example of India’s flexible federalism.
Centre-State Administrative Relations in India
In India’s vast federal system, administrative relations between the Centre and the States are crucial to ensure smooth governance across diverse regions. Articles 256 to 263 under Part XI of the Constitution specifically lay down how executive powers are shared and coordinated, creating a framework that balances state autonomy with the need for national unity.
1. Division of Executive Powers
The Union Government holds executive authority over subjects where Parliament can legislate.
State Governments exercise executive power on their subjects but must follow Union laws and policies faithfully. This means state administrations are constitutionally required to implement laws made by Parliament (Articles 256 and 257).
2. Centre’s Right to Direct States
As per Article 256, states must exercise their executive powers to ensure they don’t conflict with laws passed by Parliament. The Centre can issue directions to make sure nationwide policies are uniformly enforced.
Article 257 strengthens this control by allowing the Centre to guide or restrict state actions in matters affecting national interest, security, or its infrastructure.
The Constitution also provides flexibility for mutual delegation of functions; the Centre can entrust states with some of its responsibilities under Article 258, and vice versa under Article 258A.
3. Emergency Situations and President’s Rule
During a National Emergency (Article 352), the Centre assumes wide-reaching powers and can direct states on how to exercise their authority (Article 250).
When a state government’s functioning collapses, the President’s Rule (Article 356) kicks in, and the Centre directly administers the state through the Governor. This measure is invoked only to protect democracy and constitutional integrity, although misuse has been a subject of debate.
4. The Governor and State Public Service Commissions
The Governor acts as the constitutional bridge between the Centre and States, appointed by the President and holding office during the President’s pleasure. While the Governor is to uphold state interests, he/she also represents Centre’s authority in various matters.
The State Public Service Commission (SPSC), responsible for recruiting state civil servants, is appointed by the Governor, but the removal of its members is the prerogative of the President. This ensures a fair balance of power between the Centre and States in administration.
5. All India Services
The All India Services (IAS, IPS, IFoS) play a unique role in linking the Centre and States administratively. Officers are centrally recruited and managed but serve predominantly in states, ensuring uniformity in policy execution and governance standards across the country.
While States manage daily administration, the Centre has the final say on transfers, promotions, and disciplinary actions of these officers, keeping a unified administrative culture intact.
6. Constitutional Duty of the Centre
Article 355 enshrines the Centre’s responsibility to protect States against external aggression and internal disturbances. This duty reflects the need for collective security and stability in the federal structure.
Centre–State Financial Relations in India
Fiscal federalism forms the backbone of how financial resources are raised, distributed, and spent between India's Union and States, touching the everyday lives of citizens and shaping development priorities. The spirit behind this system is to strike a balance between strong national policies and the unique needs of individual states.
1. Constitutional Architecture:
The Constitution outlines fiscal relations through Articles 268–293, ensuring clarity on who can tax what and how funds are shared. Article 270 governs distribution of Union taxes, Article 275 covers grants-in-aid, Article 280 mandates the Finance Commission, and Article 293 regulates state borrowing.
Taxes are divided via the Seventh Schedule: the Union List gives broad tax powers (e.g., customs, income tax, GST), while the State List covers land, agricultural taxes, etc.
2. Finance Commission—The Heart of Fiscal Federalism:
Article 280 requires formation of a Finance Commission every five years. Acting as a 'balancing wheel' of the fiscal system, it decides how central tax revenue is shared both vertically (Centre vs. all States) and horizontally (between the States themselves). The 15th Finance Commission, for example, recommended states receive 41% of sharable Union taxes (down from 42% in 14th FC) to adjust for Jammu & Kashmir’s reorganization.
The Commission also identifies grants-in-aid for specific needs (such as post-devolution imbalances, tribal welfare, and disaster relief) and sets principles to supplement local bodies’ resources.
3. Types of Financial Transfers:
Tax Devolution: Union collects major taxes and distributes a portion to states. States impose their own taxes on remaining items.
Grants-in-Aid: Under Article 275, states in need (e.g., with larger tribal populations or weaker economies) receive direct grants. Article 282 further allows the Centre flexibility to fund states for any public purpose, enabling centrally sponsored schemes (CSS) like MGNREGA or PMAY.
Loans and Calamity Relief: Article 293 lets states borrow, often with Centre’s consent for fresh loans (especially if states are already indebted to the Centre). The centre also extends financial help during disasters or revenue crises.
4. GST & Cooperative Federalism:
The 2017 launch of Goods and Services Tax (GST) was a watershed moment. GST merged many state and central levies into a single system, requiring both levels to compromise on autonomy for larger good. The GST Council—where Centre and all states have a say—decides rates and rules. States initially feared losing revenue, so a GST Compensation Cess was guaranteed until June 2022. But issues like delays in compensation and uniformity vs. flexibility remain key challenges.
What are the Mechanisms for Coordination & Dispute Resolution?
In a vast and diverse country like India, it's natural for the Centre and States to have different priorities and perspectives. To ensure smooth governance and resolve disputes, India has set up multiple mechanisms that foster dialogue, cooperation, and consensus-building.
1. Inter-State Council (ISC)
As envisaged under Article 263, the President of India can establish the Inter-State Council, a high-level platform to discuss policy issues and settle disputes between the Centre and multiple states or among states themselves.
Chaired by the Prime Minister, this council includes all Chief Ministers and key Union ministers, creating a forum that encourages frank and open debate.
While its resolutions are advisory, the ISC plays a critical role in maintaining harmony and preventing conflicts through dialogue.
2. Zonal Councils
Created through the States Reorganisation Act, 1956, Zonal Councils are five statutory bodies grouping neighbouring states and union territories for regional cooperation.
These councils serve as advisory platforms where states discuss local issues like infrastructure, security, trade, and socio-economic development.
With the Union Home Minister as the chairman and rotating Chief Ministers as vice-chairmen, these councils have led to consensus on issues such as border disputes, disaster management, and women's safety.
The North Eastern Council operates separately to address the unique needs of the North East states.
3. NITI Aayog – The New Age Cooperative Federalism
Replacing the Planning Commission in 2015, NITI Aayog champions a cooperative federalism model where states are treated as partners rather than subordinates.
It offers a platform for “Team India” policymaking, enabling states to voice their needs and coordinate on multi-sectoral development plans, innovation, and reforms.
Unlike the top-down approach of the past, this approach fosters collaboration and ownership among states and the Centre.
4. The Judiciary
The Supreme Court holds original jurisdiction in disputes involving the Centre and states under Article 131.
High Courts deal with intra-state administrative conflicts and protect citizens’ Fundamental Rights against state action.
Judicial review safeguards India’s federal balance by checking excesses from both levels of government.
What are the Challenges in Centre–State Relations?
Centralization vs. Autonomy: There is a perception of over-centralization because of the Centre’s broad powers (e.g. emergency provisions, nationwide legislation) that can encroach on state prerogatives. States often seek greater legislative and executive autonomy, arguing that national-level policies should allow local flexibility.
Fiscal Imbalance: The Centre collects about 80% of tax revenues but shares only a portion with states. This creates dependency that troubles many states. Falling tax devolution and heavy reliance on Centrally Sponsored Schemes reduce fiscal space for states. Wealthier states contend they contribute more to the GST pool than they get back, while poorer states depend heavily on the Centre’s funding. Such disparities fuel debates over fairness.
Political Conflicts: Often the Centre and states are led by different parties, which can heighten mistrust. Disputes may arise over appointments (e.g. of senior officials), investigations by central agencies, or control of key policies (like law enforcement and social schemes). These conflicts sometimes play out in courts or in political campaigns, straining Centre–State trust.
Implementation Bottlenecks: Even well-intended schemes can falter without close coordination. States may cite rigid funding conditions (e.g. for labour or education reforms) that clash with local needs. Coordination failures (as seen in disaster response and public health) expose gaps in Centre–State working relationships.
Judicial Delays: Complex federal issues (like border disputes or legislative overlaps) can take years in the courts, delaying resolution of important matters.
These challenges indicate that India’s federalism is continually evolving. Achieving the right balance between national unity and regional diversity requires constant negotiation. In recent times, emphasis on “cooperative federalism” (as stressed by policymakers) aims to mitigate these frictions by involving states more in decision-making processes, but the debate over Centre–State balance remains active.
Key Reforms Suggested by Commissions on Centre-State Relations
Sarkaria Commission, 1983: The Sarkaria Commission highlighted the need to strengthen the institution of All-India Services, proposing that such services should be expanded and made more effective. It emphasized that the Union should restrict its intervention in the concurrent subjects to areas where uniform policies are essential, leaving the rest of the matters for state action to ensure decentralization and local empowerment.
MM Punchhi Commission, 2007: This commission stressed the importance of clearly defining the devolution of powers to local bodies, advocating for constitutional amendments to enshrine their status as self-governing institutions. It also recommended that the tenure of Governors be fixed at five years, similar to the President’s term, and their removal should only be through an impeachment process by the state Assembly, ensuring stability and accountability in state governance.
National Commission to Review the Workings of the Constitution (NCRWC), 2000: The NCRWC recommended the establishment of a legislative body called the Inter-State Trade and Commerce Commission, under Article 307, to facilitate smooth inter-state trade. It also proposed that emergency provisions related to disasters and calamities should be included in the Concurrent List of the Seventh Schedule, allowing both the Centre and States to legislate on such issues in times of crisis.
Additional Measures for Strengthening Centre-State Relations:
Centre-state institutions like the Inter-State Council, Finance Commission, and NITI Aayog are vital for fostering dialogue and cooperation. These institutions need to be empowered and strengthened to ensure a harmonious relationship between the Centre and States.
Fiscal Federalism plays a key role in ensuring that the distribution of resources is transparent, fair, and equitable. The Centre and States must work together to promote fiscal federalism that guarantees fair resource sharing.
Revisiting the Seventh Schedule: Many scholars advocate for further decentralization by creating a new “Local Government List,” which would give urban and rural local bodies more legislative powers.
Encouragement for State Innovation: States, being close to the ground, are often hubs of innovation. They should be motivated and empowered to introduce reforms and innovative policies that can serve as models for others.
Effective Power Sharing: To maintain the federal balance, both the Centre and the States need to operate as partners, sharing power in a manner that prevents over-centralization and promotes cooperative governance.
UPSC Previous Year Questions
Q. Which one of the following statements is correct as per the Constitution of India? (UPSC CSE – 2024 Prelims)
Inter-State trade and commerce is a State subject under the State List.
Inter-State migration is a State subject under the State List.
Inter-State quarantine is a Union subject under the Union List.
Corporation tax is a State subject under the State List.
Answer: (c)
Q. The North Eastern Council (NEC) was established by the North Eastern Council Act, 1971. Subsequent to the amendment of NEC Act in 2002, the Council comprises which of the following members?
Governor of the Constituent State
Chief Minister of the Constituent State
Three Members to be nominated by the President of India
The Home Minister of India
Select the correct answer using the code given below: (UPSC CSE – 2024 Prelims)
1, 2 and 3 only
1, 3 and 4 only
2 and 4 only
1, 2, 3 and 4
Answer: (a)
Q. Consider the following statements:
According to the Constitution of India, the Central Government has a duty to protect States from internal disturbances.
The Constitution of India exempts the States from providing legal counsel to a person being held for preventive detention.
According to the Prevention of Terrorism Act, 2002, confession of the accused before the police cannot be used as evidence.
How many of the above statements are correct? (UPSC CSE – 2023 Prelims)
(a) Only one
(b) Only two
(c) All three
(d) None
Answer: (b)
Centre–State relations require an ongoing balancing act. Cooperative federalism must evolve so that the Union and States function as true partners. States should have greater flexibility to tailor policies to local needs, while working with the Centre on national priorities. Mechanisms like the ISC, GST Council, and NITI Aayog should be used to build trust and share decision-making. At the same time, a strong national framework is crucial for India’s unity. Future federalism in India will hinge on giving states more of a voice in governance and ensuring national goals are met in a diverse democracy.
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