Federalism, Devolution & Local Governance — UPSC CSE Mains GS2

Weightage: among GS2's most reliably current-affairs-linked subjects — Centre-State friction over Governors, central agencies, GST compensation, or devolution shares supplies a question hook most years.

1. Three mechanisms, not one "Centre-State relationship"

The single most useful discipline in this subject is refusing to answer at the level of "Centre-State tensions" generally. Union-State relations operate through three distinct mechanisms, each with its own provisions, its own failure modes, and its own reform proposals — and a question almost always concerns one of them specifically.

• Legislative relations: the division of subjects across the Union, State and Concurrent Lists in the Seventh Schedule, governed by Article 246, with Article 254 resolving repugnancy in the Concurrent List in favour of central law unless the state law has received presidential assent. Article 249 permits Parliament to legislate on a State List subject in the national interest on a Rajya Sabha resolution passed by a two-thirds majority.
• Administrative relations: Article 256 obliging states to ensure compliance with central laws, the all-India services whose officers serve states but are controlled centrally, the Governor's office, and Article 356.
• Fiscal relations: the Finance Commission under Article 280, the GST Council under Article 279A, centrally sponsored schemes, and the states' constrained borrowing capacity.

A question about the Governor is an administrative-relations question; a question about GST compensation is a fiscal one; a question about a state refusing to implement a central law is legislative. Naming the mechanism at the top of the answer is the fastest way to signal that you know which conversation you are in.

2. The Governor: the most contested office in Indian federalism

The Governor is appointed by the President — in practice, on the advice of the Union government — holds office during the President's pleasure under Article 156, and has no fixed security of tenure. This combination of central appointment, central removability, and substantial discretionary power is the structural source of nearly every controversy surrounding the office.

The recurring flashpoints are worth naming precisely rather than describing as "misuse of the office" generally: the discretion in inviting a party to form government in a hung assembly; the indefinite withholding of assent to state legislation, since Article 200 allows the Governor to reserve a bill for the President's consideration without prescribing any timeline; the reporting function under Article 356; and, more recently, the Governor's role as chancellor of state universities.

The Sarkaria Commission (appointed 1983, reported 1988, with 247 recommendations) proposed that the Governor be a detached figure not intensely involved in local politics, appointed after consultation with the Chief Minister, and that reasons be communicated to a state when its bills are vetoed. The Punchhi Commission (appointed 2007, reported 2010) went further, recommending that the Governor be an eminent person from outside the state, that a clear removal procedure be provided including impeachment by the state legislature, and that the practice of making Governors chancellors of universities be discontinued. Neither commission's recommendations on the office have been implemented in substance, which is itself the most citable fact in any answer on this topic.

3. Article 356 and the S.R. Bommai settlement

Article 356 permits President's Rule where the governance of a state cannot be carried on in accordance with the Constitution. Its history through the first four decades was one of frequent and often frankly political use, which is what makes the judicial correction so significant.

S.R. Bommai v. Union of India (1994), decided by a nine-judge bench, established the position that governs the provision today. The Court held that a proclamation under Article 356 is subject to judicial review; that the correct forum for testing a government's majority is the floor of the House rather than the Governor's subjective assessment; that the power is to be used only where there is a genuine breakdown of constitutional machinery; and that a dissolved assembly can be restored if the proclamation is struck down. The same judgment held secularism to be part of the basic structure, which is why Bommai is citable in two quite different question types.

The Sarkaria Commission's recommendations complement the judicial position: that Article 356 be used sparingly and as a last resort after alternatives are exhausted, that a warning be issued to the state first with its explanation considered, and that the proclamation be a "speaking document" stating its reasons — the last of these being what makes judicial review meaningful in practice, since reasons that are never stated cannot be tested.

4. Fiscal federalism: where the real asymmetry sits

The structural feature of Indian fiscal federalism is a vertical imbalance: the Union collects the more buoyant and elastic taxes, while the states carry the larger share of expenditure responsibility, particularly in health, education, police and agriculture. The constitutional response is transfer rather than reassignment.

The Finance Commission, constituted every five years under Article 280, recommends the share of central tax revenue devolved to the states (the vertical share) and the formula distributing it among them (the horizontal share). The horizontal formula's criteria — typically including population, area, income distance, and increasingly forest cover and demographic performance — generate recurring political contestation, since income distance favours poorer states while demographic performance criteria address the complaint of southern states that successful population control reduced their share.

The GST Council under Article 279A is the more institutionally interesting mechanism, and the more examinable. It is a genuinely cooperative body — the Union holds one-third of the weighted votes and the states collectively two-thirds, with decisions requiring a three-fourths majority, meaning neither the Union alone nor the states alone can carry a decision. In exchange for this shared decision-making, states surrendered a substantial part of their independent taxation power, which is why GST is simultaneously the strongest institutional expression of cooperative federalism and the most cited example of fiscal centralisation, depending on which side of the trade the answer emphasises.

Centrally sponsored schemes are the third fiscal channel and the most criticised. Because they are tied to central priorities with prescribed conditions and state matching contributions, they direct state expenditure toward Union-determined objectives, reducing the states' effective discretion over the very expenditure they are constitutionally responsible for.

Worked example 4.1 (illustrating a full 15-mark GS2 answer). "The GST Council has been described both as the finest example of cooperative federalism and as an instrument of fiscal centralisation. Critically examine. (15 marks, ~250 words)"

Model answer. Both characterisations describe real features of the same institution, and the tension between them is the substance of the question rather than a contradiction to be resolved.

The cooperative-federalism case rests on the Council's design under Article 279A. Its voting structure gives the Union one-third of weighted votes and the states collectively two-thirds, with decisions requiring a three-fourths majority — an arrangement in which neither the Union acting alone nor the states acting collectively can carry a decision without the other. This is a genuinely shared decision-making forum of a kind Indian federalism had not previously institutionalised for taxation, and in practice the Council has functioned substantially by consensus rather than by contested vote.

The centralisation case rests on what states surrendered to enter it. GST subsumed a substantial part of the states' independent indirect taxation powers, meaning a state can no longer adjust rates within its own territory in response to local fiscal need or policy preference. Fiscal autonomy was exchanged for a share in collective decision-making, and where a state finds itself in a persistent minority within the Council, it has neither the collective outcome it wants nor the independent power it gave up. The compensation mechanism's expiry sharpened this, since states had accepted the arrangement partly on the strength of guaranteed revenue protection.

The more defensible assessment is that the Council is genuinely cooperative in its decision procedure while being centralising in its net effect on state fiscal autonomy — and that its long-term legitimacy depends on the Union continuing to use its blocking share sparingly, since a Council that routinely overrides state preferences would retain the cooperative form while losing its substance.

5. The third tier: constitutional status without commensurate power

The 73rd and 74th Amendments (passed December 1992, in force April and June 1993) added Part IX (The Panchayats) and Part IXA (The Municipalities), giving local government constitutional status for the first time. Their core provisions are worth stating precisely: a three-tier panchayat structure in states above a population threshold; elections every five years conducted by a State Election Commission; reservation of seats for Scheduled Castes and Scheduled Tribes in proportion to population and of not less than one-third of seats for women (raised to one-half in many states subsequently); a State Finance Commission every five years to recommend the distribution of resources between the state and its local bodies; and the Eleventh Schedule (29 subjects) and Twelfth Schedule (18 subjects) listing functions that may be devolved to panchayats and municipalities respectively.

The gap between this framework and its realisation is the examinable substance of the topic. The critical drafting choice is that Article 243G says the state legislature may endow panchayats with powers and authority — permissive rather than mandatory — which means the Eleventh Schedule is a menu from which states choose rather than a binding transfer. The consequence, three decades on, is that a large majority of states have not fully devolved all 29 Eleventh Schedule functions, and devolution varies widely across states.

The failure is best analysed through the three F's — functions, funds, and functionaries — because in most states the three have not moved together. Functions may be listed as devolved on paper while the funds to discharge them and the staff to implement them remain with line departments of the state government, leaving panchayats responsible for outcomes they lack the means to deliver. State Finance Commissions have frequently been constituted late, and their recommendations frequently not acted upon, weakening the one mechanism designed to give the third tier predictable resources. Parallel bodies and district-level agencies, often headed by state officials, continue to perform functions nominally devolved to elected local bodies.

Common traps UPSC sets here

• Answering at the level of "Centre-State tensions" generally instead of naming whether the question concerns legislative, administrative, or fiscal relations.
• Discussing the Governor's role without citing Sarkaria and Punchhi — the fact that both commissions' recommendations on the office remain substantially unimplemented is the strongest available evidence in any such answer.
• Treating S.R. Bommai as being only about Article 356 — it is equally citable for secularism as part of the basic structure.
• Describing the 73rd and 74th Amendments' provisions without engaging Article 243G's permissive wording — the "may endow" formulation is why devolution stalled, and it is the analytical core of the topic.
• Attributing local-government weakness to "lack of funds" alone — the three-F framework (functions, funds, functionaries) is what separates a diagnostic answer from a descriptive one.

Memory aids

• "Legislative, administrative, fiscal — name the channel first" — the opening move for any Centre-State question.
• "Appointed by the centre, removable at pleasure, discretion in between" — the Governor's structural problem in one line.
• "Floor test, not Governor's opinion" — the Bommai holding in four words.
• "Union one-third, states two-thirds, three-fourths to pass" — the GST Council arithmetic.
• "May endow, not shall endow" — Article 243G's permissive wording, the reason devolution stalled.
• "Functions, funds, functionaries — all three or none" — the local-governance diagnostic.

Exam protocol

• Open by naming which of the three Centre-State mechanisms the question concerns, then stay within it.
• Cite Sarkaria and Punchhi by name for any Governor or Article 356 question, and note their non-implementation.
• For fiscal federalism questions, distinguish the vertical share, the horizontal formula, and the conditionality of centrally sponsored schemes as separate issues.
• For local-government questions, quote Article 243G's permissive wording and apply the three-F framework rather than listing amendment provisions.
• Where a question presents a binary (cooperative federalism versus centralisation), resolve it by distinguishing the institution's design from its net effect rather than choosing one side outright.