Federalism and Centre-State Relations

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Rapid summary for last-minute revision.

Federalism and Centre-State Relations — Key Facts for KPSC KAS • Quasi-federal nature: India is a federation with strong unitary bias (not pure federation like USA); single constitution; single citizenship; single integrated judiciary; residuary powers with Union. • Three Lists (7th Schedule): Union List (100 items — defense, foreign affairs, currency); State List (61 items — police, agriculture); Concurrent List (52 items — criminal law, education, forests). • Finance Commission (Art. 280): Distributes Union’s tax revenues to states; awards based on population, revenue effort, backwardness; 15th Finance Commission (2020-2025) — Chair: NK Singh. • Article 356 (President’s Rule): President’s Rule in state; can dismiss state government; Bommai case (1994) limited misuse; judicial review available. • GST Council (Art. 279A): All states + Centre; recommends GST rates; 3/4th majority (75%) required; NITI Aayog (2015) replaced Planning Commission. • Karnataka’s federal demands: Higher revenue share; Karnataka vs Tamil Nadu Cauvery dispute; water sharing tensions.

⚡ Exam tip: KPSC KAS frequently asks about federal features of Indian constitution, Finance Commission awards, and Article 356 limits. Questions on GST Council, NITI Aayog vs Planning Commission, and Cauvery water dispute are common.

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🟡 Standard — Regular Study (2d–2mo)

Standard content.

Federalism and Centre-State Relations — KPSC KAS Study Guide

Federal Structure and Division of Powers

Three Lists — Division of Powers

Union List (100 items):

• Defence, external affairs, railways, currency, banking, foreign trade, posts, atomic energy, citizenship, immigration
• Parliament has exclusive power to legislate

State List (61 items):

• Police, public order, agriculture, forests, local government, public health, irrigation
• State legislature has exclusive power to legislate

Concurrent List (52 items):

• Criminal law and procedure, marriage, contract, trust, charitable institutions, education, forests, environment
• Both Union and states can legislate; Union law prevails if conflict (Art. 254)

Residuary Powers:

• After 42nd Amendment: Residuary powers with Parliament (not specified in any list)
• Matter not covered in any list → Parliament can legislate

Finance Commission

Composition (Art. 280):

• Chairperson (not a judge) + 4 members; appointed by President every 5 years
• Terms of reference: Presidential reference specifying issues to examine

Functions:

• Horizontal distribution: Between states (which state gets what share)
• Vertical distribution: Between Union and states
• Grants-in-aid: For local government (part of devolution)
• Criteria: Population, revenue effort, fiscal discipline, backwardness

15th Finance Commission (2020-2025):

• Chairman: NK Singh (former expenditure secretary)
• Major decision: 41% of Union’s tax revenues to states (down from 42% — 14th FC)
• Challenges: States concerned about reduced share; GST compensation cess

GST Council

101st Amendment (2016) — Article 279A:

• Constitutional body for GST; recommends tax rates, exemptions
• Composition: Finance Minister (Chair) + all state Finance Ministers
• Voting power: Centre 1/3rd; States collectively 2/3rd (weighted by revenue)
• Decision: 3/4th majority (75%) required; not absolute majority

Impact on Federalism:

• One Nation, One Tax: Unified indirect tax across India
• State SGST: States collect and retain SGST on intra-state supplies
• IGST: Integrated GST for inter-state; divided between states

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🔴 Extended — Deep Study (3mo+)

Comprehensive coverage.

Federalism and Centre-State Relations — Comprehensive KPSC KAS Notes

Centre-State Financial Relations and Tensions

NITI Aayog — Cooperative Federalism

Replaced Planning Commission (2015):

• Planning Commission (1950-2017): Centralised planning; allocated resources; states received plan allocations
• NITI Aayog: Think tank; cooperative federalism; states as partners; no resource allocation

Structure:

• PM as Chairperson: Prime Minister chairs Governing Council
• Governing Council: All Chief Ministers (rotating representation)
• Regional Councils: For specific issues (NE states, Hill states, etc.)
• Experts: Panel of economists and policy experts

Functions:

• Policy research: Long-term strategic vision
• Knowledge sharing: Best practices across states
• Innovation hub: Encourages state innovations
• Monitor SDGs: Sustainable Development Goals index

Criticisms:

• Does not allocate resources; planning without money is limited
• Some argue it’s a think tank, not planning body
• States still dependent on Centre for funds

Sarkaria Commission and Punchhi Commission

Sarkaria Commission (1983-1988):

• Commission on Centre-State Relations; Justice R. Sarkaria (former judge)
• Key recommendations:
  • More states in Planning Commission
  • Article 356 use should be “extreme step”
  • Inter-state water disputes resolution faster
• Mostly unimplemented; Centre retained powers

Punchhi Commission (2007-2010):

• Commission on Centre-State Relations; Justice (retired) Madan Mohan Punchhi
• Key recommendations:
  • Article 263 — Inter-state Council should be more active
  • Article 356 requires parliamentary approval within 30 days
  • Governor’s role should reflect federalism principles
  • Land boundary agreements: State should resolve boundaries

Implementation gap: Many recommendations not implemented; Centre-State tensions persist

Presidential System vs Parliamentary System

Parliamentary System (India):

• Executive responsible to legislature: PM must maintain Lok Sabha majority
• Collective responsibility: All Ministers collectively responsible
• No separation of powers: Executive is part of legislature

Presidential System (USA):

• Executive independent of legislature: President elected separately; no vote of confidence
• Separation of powers: Congress cannot remove President except impeachment
• Fixed terms: President serves fixed term; no early elections

India’s parliamentary federalism:

• Federal system (states have defined powers) with parliamentary features (executive from legislature)
• Unique: One of few federal parliamentary systems globally

Karnataka’s Federal Context

Karnataka’s Demands:

• Higher revenue share: Karnataka argues its higher per capita revenue effort should get more from Finance Commission
• Cauvery dispute: Long-standing water sharing dispute with Tamil Nadu; Supreme Court and CWDT awards; implementation tensions
• Water crisis: Bangalore’s dependence on Cauvery (Kodagu catchment); reduced inflows

Karnataka’s Fiscal Position:

• High per capita income: One of top 3-4 states by per capita GDP
• GST collection: GST Council formula (destination-based) may disadvantage Karnataka
• State’s own tax revenue: Karnataka has high own-tax revenue; less dependent on devolution

Regional Imbalance:

• North Karnataka: Lagging behind South Karnataka; lower per capita income
• Public expenditure: State government spending higher in south due to development patterns

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Examination Strategy

KPSC KAS commonly asks:

1. Explain the federal structure of India
2. Analyse the Finance Commission’s role in centre-state financial relations
3. Discuss NITI Aayog vs Planning Commission
4. Evaluate Article 356 and its limitations
5. Examine Karnataka’s federal context

Key distinctions:

• Union List vs State List vs Concurrent List (legislative powers)
• Finance Commission (tax distribution) vs NITI Aayog (planning advice)
• Presidential Rule (Art. 356) vs Governor’s Rule (Art. 365)
• GST Council (indirect tax) vs Finance Commission (direct tax)

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