INTRODUCTION: CHIMERIC NATURE OF INDIAN FEDERALISM
The Constitution of India does not mention the term ‘Federation’ anywhere. On the Contrary, Article 1 refers to India as a “Union of States,’ which has been described as the ‘cooperative federalism’ by Granville Seward Austin. However, 70 years of legal and political-economic discourse have proven that the reality is much different from the definition. Is India a Federation where there is a vertical relationship between the Centre and States in terms of working together? Or have we moved into a horizontal competition among States?
The answer lies in a hybrid model. Although the constitutional framework leans heavily toward a Unitary Bias, authorizing the Centre during emergencies and through financial controls, the political and economic realities post-1991 have unleashed centrifugal forces. This blog argues that India operates under a “Cooperative-Competitive Continuum,” where cooperation is constitutionally mandated but competition is economically incentivized, often leading to friction manifesting in legal disputes before forums like the Hon’ble Supreme Court.
PART I: THE CONSTITUTIONAL ARCHITECTURE OF COOPERATION
The framers visualised cooperation as the bedrock of Centre-state relations. This is not merely a political slogan but a justiciable expectation embedded in the Constitution.
- Inter-State Council (Article 263): The Constitution gives a mechanism for dialogue. In the case of State of Rajasthan v. Union of India (1977) 3 SCC 592, the Supreme Court highlight that the Inter-State Council was designed to “resolve disputes” and foster coordination. Despite of its potential, its advisory role under Article 263 limits its efficacy, making cooperation voluntary rather than mandatory.[1]
- Full Faith and Credit (Article 261): The Public acts, records, and judicial proceedings of one State must be respected by another state. This institutes seamless administration.
- Delegated Legislation (Article 258): The president can assign Union functions to State with its consent. This is the purest form of administrative cooperation.
However, the Judiciary has often intervened to force cooperation. In S.R. Bommai v. Union of India (1994) 3 SCC 1, the court held that imposition of President’s Rule (Article 356) is not a weapon for political threats but a last resort Constitutional machinery. This judgement modified the balance, compelling the centre to cooperate rather than dominate.[2]
PART II: THE UNITARY BIAS – WHEN COOPERATION BECOMES SUBORDINATION
Critics have argued that what the constitution calls ‘cooperation’ is often ‘centralization’. Several provisions tilt the scale heavily:
- Legislative Supremacy (Article 246 & Seventh Schedule): The Union list (100 entries) vs. State List (61 entries). The Residuary Powers (Article 248) rest with the parliament.
- Parliamentary Supremacy over State Laws (Article 254): In case of repugnancy between a State law and a Union law on a Concurrent subject, the union law prevails. In case Karunanidhi v. Union of India (1979) 3 SCC 431, the court clarified that repugnancy arises only when the direct conflict exists, but where the Centre occupies the field, states must retreat[3].
- Governor’s Office (Article 155 & 356): The Governor, as the Centre’s agent, can reserve Bills for Presidential assent (Article 200), successfully vetoing State legislation. The misuse of this power led to demands for its deletion under the Sarkaria Commission (1988) and the Punchhi Commission (2010).[4]
CASE STUDY – GST AS A LITMUS TEST: The Goods and Services Tax (GST) was hailed as the cooperative federalism’s greatest triumph. GST Council (Article 279A) gives the states a collective voice. However, in the case of Union of India v. Mohit Minerals (P) Ltd. (2022) 6 SCC 700, the Supreme Court held that GST recommendations are not either the Centre or States; they are only cogent. This ruling reaffirmed that states are not mere appendages, they possess fiscal sovereignty within the union framework[5].
PART III: THE RISE OF COMPETITIVE FEDERALISM (POST-1991)
The collapse of Licence Raj in 1991 did not legally amend the Constitution, but it fundamentally altered the Political Economy. The Competitive Federalism posits that States must compete for the private investment, foreign direct investment (FDI), and infrastructure funding.
LEGAL MANIFESTATIONS OF COMPETITION:
- The Battle over Ease of Doing Business: States are now competed by amending local laws (e.g., land acquisition, labour laws) within the Concurrent List’s constraints. For instance, Gujarat’s aggressive amendments to the Industrial Disputes Act, 1947, were challenged but tacitly allowed to attract investment.
- Negotiated Loans (Article 293): States cannot borrow outside India without Centre’s consent, but within India, they compete for the market borrowings. Fiscal Responsibility and Budget Management (FRBM) Act framework conditions this competition, yet the states like Maharashtra and Tamil Nadu often out compete others due to better credit ratings.
- Devolution v. Grants (Article 270 & 275): The 14th Finance Commission (2015) increased the tax devolution share to the states from 32% to 42%, reducing discretionary central grants. This shifts the incentivized states to improve their own tax.[6] GDP ratio rather than rely on the Central doles. As held in the case of State of Kerala v. Union of India (2020) (pending review before a Constitution Bench), excessive conditionalities attached to Centrally Sponsored Schemes (CSS) violate the spirit of fiscal federalism.
The Downside of Competition: The unchecked competition leads to a “race to the bottom” states lowering environmental standards or providing excessive subsidies, distorting the common market (Article 301 guarantees freedom of trade). In the case of Atiabari Tea Co. Ltd. v. State of Assam (1961) 1 SCR 809, the Supreme Court struck down Assam’s tax on tea transit, holding that article 301 prohibits fiscal barriers to inter-State trade.[7]
PART IV: JUDICIAL MEDIATION – THE SUPREME COURT AS THE REFEREE
The Supreme Court has oscillated between protecting State autonomy and enforcing Union supremacy.
- Pro-State Autonomy: In the Case of Kesavananda Bharati v. State of Kerala (1973) 4 SCC 225 established the Basic Structure Doctrine, completely holding that federalism (even if not named) is a basic structure. Hence, parliament cannot abolish State legislative powers via amendment.[8]
- Pro-Centre Coordination: In the case of State of West Bengal v. Union of India (1963) AIR 1241 (SC), the court held that Union has overriding powers to manage national resources, upholding the Coal Bearing Areas (Acquisition and Development) Act against a State Challenge[9].
Recent verdicts show a nuanced stance: In the case of State of Karnataka v. Union of India (2018) 4 SCC 149, regarding the Aadhaar Scheme, the Court validated the centre’s power to collect data (Union List Entry 97) but struck down provisions mandating States to share databases without consent (violating cooperative spirit).[10]
PART V: THE FUTURE – HARMONIZING COOPERATION AND COMPETITION
Is India tiling too far toward competition? The COVID-19 pandemic (2020-21) forced a return to cooperation (e.g., coordinated lockdowns, vaccine distribution). Yet, fiscal competition persists.
Recommendations de lege ferenda (as per Punchhi Commission):
- Make the Inter-State Council a permanent, binding dispute resolution body (not merely advisory) to reduce litigation.
- Limit the Governor’s discretion under Article 200 by imposing a time-limit for assent or mandating reasons for rejection.
- Enact a clear law on the Concurrent List to delineate which subjects permits State variation (Competition) and which mandate uniformity (cooperation).
CONCLUSION: NEITHER PURE COOPERATION NOR PURE COMPETITION
Indian federalism is uniquely asymmetric. For matters of defence, currency, and inter-state rivers (e.g., Cauvery Water Dispute, decided under Article 262), we are fiercely cooperative. For attracting Tesla’s factory or semiconductor units, we are brutally competitive.
The correct legal position is that cooperation is the constitutional rule, but competition is the economic reality. The Judiciary’s role is to ensure that competition does not balkanize the nation, and cooperation does not suffocate regional diversity. As Justice Krishna Iyer observed in State of Karnataka v. Union of India (1978) 2 SCC 1: “Federalism is not a static concept but a functional arrangement for creative unity[11].”
Until the Constitutional is rewritten (unlikely), India will continue to be a “Federation without Federalism” a cooperative union of competing Sates, held together by a Supreme Court that interprets both Article 256 (State compliance with union laws) and 131 (original jurisdiction for state-centre disputes) with a pragmatic eye.
Author(s) Name: Anish Tandi (Centurion University of Technology and Management)
References:
[1] State of Rajasthan v. Union of India (1977) 3 SCC 592
[2] S.R. Bommai v. Union of India (1994) 3 SCC 1
[3] M. Karunanidhi v. Union of India (1979) 3 SCC 431
[4] Sarkaria Commission (1988) and Punchhi Commission (2010)
[5] Union of India v. Mohit Minerals (P) Ltd. (2022) 6 SCC 700
[6] 14th Finance Commission (2015)
[7] Atiabari Tea Co. Ltd. v. State of Assam (1961) 1 SCR 809
[8] Kesavananda Bharati v. State of Kerala (1973) 4 SCC 225
[9] State of West Bengal v. Union of India (1963) AIR 1241 (SC)
[10] State of Karnataka v. Union of India (2018) 4 SCC 149
[11] State of Karnataka v. Union of India (1978) 2 SCC 1