Centre-State Relations and
Decentralization
Saloni Singh 23/0565
Centre-State
Relations and
Decentralization
India's federal structure has a delicate balance between the Centre and
the States. This section explores the historical context, constitutional
provisions, and evolving dynamics of this complex relationship. It also
examines the role of decentralization and empowerment of local
governments.
Historical Context of Centre-State
Relations
The relationship between the Centre and States in India has deep historical roots, tracing back to the
British colonial era. During this time, the balance of power was heavily tilted towards the central
authority, leading to tensions and demands for greater autonomy from the States.
The post-independence era saw the adoption of a federal structure, but the Centre continued to
maintain significant influence over the States through various constitutional mechanisms. This
dynamic has evolved over the decades, with shifting power dynamics and an ongoing debate around
the appropriate level of centralization versus decentralization.
Constitutional Provisions
for Centre-State Relations
1. The Constitution delineates the powers and responsibilities between
the Centre and States through the Union, State, and Concurrent Lists.
2. The Centre has overriding powers in certain domains like defense,
foreign affairs, and macroeconomic management, while States have
autonomy in areas like law and order, public health, and education.
3. The Governor, appointed by the President, acts as the constitutional
link between the Centre and State, with powers to ensure
coordination.
Fiscal Federalism and Resource
Sharing
Fiscal Transfers Tax Sharing Expenditure Fiscal
Responsibilities Discipline
The Constitution The Centre and
empowers the States share The assignment of Fiscal federalism also
Centre to make fiscal revenues from expenditure involves mechanisms
transfers to the various taxes, with responsibilities to ensure fiscal
States through the sharing formula between the Centre discipline, such as
mechanisms like the determined by the and States is guided limits on borrowing
Finance Commission Finance Commission. by the principle of by States and the
and Centrally This aims to balance subsidiarity, with the Fiscal Responsibility
Sponsored Schemes. the fiscal capacities States having and Budget
This helps address of the States and primary Management Act at
regional inequalities incentivize efficient responsibility for the national level.
and ensures tax administration. public services like
adequate resources health, education,
for public services. and infrastructure
development.
Role of Institutions like
Finance Commission
The Finance Commission, a constitutionally mandated body, plays a
crucial role in shaping Centre-State fiscal relations. It recommends the
sharing of tax revenues and grants-in-aid to address regional imbalances
and ensure equitable distribution of resources.
Emergence of Cooperative
Federalism
1 Collaborative Approach
Cooperative federalism has emerged as a more collaborative approach to
Centre-State relations, emphasizing joint problem-solving and consensus-
building.
2 Strengthened Institutions
The rise of institutions like the Governing Council of NITI Aayog has
facilitated regular dialogue and coordination between the Centre and States.
3 Shared Responsibilities
Cooperative federalism has led to a more balanced distribution of powers
and responsibilities, with the Centre and States working together on key
policy initiatives.
Challenges in Centre-State
Coordination
Fiscal Imbalances Political Differences
Disparities in revenue-raising capacities and Contrasting political ideologies and party
expenditure needs between the Centre and affiliations between the Centre and State
States can lead to conflicts over resource governments can hamper effective
sharing and fiscal transfers. coordination and decision-making.
Administrative Overlaps Lack of Trust
Unclear delineation of roles and Historical grievances, perceived biases, and a
responsibilities between the Centre and lack of mutual trust can undermine the spirit
States can result in jurisdictional disputes of cooperative federalism and hinder Centre-
and operational inefficiencies. State collaboration.
Decentralization and Empowerment
of Local Governments
Panchayati Raj
1 Elected rural local governments
Urban Local Bodies
2
Municipalities and corporations
Fiscal Decentralization
3
Devolution of funds and functionaries
The 73rd and 74th Constitutional Amendments have empowered local governments in India,
strengthening grassroots democracy and enabling community-based development. Panchayati Raj
institutions in rural areas and urban local bodies have gained greater autonomy in planning,
implementation, and resource management. Fiscal decentralization has involved the devolution of
funds, functionaries, and functions to these local governments.
Debates around State Autonomy and
National Unity
State National Unity Cooperative Ongoing
Autonomy Approach Debate
However, the Union
States have long government must Proponents of The debate around
sought greater also ensure national cooperative state autonomy and
autonomy to manage unity and integrity, federalism argue that national unity
their own affairs, which requires a the Centre and remains a crucial and
driven by regional certain degree of States can work dynamic component
identities, cultural centralized control together to address of India's federal
differences, and the over critical domains this dilemma, structure, with
desire for self- like defense, foreign leveraging their policymakers and
governance. This has policy, and respective strengths scholars
led to ongoing macroeconomic and finding a middle continuously
debates around the management. This ground that upholds exploring ways to
appropriate balance has created tensions both state autonomy strike the right
of power between between the need and national unity. balance.
the Centre and for state autonomy
States. and the preservation
of national unity.
Future Directions for Strengthening
Decentralization
1 Fiscal Empowerment 2 Capacity Building
Increase fiscal devolution to local Invest in training and skill development
governments and expand their revenue- programs to enhance the administrative
generating abilities to strengthen their and managerial capabilities of local
financial autonomy. government officials.
3 Digital Transformation 4 Intergovernmental
Leverage technology to improve the Coordination
efficiency and transparency of local Foster stronger collaboration and
governance, enabling better service communication between the Centre,
delivery and citizen engagement. States, and local bodies to align
development priorities and optimize
resource utilization.
