From Uniformity to Unity: Rethinking the Federal Compact
India's federal structure finds itself marked by increasing imbalances in Centre-state relations and growing tensions over state autonomy. Recent developments, especially involving Tamil Nadu, vividly illustrate the escalating friction between state governments and the central authority. Recently, the Supreme Court intervened in a matter concerning the Governor of Tamil Nadu’s refusal to give assent to several legislative bills passed by the state assembly.
The Supreme Court decisively affirmed that indefinite withholding of assent by the Governor constitutes a violation of constitutional duty, emphasising that the Governor must adhere strictly to the advice provided by the elected state government.
Although the judgment restored constitutional accountability, it simultaneously highlighted the fragility of states’ legislative autonomy, making evident their vulnerability to central interference and discretionary executive powers.
Immediately following the Supreme Court judgment, the Tamil Nadu government constituted a high-level committee in an attempt to “revisit and reassert the principles of state autonomy in today’s context.”
Headed by former Supreme Court Justice Kurian Joseph, this committee has been tasked with reviewing existing federal arrangements and recommending measures to reinstate the rights of states as enshrined in the constitution. This institutional move comes amid ongoing disputes over GST compensation, the National Eligibility cum Entrance Test (NEET), the delimitation question, the language formula to be adopted in schools, and the delays in the release of funds for centrally sponsored schemes (CSS).
These conflicts extend beyond routine policy disagreements; they represent ideological assertions of autonomy deeply embedded in Tamil Nadu’s historical Dravidian political ethos.
Historical context of federal imbalances
To understand these contemporary dynamics fully, it is essential to consider the historical context of federal tensions, particularly in Tamil Nadu. In a speech delivered in the Rajya Sabha in December 1963, C.N. Annadurai called attention to the growing frustration in the states due to centralisation of powers in New Delhi.
Annadurai demanded that in order to honour the federal spirit embodied by the constitution, states should be made “more effective sovereign units.” After becoming the Chief Minister of Tamil Nadu in 1967, he called for the creation of a “high-powered Commission” to reappraise the constitutional division of powers between the Centre and the states.
When the interim report of the Fifth Finance Commission (1968) suggested posting a central official in the state finance departments to monitor their spending, Chief Minister Annadurai vigorously opposed any move to debase the self-respect and legitimacy of an elected state government.
The Tamil Nadu government under the leadership of Annadurai’s successor, M. Karunanidhi, formed the “Centre-state Relations Inquiry Committee” headed by Justice P.V. Rajamannar in September 1969. The Rajamannar Committee report presented a comprehensive critique of the erosion of powers granted to states by the constitution.
The report observed, rather trenchantly, that Articles 256, 257 and 365 empowering the Centre to dictate terms to the states, were “repugnant” to federal principles as they could potentially nullify the executive powers of the latter. These constitutional provisions, the report noted, shrink the states to mere administrative appendages and distort the federal balance.
The Committee advocated significant constitutional reforms in order to place Centre-state relations on a balanced and stable footing. Among other things, it recommended: the repeal of Article 356 (President's Rule); the expansion of the pool of divisible taxes by making corporate taxes shareable with the states; the curtailment of centralising institutions such as the Planning Commission – which exercised extensive discretionary control over state plans; and the establishment of a robust inter-state council under Article 263.
Despite the clarity and urgency of these recommendations, many remained unaddressed by successive central governments, perpetuating unresolved structural issues.
Union govt dispensing discretionary and conditional plan grants to states
It is worth mentioning that as chairperson of the Fourth Finance Commission, Rajamannar had identified in his supplemental note to the Finance Commission Report (1965) severe misalignments between the states’ constitutional responsibilities and their financial resources. Rajamannar pointed out the diminishing role of the Finance Commission in the resource-sharing arrangement as a result of the ascendancy of the Planning Commission, a body established by executive fiat rather than constitutional mandate.
He specifically referred to the manner in which Article 282, a miscellaneous financial provision, was instrumentalised by the Union government to dispense discretionary and conditional plan grants to states. These discretionary transfers had superseded statutory transfers, thereby compromising the fiscal and policy autonomy of state governments.
This concern, expressed six decades ago, speaks directly to the ongoing federal battle between Tamil Nadu and the Union government over the withholding of the Centre’s share of funds for Samagra Shiksha Abhiyan (SSA). The Union government has made the release of funds for this centrally sponsored scheme conditional upon the Tamil Nadu government implementing the three-language formula as part of the National Education Policy (2020).
The Tamil Nadu government’s staunch opposition to a one-size-fits-all approach of the Union government must be viewed as part of the broader struggles for linguistic and policy autonomy within the asymmetric federal set-up.
The views expressed by Rajamannar in the aforesaid supplemental note were articulated with much greater force in the report of the Centre-state Relations Inquiry Committee. The Committee emphatically argued in favour of making statutory tax devolution the principal component of resource transfer to the states as it would significantly enhance their autonomy in fiscal matters.
The memorandum of the Tamil Nadu government to the Sixth Finance Commission (1972) used the Rajamannar Committee report as a scaffolding and insisted how imperative it was to liberate resource transfers from “capricious variations.”
Today, the share of non-statutory transfers has come down appreciably, however they continue to be dictated by the capriciousness of the Union government.
When the Rajamannar Committee was formed in 1969, states were competing among themselves for a greater share of resources earmarked for the Five-Year Plans. As a matter of fact, these non-statutory and tied transfers to states accounted for about two-thirds of aggregate central transfers until 1969. Since the abolition of the Planning Commission in 2014, statutory tax devolution recommended by the Finance Commission has become the terrain of fierce contestation among states in multiple respects, even as it has come to occupy the pre-eminent position (about 60 percent) in the overall resource transfers from the Union to the States.
The sharp divergence in the development trajectories of India’s states exacerbates the predicament of balancing equity and efficiency in the allocation of shareable taxes among them. The current landscape of federal fiscal relations is thus characterised by both radical shifts and a disturbing degree of continuity in terms of the Union government’s discretionary authority, justifying the case for a renewed inquiry into the future of state autonomy.
Foundations of India’s asymmetric federalism
The roots of India's current federal asymmetry could be traced back to foundational constitutional decisions. As Louise Tillin, a leading scholar of Indian federalism, has argued, the framers of India’s constitution were influenced not only by the tumultuous partition episode as it unravelled, but also by pressing socio-economic concerns and developmental priorities. Therefore, they deliberately created an asymmetric federal system that significantly empowered the Union government.
Key architects like Nehru and Ambedkar viewed centralisation as essential for achieving national integration through a supra-local civic identity that conserved and celebrated differences, redistribution of economic resources, and mitigating regional disparities. However, the intended fairness and effectiveness of this structure inherently depended upon the intentions and actions of the governing authorities.
Their recognition of India's vast diversity and regional disparities also contributed to their inclination to prioritise a centralised structure to manage conflicts, promote unity, and facilitate governance in a decolonising context. This setup allowed the Union government to coordinate national development and manage internal security effectively.
Nevertheless, it was hoped that this deliberate asymmetry would be balanced by cooperation and mutual respect between the Centre and the states. Such an optimistic vision relied heavily on the inclusive vision and ethical conduct of national and sub-national political leadership. The evolution of Indian federalism has been animated by cooperation, competition and confrontation to varying degrees.
As the semblance of cooperative federalism has given way to nearly unchecked central dominance in recent years, the need to revisit these foundational choices that shaped India’s federal structure and reinforce constitutional safeguards to prevent the misuse of centralised power is more urgent than ever.
Today, the centralisation of authority in India’s federal system has become increasingly problematic, threatening the cooperative ethos upon which successful federal governance depends. Recent trends of delayed financial transfers, discriminatory practices against politically unfavourable states, and intrusive central governance undermine the autonomy and effectiveness of state governments. Such practices threaten the fundamental democratic principles that underpin the Indian polity.
Democratic engagement and the path forward
Addressing or exacerbating this asymmetry ultimately rests upon the collective will of the citizenry and the representatives they choose to elect. Active democratic engagement, informed public discourse, and vigilant protection of constitutional morality are critical for recalibrating India's federal balance. It is imperative for both citizens and political leaders to prioritise federal principles, demanding meaningful reforms to sustain India's diverse and vibrant democracy.
To strengthen democratic engagement, citizens must have a clear understanding of constitutional rights and duties, and engage actively with political processes at the state and national levels. Educational campaigns, informed media discourse, and active civil society involvement can help mobilise collective action, ensuring that federal issues remain at the forefront of public debates. Additionally, enhancing institutional transparency and accountability mechanisms can foster trust and cooperation between the states and the Union government.
The historical episodes involving Tamil Nadu’s pioneering efforts to mainstream the discourse around state autonomy and the current federal tensions highlighted by Tamil Nadu's proactive stance underscore the urgent need to reassess India's federal arrangements. While India's federalism is constitutionally asymmetric by design, its future trajectory – towards either greater equity or deeper centralisation – will ultimately depend on the active and informed engagement of the citizenry, ensuring a democratic federalism that respects state autonomy and national unity alike.
Raghunath Nageswaran is a PhD candidate at the Geneva Graduate Institute, researching the history of economic policymaking and federalism in postcolonial India through the lens of Madras State.
Vignesh Karthik K.R. is a postdoctoral research fellow of Indian and Indonesian politics at KITLV-Leiden; and author of the forthcoming book The Dravidian Pathway: The Dravida Munnetra Kazhagam (DMK) and the Politics of Transition in South India (C. Hurst & Co/ Westland Books/Oxford University Press 2025).
Semmozhi Poongundran is in his third year of pursuing a law degree at Christ University, Bangalore.
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