Political and Fiscal Challenges

The process of evolution of Indian federalism has been influenced, inter alia, by political development, including rise of regional identities, end of one-party dominant era, and judicial interpretations of the Constitution. As discussed in earlier sections, three quarters of a century of thought and struggle over defin-ing the Indian nation, over freeing the country from foreign occupation, and over the desirable shape of the social and economic order in a future indepen¬dent India had provided the nationalist leadership at Independence with a set of ideas and goals that helped to structure their responses to the problems of governing the newly independent country. At the top of their goals, the sine qua non for everything else was an abiding faith in and determination to preserve the national unity and integrity of the country against all potential internal and external threats to it at all costs. The partition of the country only strengthened their resolve.

Domestic ethnic, religious, linguistic, and cultural group demands

Two strict rules have opened followed since Independence in dealing with dissident domestic ethnic, religious, linguistic, and cultural group demands. First, no secessionist movement will be entertained and that any group which takes up a secessionist stand will, while it is weak, be ignored and treated as illegitimate, but should it develop significant strength, be smashed, with the help of the armed forces if necessary. All secessionist demands in post independent India that acquired any significant strength have been treated in this way, especially in the northeastern part of the country and lately in Punjab and Kashmir. Second, there has been a prohibition against concession of de¬mands for any form of political recognition of a religious community. Religious minorities were free to preserve their own law and practice their religion as they see fit, but not to demand either a separate state for their community even within the Indian Union or separate electorates or any form of proportional rep¬resentation in government bodies. Any such demand would not be considered legitimate.

Political tensions within the ruling party

Also shifts have occurred in the major thrust of centre-state conflicts and contradictions since Independence. The considerations of interest are major political tensions within the ruling party at the centre and tension between it and a wide variety of opposition parties, which offer more or less plausible al¬ternative centres of power in different regions (and also at the centre, in form of coalition partners) are clearly reflected in the unfolding of the centre-state tensions in any given period.
A parallel trend has been displayed by economic tensions. Contradiction between the rising urban and rural working classes and the ruling classes and the subsequent fragmentation and emasculation of the working class organizations due to the shift in logic of development can be noticed.

Cultural and linguistic differences

Cultural and linguistic differences have contributed to the political idiom specific to centre-state relations right from Independence. While political and economic conflicts develop centre-state conflict dimensions of their own, con¬flicts involving linguistic and cultural (and even communal) dimensions have tended to assume significance under certain circumstances. Language and cul¬ture are emphasized (especially in the regions lying outside the Hindi-speaking heartland of India, embracing Uttar Pradesh, Bihar, Madhya Pradesh and Rajasthan) as features unique to the different ‘nationalities’ comprising India. Demands for an equitable distribution of political power and privileged access for the weaker regions to economic resources are often couched in the language of demands for greater autonomy for the different states as well as for a more generous investment of the central plan resources in regions far away from the ‘heartland.’

The change in the nature of conflicts and their resolution has clearly fol¬lowed the pattern of political development in India. Predominance of the Congress party at both the centre and state level during the early years of the post- Independence period provided for a unique mechanism for resolution of such conflicts. However, the Congress dominance began to wane when the party became less democratic and more centralized in later years. The period of the Congress decline saw a related phenomenon of the increase in strength of regional or state parties who came to capture power in the states. Their demand for more autonomy as well as for evolving proper mechanism for implemen¬tation of federal features grew. Even as the political system demanded more federalism, the Congress responded with less. But a transformation of the party system in the recent times coupled with emergence of coalition politics as a norm at both the centre and states levels have rewritten the federal equation in cotemporary times.

<div class=”highlightbox”
State machinery as a ‘facilita¬tor’ or merely a ‘regulator
These reforms have restricted the role of the State machinery as a ‘facilita¬tor’ or merely a ‘regulator.’ Developmental planning in India is now no more a command economy model which called for a massive intervention of the State. With the restructuring of the State-market relationship which saw an increased role for the private players, a loosening of control by the centre over states is easy to detect. Whereas, in the period just after Independence, strong faith in centralised planning led to the concentration of the economic and political power in the centre, a move towards decentralization and shift to accommo¬date greater say of private players and the corporates in the planning process has yielded more space for states and, thus, enhanced their manoeuvrability. States now have more freedom to raise resources for their socio-economic development from the market-domestic as well as global. This has redefined the nature of political control of the centre over the states. These reforms have re-defined centre-state relations.

India’s parliamentary federalism and coali¬tion politics

The relationship between India’s parliamentary federalism and coali¬tion politics is in some ways sui generis The distinction between national and state parties is not on the basis of the arena in which they compete. Most of them compete in both assembly and parliamentary elections. Since the states in India differ vastly in terms of population and size, they play for dif¬ferent stakes in Parliament. With their increasing importance at the national level, they have been able to minimize the manoeuvrability and discretion of the centrist parties. This has resulted in the reconfiguration of the federal relationship in India.

Economic reforms and the phenomenon of globalization

A new shift has occurred in the economic domain also. The path of develop¬ment which India undertook in the initial years of the post-Independence pe¬riod has undergone a change now with India undertaking to reform its economy through liberalization. Economic reforms and the phenomenon of globalization has necessitated examination-of India’s federal system, especially when all the layers of federations now simultaneously interact with foreign governments and corporations in the global economy. Contemporary India is characterized by transition from a planned to market economy, redefinition of the role of the state’ and emphasis on decentralization.The traditionally prevailing system has been of constitutional demarcation of fiscal power of generation of resources. But adoption of centralized planning in a mixed economy framework for social engineering in accordance with entry in the concurrent list-‘Economic and Social Planning’–concentrated eco¬nomic powers with the centre. Development over the years such as the creation of the Planning Commission, nationalization of major financial institutions in¬cluding banking and insurance consolidated the financial position of the centre and enhanced their political control over the states by aggravating the financial dependence of the states over the centre.

<div class= “highlightbox”



  • In India there are many inter-state rivers and their regulation and development has been a source of inter-state function. These relate to the use, control and distribution of waters of inter-state rivers for irrigation and power generation.
  • In the Indian Constitution, water-related matters within a state are included in the state list, while the matters related to inter-state river waters are in the union list. Keeping in view this problem of unending river water disputes, the Constitution framers vested the power to deal with it, exclusively in Parliament.
  • The Parliament hence, may by law provide for the adjudication of any dispute or complaint, with regard to use, distribution or control of the waters.
  • The Inter-State Water Disputes Act was enacted by the Parliament in 1956 according to which tribunals are set up for adjudication of water disputes referred to them


Under the pressure of an external crisis
The economic reform in India which began slowly in the 1980s accelerated its pace at the beginning of the 1990s under the pressure of an external crisis. The most visible component of reforms so far, has been the relaxation of various internal and external controls on private economic activity, the scrapping of the ‘licence-permit quota raj’ and integration of India’s economy with the rest of the world. Mainly two groups of reform can be identified. The first involves redrawing of state-market boundaries, including changes in ownership and reg¬ulations, financial sector reforms, assignment of regulatory powers, infrastruc¬ture reform and development, and privatization. The second is concerned with the reconfiguration of federal institutions themselves such as tax reforms, re¬form of centre-state fiscal transfer mechanisms and local government reforms.

Complex and culturally heterogeneous democracy

The complex and culturally heterogeneous democracy such as India tried to manage its diversity through federal institutional arrangements. But the de¬mands of groups in the Indian society for greater power, resources and autonomy have been growing. Some of those demands have been successfully accommo¬dated by politicians, parties and governments through creative ‘management’ of the centre-state relations. The centre-state relations have tended strongly to remain ‘manageable’ because-first, powerful group demands remain mainly a product of intra-state conflict and seldom take the form of states’ demands which impinge mainly on the centre and which if frustrated-might generate secessionist sentiments. Nonetheless, in some cases, things have gone spectacu¬larly wrong and violent separatist movements have developed with implications for the democratic process underlying the centre-state relations.

Second, secessionism requires a sort of state-wide solidarity. The social and cultural complexities and heterogeneity within most states are so formidable that they hinder any development of such solidarity.
Third, preoccupations of the Indian citizens from one to another of the many identities (such as caste, religion, regional, linguistic, communal or sectar¬ian) which they have available to them shift with great fluidity. This tendency reduces the severity and longevity of most conflicts within most states and pre¬vents tension and conflicts from building up along a single fault line in society.

Finally, the capacity of the political institutions (both formal and informal) to respond and accommodate successfully various demands (reflective of states’ politics of bargaining) remain intact despite suffering decay in recent years. It prevents escalation of conflicts into any major crisis.
During the first 20 years or so after Independence in 1947, the society in most of India was sufficiently self-regulating and posed few serious problems for political institutions-formal or informal. The Congress party’s cluster of regional political ‘machines’ possessed the substance and the reach to manage most of the social tension that arose.

Emergence of Interest Groups

Since the late 1960s, things have become more difficult on both the socio¬cultural and political fronts. On the one hand, interest groups have crystallized identities along language, culture and religion. With the growing awareness of their political concerns, these groups have pressed harder for resources, power and respect and have exhibited impatience with mere tokenism. On the other hand, political decay has acted most formal and informal political institu¬tions mainly due to the attempts by politicians to erode the substance and autono-my of institutions in the interest of personal rule, creating a crisis in ‘management’ techniques and sowing the seeds of frustration among organized interests. The result has been the production of far more strife of a destructive sort.

Ethnic Discontent, Armed Struggle and Demands for Separation

India has seen escalation of ethnic discontent into violence, armed struggle and demands for separation What has made ‘management’ of these violent con¬flicts difficult, is the considerable degree of overlap between expression of de¬mands and politics in violent mode with identity issues. Secessionist demands in states such as Punjab, Mizoram, Jammu and Kashmir and Manipur can be expressly interpreted in terms of ethnic/religious identity. Today, Punjab and Mizoram are post-conflict societies but until the late 1980s these two states were rocked by tremendous violence and demands for secession. The other two states-Jammu and Kashmir, and Manipur-continue to be tom apart by the same phenomenon.  Looking at the violent pattern of politics in such areas leads one to question the performance of democratic and federal institutions in this part of the country. The conflicts have occurred when the ability of political institutions to contain the demands is incapacitated by the misuse of public office for private gain. This leads to misgovernance, on the one hand, and to lack of confidence in the capacity of institutions to govern according to rules, on the other. These are the processes which breed such expected results. However, the other important cause for such instances is violation of democratic and federal principles and dis¬sociation of democratic value from federal principles. If democracy rests on the normative principles of participation and accountability, federalism best serves to realize them. When the federal principle is violated through infringement on regional autonomy by the centre, the democratic principles of participation and accountability are also violated. The violations of the federal/democratic prin¬ciples when combined with politicization of ethnicity lead to conflicts, which become intractable.

But politics of violence and secessionism has inflicted incalculable harm in the form of dislocations, homelessness, violations of human rights and loss of lives. The fragmentation of demands reflect democratization of society. The challenge cannot be responded merely by territorial distribution of resources and power. Principles of democracy and federation, in its truest sense, would demand extension of rights, opportunities and resources to diverse groups and communities as well.It is clearly manifested in the political and fiscal dimen¬sions of Indian federalism.

But the dynamics of Indian federalism cannot be understood only through its structure. The regionalization of politics, the loss of authority of central government institutions, the rise of separatist movements in Punjab and Kashmir, the growing pattern of politics of violence and demands for sovereignty in the North East, especially in Naga-inhabited areas, and the erosion of cultural unity that is being undermined by religious and caste identities, have exposed the limitation of the structural approach. Preoccupation with legal formalism, it was felt, at the cost of ignoring social and cultural basis of state has yielded myopic understanding of the nature of the Indian federalism. The concept of federalism is composed of three• determinants: federalism as a socio-cultural theory of pluralism, federalism as a political principle involving a diffusion of power, and federalism as an administrative arrangement based on distribution of power and jurisdiction. Federalism also encompasses four ideological principles: composite nationalism, participatory democracy, secularism, and social justice. In short, the study of federalism, must focus not only on the reconstruction of centre-state relations, regionalism and reorganization but also on issues of socio-cultural pluralism and accommodation. Thus, federalism must build and sustain not only the unity of the polity but also promote the plurality of the society.

Federalism, in the Indian context, remains a potent concept despite fail¬ing in some cases to keep its promise of providing a democratic institutional mechanism for its diverse society. Despite its shortcomings, it remains the best hope for governing a territorially diverse and pluralistic society like India. Its ability to make the centre strong as well as sustain itself in view of the growing demands for regional and group autonomy gives it a unique flexibility, and hence, is its strength. The only requirement in the present time is to ensure sharing of resources and opportunities with different eth¬nic and cultural groups and communities as well to reconcile democratic polity with increasing democratization of society. In short, federal India needs only to con temporize itself.

Leave a Comment

Your email address will not be published. Required fields are marked *