Federalism in India: Building Consensus for Reform and Cooperative Governance

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• Debates over the recently defeated Constitutional Amendment Bill reflect a long history of contestation in India’s federalism, which has continuously evolved since Independence as a key instrument of nation-building. 
• Federalism in India has remained dynamic, shaped by issues such as post-Partition centralisation in constitutional design, disputes over fiscal devolution, the centralising influence of the Planning Commission, misuse of Article 356, partisan roles of Governors, language conflicts, delimitation, and parliamentary seat distribution. 
• The article argues that Indian federalism has always been a work in progress rather than a fixed arrangement.

Rising Democratic Deficit in India’s Federal Structure

• In a democracy, equal citizenship requires that every vote carries similar weight. 
• As population patterns change over time, the distribution of parliamentary seats across and within states must be periodically adjusted to maintain fair representation.
• However, constitutional amendments in 1976 and 2002 froze the allocation of political representation based on the 1971 Census, postponing fresh redistribution until after the first Census conducted post-2026.
• This prolonged freeze has created a growing “democratic deficit”—the gap between a state’s share in India’s population and its share in parliamentary seats.
• By the 2024 elections, if seats had been allocated according to current population estimates:
  • The four southern states (Andhra Pradesh, Kerala, Tamil Nadu, Telangana) would have lost 23 seats 
  • The four northern states (Bihar, Madhya Pradesh, Rajasthan, Uttar Pradesh) would have gained 31 seats
• While the South and West Bengal have reached or fallen below replacement fertility levels, the population share of the Hindi heartland has steadily increased, intensifying representation-related tensions in India’s federal framework.

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Rising Fiscal Transfers as a Federal Challenge

• In a federal system, fiscal resources are ideally linked to states’ economic size and performance. 
• However, some redistribution from richer to poorer states is necessary to ensure equitable access to public goods and support national integration.
• The concern arises when redistribution becomes continuously expanding and open-ended, creating resentment among contributing states.

Shift Over Time

• Early 1960s – Fiscal disparities were relatively modest:
  • Hindi heartland states received about 20% more than their economic contribution 
  • Southern and western states received about 20% less
• By 2023 – The redistribution gap widened sharply:
  • Hindi heartland states received 90% more Finance Commission resources relative to their economic contribution 
  • Southern states received 44% less 
  • Western states received 58% less 
• This indicates a significant expansion in the gap between contributing and beneficiary states, especially in recent decades.
• Hence, the democratic deficit and rising fiscal transfers are symptoms, while the underlying challenges in India’s federal structure lie in deeper systemic causes.

Deeper Structural Cause: Divergent State Performance

• A major underlying challenge in India’s federalism is the sharp divergence in demographic and economic performance among states.
• Since 1980, the southern states, western states, and Haryana have recorded rapid growth in per capita GDP, comparable in pace and duration to China’s growth. 
• These states have steadily moved ahead of the Hindi heartland states and West Bengal in terms of economic performance and living standards.

Federalism Under Strain

• Such widening disparities create serious pressures within a federal system because they directly affect:
  • Political representation (through population-based seat allocation) 
  • Economic redistribution (through fiscal transfers) 
• Balancing these competing claims becomes increasingly difficult.

Perception of Reward and Penalty

• The challenge is intensified by a growing perception that:
  • Better-performing states are being penalised for successful economic growth and population control 
  • Poorer-performing states are being rewarded through greater fiscal transfers and potentially higher political representation 
• This perception deepens tensions in debates over India’s federal structure.

Erosion of Democratic Sensibility

• A major factor aggravating India’s federal challenges is the increasingly divisive nature of national politics. 
• Analysts believe, on several major policy decisions—such as demonetisation, farm laws, the Citizenship Amendment Act, new criminal laws, electoral revisions, and recent constitutional proposals—the Centre has acted unilaterally with limited consultation and insufficient democratic consensus-building.

From Cooperative to Combative Federalism

• Politics is increasingly being framed not as democratic competition, but as an existential struggle against opponents. 
• As a result, cooperative federalism, essential for nation-building, is giving way to contentious and confrontational federalism.
• This has intensified grievances across regions and communities, including: Kashmir; Ladakh; Manipur; Southern states; Religious minorities.
• The biggest casualty of this shift is trust, which is vital for a functioning federal democracy: Trust among citizens; Trust between citizens and the state; Trust between the Centre and states.

What is Democratic Sensibility

• Experts define democratic sensibility as the willingness to consult, accommodate, compromise, and exercise restraint, especially by those holding greater power.
• An example cited is a GST Council meeting around 2018, when Kerala Finance Minister, isolated in opposition on gambling taxation, considered walking out.
• Although the Centre and almost all states could have easily overruled Kerala, then Union Finance Minister instead persuaded Kerala to stay, accommodated its concerns, and preserved consensus—demonstrating democratic maturity and cooperative federalism.

Conclusion

•  While several institutional solutions have been proposed—such as revised fiscal formulas, new federal compacts, and voting reforms—analysts argue that no structural reform will succeed without democratic sensibility, especially from the Central government.
• Without mutual trust and consultation, even manageable federal issues can escalate into major political crises.