Centre–State Relations & Indian Federalism

The Seventh Schedule divides all subjects of governance into three Lists. Article 246 then fixes who may legislate on each: Parliament has exclusive power over List I (Union List), a State Legislature has exclusive power over List II (State List), and both may legislate on List III (Concurrent List).

Article 254 — the repugnancy rule. If a State law and a Union law on a Concurrent subject clash, the Union law prevails and the State law becomes void to the extent of the clash. But Article 254(2) carves out an escape: if the State law was reserved for the President's consideration and received his assent, that State law prevails in that State. Even then Parliament keeps the last word — it can later pass a fresh law overriding the State law.

Article 245 sets the territorial limits: Parliament may legislate for the whole or any part of India, a State Legislature for the whole or any part of that State. And a law of Parliament is not invalid merely because it has extra-territorial operation — that is how India taxes income earned abroad by residents.

Article 248 — residuary powers. Any subject not listed anywhere (cyberspace, cryptocurrency, satellite services when they were new) belongs to Parliament, read with Entry 97 of the Union List. Contrast this with the USA, where residuary powers rest with the states — a classic comparison question.

• Art 247: Parliament may establish additional courts for the better administration of its own laws.
• Art 251: Laws made under Arts 249/250 do not take away the State's power to legislate, but in case of conflict the parliamentary law prevails and the State law stays inoperative only while the Union law lasts.
• Art 255: A requirement of the Governor's or President's previous sanction or recommendation is treated as a matter of procedure only — its absence does not invalidate a law that later received assent.
• Under Arts 200–201, the Governor may reserve a State Bill for the President, and the President may withhold assent — a powerful and much-litigated central check on State legislation.

Making a law is one thing; getting it obeyed on the ground is another. Because the Union has very few field offices in the districts, Union laws are executed largely by State machinery. Part XI, Chapter II therefore gives the Centre the power to direct States.

• Art 256: Every State must exercise its executive power so as to comply with the laws made by Parliament; the Union may give directions for this purpose.
• Art 257: The State's executive power must not impede or prejudice the Union's. The Centre may direct a State on the construction and maintenance of means of communication of national or military importance and on the protection of railways; the extra cost is paid by the Centre.
• Art 258: The Union may entrust its functions to a State with that State's consent; Art 258A (added by the 7th Amendment, 1956) lets a State entrust its functions to the Union.
• Art 261: Full faith and credit must be given throughout India to the public acts, records and judicial proceedings of the Union and of every State.
• Art 365 — the sting in the tail: if a State fails to comply with a Union direction, the President may hold that a situation has arisen in which the government of the State cannot be carried on in accordance with the Constitution — the doorway to President's Rule.

Article 263 — the Inter-State Council. The President may, by order, establish a Council to (a) inquire into and advise on inter-State disputes, (b) investigate subjects of common interest, and (c) make recommendations for better coordination of policy and action. Acting on the Sarkaria Commission's advice, the Inter-State Council was actually set up in 1990. It is chaired by the Prime Minister and includes all Chief Ministers, the Chief Ministers/administrators of Union Territories, and six Union Cabinet Ministers. Its recommendations are advisory, not binding.

Here lies the real heart of Centre–State tension. The Constitution gives States the big spending responsibilities — police, schools, hospitals, roads, irrigation — but gives the Centre the big revenue handles, chiefly income tax, corporation tax and customs. This built-in gap is called vertical fiscal imbalance, and the whole machinery of Articles 268–293 exists to bridge it.

Article 279A — the GST Council was inserted by the 101st Amendment Act, 2016 (GST rolled out on 1 July 2017). The Union Finance Minister is its Chairperson; members are the Union Minister of State for Finance and one minister nominated by each State, with a Vice-Chairperson chosen from among the State ministers. Every decision needs a three-fourths majority of the weighted votes of members present and voting, where the Centre's vote carries one-third weight and all the States together carry two-thirds.

Article 262 — inter-State river water disputes. Because water is a State subject but rivers refuse to respect boundaries, the Constitution allows Parliament to provide by law for adjudication of such disputes, and — remarkably — to bar the jurisdiction of the Supreme Court and every other court over them. Parliament used this power to pass the Inter-State River Water Disputes Act, 1956 and the River Boards Act, 1956. Disputes therefore go to tribunals (Cauvery, Krishna, Godavari, Ravi-Beas, Mahanadi and others), not to ordinary courts.

Articles 301–307 — one national market. Art 301 guarantees that trade, commerce and intercourse throughout the territory of India shall be free. The exceptions are tightly drawn: Art 302 lets Parliament restrict this in the public interest; Art 303 forbids discrimination or preference between States (Parliament alone may deviate, and only to deal with scarcity of goods); Art 304(a) permits a State to tax imported goods only if it taxes its own goods equally, and Art 304(b) permits reasonable restrictions in the public interest only with the President's previous sanction. Art 307 allows Parliament to appoint an authority to enforce Arts 301–304 — no such authority has ever been appointed.

The Governor — the constitutional joint that squeaks. The Governor is appointed by the President (Art 155), holds office during the President's pleasure (Art 156), and exercises certain functions in his own discretion (Art 163). Because the appointing authority is effectively the Union Council of Ministers, every controversial gubernatorial act becomes a Centre–State issue: reserving State Bills for the President (Art 200) — where the Constitution sets no express time limit — inviting a Chief Minister in a hung Assembly, ordering or refusing a floor test, and reporting to the President under Art 356.

NITI Aayog (National Institution for Transforming India) replaced the Planning Commission on 1 January 2015 by a Cabinet resolution — note that it is neither constitutional nor statutory. Its Chairperson is the Prime Minister, and its Governing Council includes all Chief Ministers and Lieutenant Governors of Union Territories. Unlike the Planning Commission, it does not allocate funds; it works through cooperative federalism (States as partners in planning) and competitive federalism (ranking States on indices such as the SDG India Index, and running the Aspirational Districts Programme).

• Special Category Status (SCS) was never a constitutional category — it was an administrative arrangement under the old Gadgil formula giving certain States (chiefly hill and north-eastern States) a far more generous grant-to-loan ratio in central plan assistance.
• Bihar has demanded SCS for years, arguing that it lost its industry and minerals in the 2000 bifurcation. The 14th Finance Commission effectively ended the special-category distinction for devolution purposes, recommending a much higher tax share for all States instead.
• The Raghuram Rajan Committee (2013) proposed a Composite Development Index to rank States by need instead of using a "special category" label; it placed Bihar among the "least developed" States, strengthening Bihar's case for need-based transfers.
• Bihar's other federal pressure points: floods on the Kosi and Gandak, which originate in Nepal — an international matter handled by the Union (Art 253 and Union List entry 56), not an Article 262 inter-State dispute; and its position in the Eastern Zonal Council with Jharkhand, West Bengal and Odisha.