The structural balance of India’s quasi-federal system faces strain as states confront fiscal constraints and governance disputes with the Union over GST, delayed central transfers and central schemes.
Constitutional and Financial Framework
- Seventh Schedule: Division of subjects into Union, State and Concurrent Lists.
- Article 263: President may establish an Inter‑State Council for dispute discussion and advice.
- Article 254: Parliament law prevails on Concurrent List subject inconsistency.
- Article 280 / Finance Commission: Recommends vertical devolution; current devolution share to states is 41% of divisible central taxes.
- Cesses and surcharges: Retained by Centre and excluded from divisible pool, reducing net transfers to states.
- GST impact: Limits independent state taxation; raises reliance on timely central releases and compensation mechanisms.
Institutional Frictions
- Article 200 (Governor): No statutory timeline for assent or return of state bills, causing procedural delays.
- Centrally Sponsored Schemes (CSS): Matching contributions and prescriptive guidelines constrain state fiscal flexibility.
- Federal agencies: Overlapping investigative jurisdiction in opposition‑ruled states creates administrative disputes.
- Inter‑State Council: Recommended by Sarkaria; constituted in 1990 but meeting regularity is ad hoc.
Reform Proposals
- Finance Commission terms: Amend mandate to limit cesses/surcharges and review devolution formulae.
- State Finance Ministers’ Council: Institutionalise permanent consultative forum for fiscal coordination.
- Codify procedures: Fixed six‑month timeline for gubernatorial decision; statutory rules for hung assemblies.
- Inter‑governmental dialogue: Mandate annual Inter‑State Council cycles for policy dispute resolution.
IASPOINT Booster Facts
- Sarkaria Commission (1983): Urged restrained use of Article 356 and creation of a permanent Inter‑State Council.
- Punchhi Commission (2010): Recommended six‑month limit for governors and prior consultation via Inter‑State Council on Concurrent List bills.
- Bommai (1994): Supreme Court held assembly floor is sole forum to test majority, restricting arbitrary dismissals under Article 356.
- Zonal Councils: Statutory bodies under the States Reorganisation Act, 1956 for regional coordination.