1This special issue interrogates the evolving ideas of federalism at play in India today. In doing so, it offers insights into the role of federalism in accommodating India’s substantial regional diversity and addressing political and economic inequalities, and also examines the relationship between democracy and federalism. In recent years, political opponents of the BJP have rallied around the idea of federalism as part of a strategy of protecting democracy and constitutional values, leading some to argue that federalism is a bulwark against authoritarian drift. The project of using federalism to defend democracy in India today is an inherently political project, one which involves a debate about the kind of polity India seeks to be, the place of minorities within that polity, and the extent to which diversity is seen as a strength or weakness of that political project. In some quarters, these debates are leading to the more explicit articulation of federal “principles” that were assumed to be a settled part of the fabric of the polity in an era of political regionalization between 1989–2014 when no single party had a majority in the national parliament, but which have been called into question since 2014. This special issue seeks to provide insight into the wide-ranging debates about federalism—from both political and economic perspectives—that are taking place in twenty-first century India.
2Indian federalism has attained the status of what W. B. Gallie (1955:168) described as an essentially contested concept: a concept of which “there is no one clearly definable general use … which can be set up as the correct or standard use.” The essence of the concept has been contested from the inception of the constitution. Federalism does not appear by name in the constitution, but India is described as a Union of States. The term “quasi-federal” has been used since the constitution was promulgated to capture the idea that India’s approach to federalism was sui generis and placed so many restrictions on the autonomy of the constituent States to be considered federal in a textbook sense. In the intervening decades, linguistic reorganization, reactions to central over-reach (initially under Indira Gandhi) including regional autonomy movements and the judicial recognition of federalism as part of the constitution’s basic structure, the emergence of regional political parties and economic liberalization have slowly breathed more life into the concept of federalism as a full-fledged constitutional value. These processes granted a greater ethos and practice of federalism in India, in the sense of the existence of two levels of government with their own sphere of authority, even though there was limited change to formal institutions. But since 2014, as an idea and in practice, what might be considered federal values are being contested because of the return of a one-party dominant party system presided over by an ethnic nationalist party. On the one hand we see the vigorous defense and promotion of the idea and significance of federalism by regional political actors. On the other, the rise of a more unitarian majoritarian nationalism—or what Kailash (this volume) calls “reunitarization”—has brought India’s status as a federal system, and what federalism in the Indian context entails, back into essential contention.
3In this introduction, we examine the institutional design of federalism in its political and fiscal dimensions, and conceptually disentangle federalism from de/centralization. We suggest that it is essential to consider political and fiscal dimensions together in examining federalism. Contemporary debates about the political representation of states in the Indian Union are closely connected to the question of their fiscal contributions to the Union. The pending “delimitation” exercise, discussed later in this introductory essay, which will reassess the allocation of parliamentary seats to each state has generated a wider debate about the sustainability of the current model of fiscal redistribution. For these reasons, while most of the articles in the special issue focus on the political dimensions of federalism, this introductory essay establishes the wider political economic context. As we assess the changes that have taken place in the field of federalism over the last decade—at the level of ideas and institutions in both the political and economic domains—we will introduce the contributions of the articles, book reviews and interview in this special issue. First, however, we begin by describing the design of federalism in India and explaining why it can be understood as an “essentially contested concept.”
4It is worth reminding the reader that federalism, per se, does not itself connote a particular degree of de/centralization. Federal systems can be more and less de/centralized and can undergo dynamic processes of de/centralization in which policy authority or resources migrate to a lower or higher level of political authority. Yet in India’s case, the move towards greater centralization since 2014 has often been seen as posing a threat to federalism. In this section we disentangle de/centralization from federalism and identify the contours of federalism as they are enumerated in India’s constitution and as they have evolved in practice.
- 1 Louise Tillin is grateful to the Federalising Processes project organized by Simona Piattoni and Ma (...)
5There is a tendency to equate federalism and decentralization in federations—like India—that have been formed by disaggregation or, in other words, the devolution of power from a previously unitary central authority. In such federal systems, which Stepan (1999) called “holding together” federal systems, deeper federalism is often seen as synonymous with decentralization or the acquisition of greater authority by subnational units. However, in federations (or potential federations) by aggregation, formed by individual polities pooling their sovereignty—such as the United States or Germany (historically) or the European Union—processes of federalization have involved strengthening the union by providing greater authority to central government. Ideas of creating a more “federal Europe,” for instance, would entail a process of centralization in which authority migrates from nation-states to the European Union.1 In such federations by aggregation, or “coming together,” federations, deeper federalization is therefore associated with centralization and the pooling of sovereignty. It might be noted that that in India, as well, there are parts of the country—especially Kashmir—where this understanding of federalism as involving a conditional centripetal delegation of authority to join a Union rather than a centrifugal devolution from a unitary central authority have had greater historical resonance (Dar and Tillin 2025). For these reasons, in this introductory discussion of federalism in India, we separate out a consideration of the institutions of federalism from a discussion of patterns of de/centralization. Federal systems can be more and less de/centralized, and degrees of de/centralization can change over time, without necessarily involving a fundamental challenge to federal institutions. However, periods of de/centralization may also bring institutions into question. In this special issue we examine the extent to which the current era of centralization is witness to a reconfiguration of federalism both at the level of ideas and of institutions.
6Once we have conceptually separated federalism and decentralization, what is federalism? The classic definition of federalism is a system of government which combines the “self-rule” of federal sub-units with “shared rule” in a central government (Elazar 1987). However not all federations—including India—have a system of “shared rule” in which federal sub-units are involved in central government decision-making. For this reason, Fenna and Schnabel (2024) have recently argued that the only necessary and sufficient feature of a federal system is “the existence of two constitutionally guaranteed orders of government, each enjoying a direct relationship with the people and exercising meaningful powers.”
7Beyond institutions, federalism should also be understood as an idea. It has been argued that federalism expresses a political idea of covenant, or moral contract, resting on partnership and the mutual recognition by both sides to a “federal bargain” of the integrity of the other party to the bargain (Elazar 1987; Burgess 2012). This is often connected to the understanding that federalism is intrinsically anti-majoritarian and that structurally—by virtue of its territorial design—a federal system should protect the rights of minorities. Yet not all federations—India’s included—have been born of an explicit “federal bargain.” As Burgess (2013:8) argued: the mere existence of a set of federal institutions, does not mean that there is a “federal spirit”: this is something that must be constantly inculcated. For many scholars of federalism, the need for the constant nurturing of such a federal spirit and for both levels of government to restrain from impinging on the integrity of the other implies that federalism necessarily requires a liberal democratic context in which to flourish.
- 2 B. R. Ambedkar, speech to the Constituent Assembly of India, 4th November 1948
8Against such a backdrop, what is the Indian variant of federalism—in institutional and ideational terms—and how is it distinctive? In institutional terms, India has a comparatively centralized federal design with strong inter-dependence between levels of government, and it is designed to be flexible in its operation. Dr B. R. Ambedkar described the flexibility that was hard-wired into federal design as the sine qua non of the constitution: it could be either unitary or federal according to need.2
9Indian federalism is highly centralized in the way that legislative competencies are divided between the Union and State governments, in the enumeration of residual powers (which lie with the Union), and as a result of the relatively weak representation of states’ interests at the Centre. States are not represented on an equal basis in the Rajya Sabha—or Council of States. Since a 2003 amendment to the Representation of the People Act, 1951, the territorial component of representation in the upper house was further weakened by removal of the residency requirement for Rajya Sabha candidates. Furthermore, under Article 3 of the constitution, the central government retains the right to even redraw the boundaries of federal sub-units, something that is difficult to imagine in federal systems formed by “aggregation.”
- 3 Concurrent List is one of the three lists in the Indian Constitution that divides subjects of legis (...)
10In addition to its centralization, India’s federal model is distinctive because of the high degree of inter-dependence between levels of government. Often considered the first exemplar of “cooperative federalism” in the world, India’s constitution enshrines an extensive concurrent list,3 and mechanisms that by design empower the central government to intervene in the affairs of states (Tillin forthcoming). For these reasons, K. C. Wheare (1963) used the famous moniker “quasi-federal” to describe India’s constitution because it departed so significantly from the classic understanding of federalism as defined by the existence of two levels of government whose autonomy was constitutionally guaranteed. Indian federalism is flexible by institutional design, eschewing the rigidities often associated with federal constitutions and empowering parliamentary majorities to take unilateral action without facing checks from political interests organized along territorial lines. In previous work, Tillin (2019) has argued that we should see the resulting form of federalism as a distinctive Indian model rather than being a derivative or diminished model.
11If the institutional contours of what is distinctive about Indian federalism are relatively clear, there is much greater contestation about what federalism means at the level of political thought. This extends to questions of where sovereignty lies; what the mutual responsibilities of different levels of government to each other are; what an appropriate degree of federal restraint would look like and when central incursion in the affairs of states is legitimate. Perhaps most of all, there has always been a tacit dispute over whether “cooperative federalism” which hinges on intergovernmental cooperation—rather than a separate spheres approach that recognizes the autonomous position of two levels of government—should be seen as the essence of Indian federalism.
12The essentially contested status of federalism as a concept in India is exemplified in jurisprudence. The Supreme Court of India has demonstrated a deep ambivalence in its interpretations of federalism, as Ritwika Sharma and Mayuri Gupta show in their contribution to this special issue. The Supreme Court of India, they suggest, has lacked—or failed to develop—a consistent political theory of federalism. This has meant that while federalism has been recognized as part of the basic structure doctrine, the highest court has been inconsistent in its defense of federalism as a set of institutions that rest on the autonomy of two levels of government (see also James and Arora forthcoming; Swenden and Saxena 2021). Whether this inconsistency is a failing of jurisprudence or a failure of political theory is open to discussion.
13As with political institutions, the design of fiscal federalism in India also leans towards empowering the central government. The central government is responsible for the major heads of direct taxation (income and corporation tax), which account for about a third of center and state tax revenue combined. This creates an imbalance between revenue raising powers which favor the center, and the largest expenditure responsibilities which sit with the states. This fiscal imbalance is addressed by a quinquennial Finance Commission which devises the formulae by which central tax revenue is assigned to states. Until the introduction of the Goods and Services Tax (2017), both levels of government also had different powers to raise indirect taxes which resulted in a complex, overlapping indirect tax landscape.
14Since 2014, Indian fiscal federalism has undergone significant changes. The abolition of the Planning Commission, the creation of the National Institution for Transforming India (NITI Aayog), the constitutional amendment introducing the Goods and Service Tax (GST), the establishment of the GST Council, and the new criteria adopted by the Terms of Reference (ToR) of the Fifteenth Finance Commission (FC), particularly the shift from the 1971 to the 2011 population base, which had been used for the past three decades have changed the fabric of fiscal federalism. While the Constitution clearly demarcates fiscal powers across the Union List (functions assigned to the federal government) and the State List (functions exclusively assigned to state governments), over the years the Union government has encroached on fiscal arrangements for state subjects (Tillin 2019). This has occurred primarily through centrally sponsored schemes (CSS) and the inclusion of Education policy in the Concurrent List (Reddy and Reddy 2019:76), justified as a means of pursuing national priorities and reducing state-level variation.
15The introduction of the GST is the biggest change in the field of fiscal federalism since 2014. Under the GST, states and the Union have pooled their taxation powers in the field of indirect tax. This might be the only example of an explicit “federal bargain” in India’s history, in which both states and Centre have agreed to pool their sovereignty, although the guarantee to compensate states for revenue foregone offered a very strong inducement for states to accept this bargain (Tillin forthcoming). The introduction of GST has enhanced the degree of Centre-State interdependence in fiscal federalism which, as we set out above, is a key feature of the institutional design of Indian federalism more generally. As a result of GST, states have lost their autonomy to tax consumable items and set their own taxation rates, while the Union government has also lost the freedom to change the rates of Union excise and service taxes. The design of the GST Council, which was established to collectively arbitrate the tax rate and disputes, can be argued to have increased the powers of the Union government over taxation because of the design of voting on the council. The Union government has a one-third voting share, and because decisions must be taken by a three-fourths majority, no decision can be made without the Centre.
16Contributors to this special issue examine how Indian federalism—as a set of ideas and institutions—has evolved since the rise of one-party dominance under the BJP since 2014. For an earlier review of changes in Indian federalism in the immediate aftermath of the 2014 election see Sharma and Swenden (2018). Sharma and Swenden argue that, in the early years after the 2014 election, centralization was most evident in the political domain, but weakest in fiscal matters. In this section, we outline the contributions of this special issue to understanding the scenario more than a decade after those elections. We do so by situating the articles, book reviews and interview in the special issue in a discussion of the major trends and tensions in both the political and economic dimensions of federalism. This introductory essay thus serves to provide a standalone review of the field of federalism, as well as a synopsis of the special issue itself. We begin by looking at the implications of the return to one party dominance in parliament for federalism; the resurgence of a more unitary imagination of India and the critiques of such unitary ideas; and the nature of institutional change in this period. We then turn to the fiscal and economic dimensions of federal debates. We look in particular at the wider political economy of federalism, taking into account economic centralization and growing inter-state inequality—topics that are the subject of an interview conducted for this special issue.
17The primary reason why federalism has appeared to be under pressure—and why federalism itself has emerged as a faultline of political contestation—is the return of a one-party dominant system since 2014. The achievement of a parliamentary majority by the BJP in the 2014 Lok Sabha elections served as a bookend to twenty-five years of political regionalization in which no single party had been able to achieve a majority on its own. Although the BJP depended on its allies in the National Democratic Alliance (NDA) to retain a majority in the 2024 elections, it continues to serve as the dominant national pole around which party competition is organized across India.
18In India’s parliamentary federal democracy, a party with a parliamentary majority faces relatively weak checks on its ability to centralize political power. In the absence of a territorially organized upper house of parliament or stronger policy-making prerogatives for states, changes to the composition of power in parliament can have far-reaching implications for the practice of federalism (Tillin 2018). Just as the era of party system fragmentation and political regionalism between 1989–2014 saw political and economic power flow to the states, the period of one-party dominance since 2014 has seen a recentralization. Across a range of policy domains, there have been renewed efforts to make “one nation” policies that aim to reduce inter-state variation and strengthen a single national market and polity—from one nation, one tax (resulting in the passage of the Goods and Services Tax); one nation, one grid (an effort to create a single electricity grid); one nation, one ration card (national portability of ration cards for food subsidies) to one nation, one election (the proposal for simultaneous elections that remains on the table [Aiyar and Tillin 2020]).
- 4 See Narayanan et al. (2023) for an excellent history of the office of the governor, which makes cle (...)
19There have also been growing central incursions into the affairs of states, including via the politicization of the office of governor.4 Moreover, the personalization of political power and aggressive efforts by the central government to claim credit for all government policies under Prime Minister Narendra Modi has increased Centre-State conflict. Conflict has arisen from an erosion of institutional norms of restraint and reciprocity in Centre-State relations, but also as state-level strongmen (and women) have themselves responded to Modi’s populist strategies in kind.
20In addition to the nationalization of party system competition since 2014, it is also significant that the BJP party organization itself has become increasingly centralized. In the decades of its rise to power, the BJP had to accommodate itself to diverse regional political cultures to widen its geographical reach. Strong regional leaders, such as Shivraj Singh Chauhan in Madhya Pradesh and Raman Singh in Chhattisgarh, emerged and served as BJP Chief Ministers during the early 2000s while the party was out of power at the national level. Modi’s ascendancy has been associated with pronounced intra-party centralization within the BJP, in which regional political leaders have become dependent for their positions on central support, where regional stalwarts have been sidelined and state assembly elections fought by relying on the platform of the Prime Minister rather than a Chief Ministerial candidate.
- 5 For the idea of descriptive representation, see Hanna Pitkin (1967). In The Concept of Representati (...)
21The implications of centralization within the BJP have not been well studied, yet they have potentially important ramifications for descriptive representation5 in parliament. As the dominant party in the parliamentary system, the BJP’s internal party structure also influences the way in which different social groups are represented in politics at different levels. In their paper for this special issue, Dishil Shrimankar and Arvind Kumar, examine the implications of intra-party centralization within the BJP for the political representation of historically marginalized groups. As noted above, centralization and decentralization do not, in and of themselves, have a normative conflict or association with federalism. Nor do they have a unidirectional relationship with representation and equity. Centralization has been used both in the service of caste emancipation, and to uphold social hierarchies. Decentralization is often invoked as necessary for the protection of plural identities, even as it has been criticized for reinforcing local patterns of caste dominance via elite capture. Shrimankar and Kumar open up this discussion by investigating whether intra-party centralization within the BJP has improved the representation of lower caste and women candidates. They find that such centralization has not led to significantly greater representation of historically marginalized groups.
22Alongside the centralization of the polity and policymaking, the last decade has also witnessed a centralization of economic power. Indeed, arguably political and economic centralization have reinforced each other. What Harish Damodaran (2020) calls conglomerate capitalism has altered the state-capital relationship that prevailed before 2014. He argues that in most sectors, only two players, or at most three, control a combined market share greater than 50 %. This centralization has not only weakened small regional capital and entrepreneurship but also redefined state-level political and economic relations, centralizing both corruption and rent-seeking. As Adam Ziegfeld (2016) shows, regional parties thrive in contexts of national coalition governments, and so does regional capital—it has been pivotal in coalition-era politics. Without access to the Centre, it becomes harder for regional capital to influence policymaking in Delhi.
- 6 Electoral Bond is a financial instrument introduced in 2018 allowing individuals and corporations t (...)
23Political financing itself is also undergoing a transformation. The BJP does not need regional capital or its funds, having centralized political financing through big capital. Unlimited corporate donations via electoral bonds,6 with donor anonymity protected (until 2024), made this system appear “cleaner” than the fragmented, transactional state-capital relationships of the pre-2014 era. As Damodaran (2020) documents, a significant share of political financing once came from local entrepreneurs, contractors, builders, and miners, who typically supported regional parties in their respective states. The Centre now seeks to control these financial flows via electoral bonds, thereby cutting off funding to regional parties, including its own allies.
24Beyond party system change, the rise of the BJP as an ethno-nationalist party has been associated with a shift in ideas of federalism. In the era of political regionalization between 1989–2014, the BJP was forced to accommodate itself to multi-ethnic federalism—something that its forerunner, the Bharatiya Jana Sangh had opposed. The Rashtriya Swayemsevak Sangh (RSS), its parent organization, had critiqued the idea of federalism and even the creation of linguistic states in the 1950s and advocated that the Indian constitution be rewritten to create a unitary and centralized state (Chatterjee 2022). As the BJP sought to build regional bases in different parts of the country, often by supporting sub-state regional movements, the party adopted a more pragmatic approach to federalism (Tillin 2013). While BJP election manifestos have always included the commitment to abrogate Article 370 (which until 2019 governed Kashmir’s autonomous status in the constitution) as a core commitment, the more forthright opposition to India as a multi-ethnic federal system was diluted.
25Since 2014, as Kailash’s contribution to this special issue outlines, a more unitary idea of the Indian Union has again been in the ascendancy. Kailash interprets this change as resulting from a shift away from a constitutional value of civic nationalism, which federalism expressed institutionally by allowing a plurality of identities, beliefs and cultures to co-exist. The rise of Hindu nationalism—a form of ethnic nationalism which seeks to achieve the primacy of Hindu identity—has seen an attempt to reduce the demos to an “ethnos,” a move which poses a direct threat to India’s identity as a federal polity.
26However, the rise of unitarism also confronts well-organized regional political projects that seek to protect federalism or strengthen their “federal bargain” with the Centre. In her contribution to the special issue, Smitana Saikia considers the case of Nagaland in Northeast India. Nagaland is ruled by a coalition government with the BJP as a junior partner, but Saikia shows that the historical strength of the Naga regional movement (which resulted in the 1971 negotiation of an autonomy clause in the constitution under Article 371) means that the state has not simply fallen in behind a unitarist or ethno-nationalist reimagining of Indian federalism. Saikia shows that Nagaland has been able to retain relative autonomy and defy centralization due to the strong constitutional safeguards for autonomy under Article 371, the relatively weak dependence of BJP politicians in Nagaland on the national BJP organization (unlike in other BJP-governed states) and the need of the BJP to accommodate itself to a predominantly Christian State. These factors have compelled the BJP in Nagaland to act in a non-unitarist way, tolerating policy-based incongruence with national policies and strategically altering its views on key ideological tenets of Hindu nationalism to fit the local context.
27Yet asymmetrical arrangements have not been straightforward to negotiate and maintain in the face of majoritarian nationalism. In his book review of Chitralekha Zutschi’s new biography of the Kashmiri nationalist leader Sheikh Abdullah, Rouf Dar reminds us that Kashmir’s leaders have long been caught in contradictory positions as they have fought to negotiate autonomy while recognizing the demands of Indian nationalism. Dar argues that it is important to recognize the sovereign authority that Kashmir’s leaders intended to maintain while forging a relationship with the Indian Union after Independence. While the abrogation of Article 370 in 2019 was an abrupt break, Sheikh Abdullah’s biographical story underlines that the challenges of accommodating Kashmiri nationalism with or within Indian nationalism have been evident for much longer.
28Together these contributions to the special issue demonstrate that ideas about federalism remain actively contested in India today, just as they have been historically, even within national and regional units of the dominant party. While many regional parties resist the centralizing impulse of national parties, their approaches differ and can be classified into two distinct ideas of federalism from a regional perspective. The first envisions empowering federal institutions so that states have greater autonomy in policymaking and can act as a countervailing force in the polity against the unitary tendencies of national parties. The other is to rethink the idea of India itself. The federal idea in Tamil history, for instance, seeks reconstitution of India itself (Krishnan et al. 2022). The federal idea in this reading is not merely tied to state autonomy in policymaking at the state level or by virtue of participation in national coalition governments. The making of India, for Tamils, is understood as part of a shared cultural history rather than a continuation of a singular civilizational past or as an empty container to be filled by an emerging political community. Hence, beyond the constitutional idea of federalism, these diverse imaginaries of India serve as an internal countervailing shield, drawn from different regional cultural histories, against homogenizing or centralized nationalist projects.
29The sociologist William S. Livingston (1952:90) wrote in the 1950s that federalism is the outcome of a compromise between the demands of subnational communities to protect and recognize their distinctiveness and the counter-demand for greater unity or integration:
These two demands or forces—the one impelling towards autonomy and independence for the component units, the other impelling towards centralisation and the suppression of diversity—meet each other head on; the result of their conflict is the federal system.
30The tensions that we see in India today entail the continual working out of the contours of federalism—as idea and set of institutions.
31Moving beyond political and ideational change, the special issue then considers elements of institutional change. Looking forward, the most existential challenge to federalism may come from delimitation or the reallocation of parliamentary seats across states of the Indian Union which is due to take place after the expiry of an existing constitutional amendment in 2026 and the conduct of a national census. This would be the first time that the allocation of parliamentary seats across states will have been revised since the 1971 census. If such a revision is carried out on a purely population-based formula, it would enhance the majoritarian nature of democracy by increasing what Stepan (1999) described as the “demos enabling” (or majority enabling) character of federalism. It would do so by reducing the parliamentary voice of southern and other states that have seen lower population growth than northern states. This would reduce the ability of relatively less populous southern states to influence central government decision-making. Delimitation would reverse a de facto compromise over the regional distribution of political voice which—while not designed to protect a federal principle—has become an important informal institutional dimension of federalism since the original 1976 constitutional amendment which froze the allocation of parliamentary seats across states.
32In political terms, while delimitation holds out the potential promise of taking India closer towards “one person one vote” by addressing the under-representation of citizens in northern states, it also threatens to blow open a much bigger debate about the nature of India’s federal settlement. This debate includes the moral contract of redistribution between richer southern states and poorer northern ones, a subject that we reflect on below and in the interview with Kalaiyarasan A. and Rathin Roy in this special issue.
33Another field in which there have been substantial changes to the institutional design of federalism is with regards to constitutional “asymmetry”—provisions which grant differential levels of autonomy to different states or union territories in recognition of their distinct needs or circumstances. The biggest overt change has been to the status of Jammu and Kashmir as a result of the abrogation of Article 370 in 2019, and the bifurcation of J&K from one state into two union territories. While the BJP has promised to restore statehood to Jammu and Kashmir, this has not yet happened. In their contribution to this special issue, Balveer Arora and Khan Kham Suan Hausing consider the status of other important examples of asymmetry: the cases of the National Capital Territory of Delhi, Manipur and Nagaland. In focusing on these diverse cases, the authors explore the reality of cascading forms of state authority that involve not only Centre-State, but also Centre-State–sub-State relations, and result in often contradictory outcomes in terms of conflict or accommodation of regional demands and identities. They argue that the frictions involved in asymmetrical arrangements at once reveal their vulnerability to the pressures of popular politics at the national level, as well as an essential means by which Indian federalism has adapted—and continues to adapt—to the demands and needs of territorially mobilized groups in a diverse polity.
34The social, economic, geographical and demographic diversity of India means that federalism is not just a question of institutional design, but one that is shaped in practice by the lived experience of everyday negotiations between citizens and the state. Looking at a different policy field—that of public health—Fabien Provost’s book review of a new volume edited by Balveer Arora and Mohan Rao Public Health and Federalism in India: Dissonant Discourses urges scholars to complement institutional analyses of federalism with ethnographic studies which seek to understand the everyday negotiations—in this case within medical bureaucracies by patients, medical staff and bureaucrats—where federalism is brought to life. The tension between diversity and efforts to achieve equity is an animating tension in all federal democracies. How the diversity-equity trade-off is resolved involves questions of institutional design as well as everyday negotiation.
35The changes outlined in the sections above—and in particular the pending delimitation exercise which would reallocate parliamentary seats, and therefore political voice among states according to the population changes that have taken place since 1971—have provided the catalyst for a much wider debate about the nature of the moral bargain that underpins India’s current model of horizontal fiscal redistribution between smaller, richer (currently opposition-ruled) states and poorer, more populous northern (currently BJP-ruled) states. This is a pressing debate in the context of substantial regional inequality that has been growing since economic liberalization.
- 7 Freight Equalization Policy—a mechanism of subsidized railway freight charges for transporting raw (...)
36Until the 1990s, the Union government planned economic activity and deployed resources for investment; the main instruments were choosing where central public-sector projects would be located and formulating policy for licensing and for freight equalization.7 These interventions—particularly, public sector investment—contributed to reducing disparities in regional income until the early 1980s (Gupta 1973). In the early 1990s, the Union government made market-oriented reforms, changed the industrial policy regime and devolved the responsibility of resource mobilization to state governments (Kennedy 2014). Private capital became the main source of investment, and the union government encouraged state governments to offer incentives to potential investors. That set the trend of divergence, because states endowed with better institutions, infrastructure and state capacity were better able to take advantage of the opportunities offered by liberalization and achieve better economic growth. Regional income inequality within India has therefore widened significantly.
Figure 1: The Ratio of Gujarat’s Per Capita Income to Bihar
Source: Compiled and Estimated from India Time Series (ITS) Database, Economic & Political Weekly Research Foundation (EPWRF)
37Inter-state disparities in per capita gross state domestic product (GSDP) as measured by the coefficient of variation doubled between the 1980s and 2020. The ratio of per capita income of Gujarat to Bihar rose from 2.1 in 1980 to 2.2 in 1990, 2.5 in 2000, 3.7 in 2010 and 4.9 in 2020 (see figure 1). The ratio of the per capita income of Tamil Nadu to Uttar Pradesh was 3.1 in 2020—up from 1.2 in 1980s, 1.4 in 1990, 2.1 in 2000 and 2.8 in 2010. Today, on average, a person in Gujarat earns almost 6 times what a counterpart in Bihar earns, and one in Tamil Nadu earns 3 times that of a fellow citizen in Uttar Pradesh.
38Finance Commission transfers have not been able to redress this growing income inequality. While the per capita income gap between Gujarat and Bihar is sixfold, the per capita transfer to Bihar is only about 1.5 times that of Gujarat. In 2019–20, per capita transfers (tax and grants) amount to ₹6727 in Tamil Nadu, ₹5906 in Gujarat, ₹9147 in Bihar, and ₹9961 in Uttar Pradesh. In other words, given the size of the poorer States, the absolute transfers may appear much higher; however, when translated into per capita terms, they hardly differ from those to the richer States. Given the extent of regional inequality, the quantum of transfer is wholly inadequate: the union government would need to transfer five times the amount per capita that it transfers to the richest state to fully offset the revenue shortfall (Rao 2017). These transfers may, at best, partially cover the cost of delivering public services—let alone address any structural inequality.
39On the other hand, Bihar, Uttar Pradesh, and Madhya Pradesh continue to depend heavily on these central transfers. Together, tax devolution and grants-in-aid constitute 75 % of Bihar’s revenue, 54 % for Uttar Pradesh, and 56 % for Madhya Pradesh. In contrast, the corresponding figures are significantly lower for Tamil Nadu (32 %), Karnataka (28 %), and Gujarat (28 %) (see figure 2). While these transfers are relatively small in per capita terms for poorer States with large populations, the absolute size of transfers is substantial, and the day-to-day fiscal functioning of these states still relies significantly on central support.
Figure 2: Share of Devolution (Tax + Grants) in States’ own revenue for 2023–24 (%)
State names: MN (Manipur), NL (Nagaland), AR (Arunachal Pradesh), Mizoram (MZ), TR (Tripura), MG (Meghalaya) BR (Bihar), SK (Sikkim), AS (Assam), JK (Jammu and Kashmir), HP (Himachal Pradesh), UK (Uttarakhand), WB (West Bengal), Madhya Pradesh (MP), JH (Jharkhand), Uttar Pradesh (UP) CG (Chhattisgarh), AP (Andhra Pradesh), PB (Punjab), Rajasthan (RJ), OD (Odisha), KL (Kerala), GA (Goa), TN (Tamil Nadu), TS (Telangana), GJ (Gujarat), KA (Karnataka) and HR (Haryana).
Source: Compiled and Estimated from India Time Series (ITS) Database, Economic & Political Weekly Research Foundation (EPWRF) and PRS Legislative Research.
40Addressing this rising inequality has acquired significance because of the need to maintain the fiscal compact. Regional inequality and the fiscal dependency of poorer states reflect differences in infrastructure and institutions which in turn are dependent on fiscal resources. These states are thus locked in a vicious cycle. The quality of institutions is poor. For instance, a recent report by the Comptroller and Auditor General (CAG) shows that Bihar failed to submit utilization certificates (UCs) for a staggering ₹70,000 crore (Bhelari 2025). As Ahluwalia (2000) argued long ago, it is not the quantum of transfers a state receives, but its capacity to spend effectively and the quality of its governance that determine welfare outcomes.
41More contentious still is the sustainability of these fiscal transfers. Some degree of redistribution is inevitable in large federations and India is no exception, with richer states subsidizing poorer ones. But it is generally rare for poorer regions to also constitute the majority of the population, with a minority of richer states subsidizing the majority of poorer ones.
42There is also another source of resentment emerging from the fiscal constraints faced by prosperous states, as these transfers limit their ability to invest in their own infrastructure and social policies. Furthermore, the prospect of delimitation, which could challenge existing patterns of representation, threatens the legitimacy of the model of horizontal redistribution. While the polity today is shaped by centripetal forces arising from the dominance of a single political party, growing regional economic divergence reveals the centrifugal forces at play which are further widening inequality among states.
43As we explore in the interview with Kalaiyarasan A. and Rathin Roy in this special issue, it is important that these debates are informed by a wider understanding of the factors that have contributed to the persistence of such high rates of regional inequality. The relative prosperity of southern and western states has been dependent on a perverse story of capital moving from poorer to richer states, thus northern capital has contributed to the development of the faster growing regions of the country. Alongside this, there is a pattern of labor migration from poorer to richer states. While this internal labor migration has provided cheap labor for industry in the south and west, it is also pulling down average wages in these states. As Kalaiyarasan sets out in our interview, the gap in average wages between states is much smaller than the gap in per capita income. In other words, the regional inequality which pushes labor to migrate from poorer to richer states is also producing growing interpersonal inequality in richer states. In our interview, Roy suggests that a rethinking of India’s federal bargain—in the context of both the pending delimitation exercise and the debates about the sustainability of the current model of horizontal fiscal redistribution—will thus have to reckon with the political economy of north-south inequality. This may require policy solutions that address both the need for jobs in northern states and for higher wages in southern states.
44After 2026 and the conclusion of the next census, India will formally begin the process of revisiting the “delimitation” of its parliamentary constituencies. In other words, it will reassess the number of parliamentary seats allocated to each state in the Lok Sabha (lower house or House of the People) which has been frozen for over fifty years. This seemingly technocratic exercise has the potential to open up a fundamental set of debates about the character and sustainability of the current model of Indian federalism. Delimitation may see the reallocation of parliamentary seats from less populous, opposition-ruled southern states to more populous BJP-ruled northern states. If this happens, central elements of India’s “federal bargain” will be thrown open to potentially destabilizing partisan conflict, notably the redistributive model of fiscal federalism through which taxes collected in richer southern and western states are redistributed to poorer northern states. Delimitation will take place against the backdrop of the wider trends of centralization over the last decade under the consolidation of the BJP’s dominant national party system. It will also occur in the context of the ascendancy of a civilizational discourse on the Hindu right which evinces a weak commitment to federalism as an element of the constitution’s “basic structure.” These multiple developments demonstrate that the coming years will witness a defining set of debates about the nature and future of Indian federalism. Federalism is likely to become a faultline for political mobilization and contestation over the very idea of India and the place within its Union of constituent states, representative of the country’s deep linguistic, religious and regional diversity.
45This special issue of SAMAJ interrogates the evolving ideas of federalism at play in India today and historically, by examining how India’s changing party politics and judicial system are reshaping federal practice and how the resultant debates are connected to the political economy of federalism. India is at a crossroads. How growing regional economic inequality, as well as India’s diverse regional political cultures, can be addressed and accommodated respectively within a federal system that is under immense strain are questions of crucial importance for its future. That these debates are coming to a head at a time when democracy itself is under great strain is no coincidence. The future of federalism is deeply intertwined with the future of democracy.