The phrase cooperative federalism has been used by every Indian government of recent memory as a description of the relationship it seeks with states. It suggests a partnership between equals, a division of responsibilities suited to the diversity of a vast country, and a respect for the constitutional allocation of powers between the Union and the states.
The reality, assessed honestly, is something different. India's federal system has, over the past several decades, experienced a drift toward centralisation that the constitutional text does not fully sanction but that political incentives consistently produce. This drift is not new, but it has accelerated, and its consequences for the quality of governance across a country as diverse as India are significant.
Understanding why cooperative federalism matters, and why India's practice falls short of its rhetoric, requires looking at both the constitutional architecture and the political economy that shapes how that architecture actually functions.
The Constitutional Design and Its Tensions
India's constitution created, in Ambedkar's words, a Union of States rather than a federation. The distinction was deliberate. The framers, conscious of partition and the challenges of national integration, created a system that was federal in its distribution of powers but strong at the centre in moments of national emergency. The constitutional lists, the Union List, the State List and the Concurrent List, divided legislative powers. The Seventh Schedule is explicit about who has authority over what.
But the constitutional design contains tensions. The centre has financial dominance. States depend on central transfers for a significant fraction of their revenue. This fiscal dependence creates a leverage that the centre exercises through the design of centrally sponsored schemes, conditional grants, and the implicit pressure on states that rely on central cooperation for a wide range of functions.
The Emergency provisions, which allow the centre to assume direct control of state governments under specific conditions, have been used, sometimes abusively, to dismiss state governments that the ruling party at the centre found inconvenient. The Governor, constitutionally the head of state, is appointed by the centre and has sometimes functioned as a central political agent in states governed by opposition parties.
The result is a system in which the formal federal architecture coexists with significant mechanisms of central control, and where the balance between the two shifts with the political calculations of the government in power at the centre.
The Fiscal Asymmetry
The most consequential dimension of India's centralisation is fiscal. States are responsible for delivering most of the public services that citizens actually interact with: schools, hospitals, local roads, water supply, sanitation, police, agriculture support. But states raise less than half of the total tax revenue in the country.
The Finance Commission, a constitutional body, allocates a share of central taxes to states. This allocation has become more generous over time, and the Fourteenth Finance Commission's recommendation to increase states' share to 42 percent was a significant step. But the design of centrally sponsored schemes, which tie central funds to specific programmes with conditions set by the centre, limits states' flexibility to allocate resources according to their own development priorities.
A state that receives significant central funds through specific schemes must implement those schemes as designed by the centre, with the centre's beneficiary lists, timelines, monitoring systems and eligibility criteria, even if the state's own assessment of local needs would suggest different approaches. The uniformity of centrally designed programmes applied to the diverse conditions of India's states is a source of significant implementation inefficiency.
Tamil Nadu's public health system has different characteristics and priorities from Uttar Pradesh's. Kerala's education challenges are different from Rajasthan's. Meghalaya's governance context is different from Maharashtra's. A development strategy that imposes uniform national programmes across these diverse contexts will inevitably be suboptimal in many of them.
True cooperative federalism would allow states more discretion over how they spend their allocation, with accountability for outcomes rather than compliance with programme design. The move toward untied grants, which states can deploy according to their priorities, is a move in the right direction. It remains incomplete.
The Goods and Services Tax and Its Federalism Implications
The Goods and Services Tax, implemented in 2017, was described as a model of cooperative federalism. States and the centre negotiated together to create a unified national tax system that replaced the fragmented state-level taxes. The GST Council, on which all states are represented and most decisions require substantial consensus, was presented as an institution of genuine federal cooperation.
The GST is a genuine achievement of intergovernmental cooperation. But it also involved states surrendering their most important independent revenue instrument, the power to set sales tax rates, in exchange for a guaranteed share of GST revenue and central compensation for any shortfall in the early years of implementation.
The disputes that followed, over the calculation of compensation shortfalls, over the pace of compensation payments, over the distribution of revenue from specific goods, revealed the limits of the cooperative model. States found that they had less revenue autonomy than they expected and more dependence on central decisions than the cooperative rhetoric had suggested. States that lost revenue argued that the central government was interpreting the compensation formula in ways that disadvantaged them.
The GST experience illustrates a broader pattern. Intergovernmental negotiations in India often produce agreements that are presented as cooperative but that embed structural advantages for the centre, which has more fiscal firepower, more constitutional authority, and more political leverage.
The Governor Problem
The office of the Governor has become one of the most contested sites of Centre-State tension in recent years. Governors, who are appointed by the President on the advice of the central government, have in several states governed by opposition parties refused to give assent to legislation, delayed action on bills, withheld approval for cabinet decisions and acted in ways that appear to serve the political interests of the central government rather than the constitutional functions of the office.
The Supreme Court has had to intervene repeatedly to clarify the limits of gubernatorial discretion and to instruct specific Governors to act on pending matters. This is not how constitutional federalism should function. The fact that the judiciary has had to step in repeatedly reflects a political environment in which the Governor's office is being used as an instrument of competitive politics rather than as a constitutional position.
The solution, recommended by various commissions over several decades, is to rethink either the appointment process for Governors, perhaps involving state governments in the selection, or the scope of gubernatorial discretion, which is currently so broad that it can be used for political interference without obvious constitutional remedy.
This reform has not been made because the party in power at the centre at any given time has a direct interest in maintaining the current arrangement, since it provides leverage over states. The reform will likely only come when a government faces from opposition what it has previously applied in power.
What Genuine Cooperative Federalism Requires
The argument for genuine cooperative federalism is not merely procedural or constitutional. It is developmental.
India is too large and too diverse for uniform national solutions to work well across all states and all contexts. A policy that works in Kerala may be inappropriate in Bihar. An approach that suits the dense urbanisation of Maharashtra may not suit the dispersed rural population of Odisha. The best governance arrangements for Ladakh may be very different from the best arrangements for Puducherry.
This diversity requires a federal system that allows genuine experimentation, that lets states learn from each other, that permits policies to be adapted to local contexts, and that holds state governments accountable to their own citizens rather than primarily to the requirements of central schemes.
India has examples of this working. States that have built genuine governance capacity, that have developed their own approaches to healthcare, education, agriculture or urban management, have often outperformed states that have depended primarily on centrally designed programmes. Kerala's health outcomes. Tamil Nadu's mid-day meal programme, which started as a state initiative and became a national model. Delhi's mohalla clinic model. Telangana's agricultural data systems. These are state-level innovations that emerged from local context and local political commitment.
A federal system that nurtures this kind of state-level innovation, by giving states fiscal space, by not insisting on uniform national approaches, and by creating genuine intergovernmental platforms where states can learn from each other, would produce better development outcomes than one that tries to design optimal solutions at the national level.
The Opposition State Question
India's federalism is complicated by the reality that political competition between the centre and states governed by opposition parties often compromises functional relationships. When the centre and a state are governed by different parties, the relationship can become adversarial rather than cooperative. Central funds may be delayed or conditioned in ways that disadvantage the state. Central investigations and enforcement agencies may be used in ways that opposition state governments regard as politically motivated.
This is not unique to any particular government. It is a recurring pattern across different ruling parties at the centre and different opposition-governed states. The institutionalisation of intergovernmental conflict along partisan lines is one of the most damaging features of India's federal practice.
Cooperative federalism requires that the institutional relationships between the centre and states function in ways that are not primarily driven by political calculations about partisan advantage. This is difficult in any democracy. In India's current political environment, it is especially challenging.
The India That Genuine Federalism Would Produce
India aspires to be a country that reaches its full potential as one of the world's great economies and democracies. Reaching that potential requires governance that works for 1.4 billion people across an astonishing diversity of contexts.
No single government in New Delhi, however capable, can design optimal policies for the forests of Arunachal Pradesh, the fishing communities of coastal Andhra, the urban poor of Mumbai, the tribal communities of Jharkhand and the industrial workers of Gujarat simultaneously. The information is too diverse, the contexts too varied, the tradeoffs too local for centralised design to be optimal everywhere.
What a genuine federal system can do is create the framework within which state and local governments, closer to the ground and more responsive to local conditions, can develop, implement, adapt and improve their own governance. It can create horizontal learning through the exchange of experiences between states. It can hold all levels of government accountable to citizens rather than to higher levels of government.
This is the federalism India's constitution gestures toward. It is the federalism that India's development requires. The gap between that aspiration and the current reality of competitive centralisation is one of the country's significant governance deficits.
Closing it requires more than rhetoric about cooperative federalism. It requires the centre to genuinely share power, fiscal space and policy discretion with states, to resist the temptation to use central authority for competitive advantage, and to build the intergovernmental institutions that make cooperation real rather than performative.
That is a significant ask of any central government. But it is what India's Constitution envisaged, what India's diversity demands, and what India's development requires.