Chandrachud argued that India’s federal architecture must adapt as society’s demands become more complex, especially amid rapid shifts in governance and technology. He acknowledged that while collaborative governance is pivotal, imposing uniformity from the Centre could weaken federal structures. Such impositions risk sidelining state-specific concerns, especially in areas like education, healthcare, and rural development, where state needs vary widely. The focus, according to him, should ideally balance central oversight with local priorities, allowing states the flexibility to tailor policies to their unique needs.
This perspective resonates with concerns voiced by state representatives who view federalism as more than an administrative function. Centralization efforts, particularly in fiscal matters, have long been contentious. States argue that while national programs like GST promote economic unity, they often constrain states’ financial autonomy. This arrangement, they argue, creates dependency on central fund allocations, limiting state governments’ ability to direct resources based on local needs.
The centralization debate has grown sharper as tensions increase over the use of federal bodies in regulatory enforcement. State officials have raised concerns about federal institutions’ overreach, pointing to instances where agencies like the Enforcement Directorate and the Central Bureau of Investigation have taken actions viewed as impinging on state jurisdictions. States argue that this centralized authority can disrupt state governance, effectively challenging the constitutionally enshrined separation of powers. For instance, the deployment of federal agencies in state-specific issues is seen by some as blurring constitutional boundaries, a development with potential long-term implications for democratic balance.
Historical attempts to ensure collaborative governance, such as the Inter-State Council and the Finance Commission, highlight ongoing efforts to negotiate this balance. Yet, experts caution that these bodies sometimes lack effective teeth, operating more as consultative forums than actionable bodies with binding authority. Dr. M. Govinda Rao, a prominent economist, commented on how India’s cooperative federalism needs more robust dispute resolution mechanisms, particularly when financial arrangements lead to standoffs that halt development projects or obstruct administrative processes.
Emerging policy areas, like digital governance and climate action, are introducing new layers to the federal debate. Digital governance, for example, raises questions about data management, cybersecurity, and privacy, areas where national oversight is essential but where local application and adaptation are equally crucial. As technology proliferates, the need for state-specific policies is evident. However, a centralized approach to data and cybersecurity, Rao suggests, could marginalize state capabilities and overlook region-specific vulnerabilities.
Environmental and climate-related policy is another focal point where the call for state-specific autonomy has gained momentum. States like Maharashtra and Kerala, which are prone to floods and other climate impacts, advocate for more independence in managing resources and designing resilience programs. Federal oversight on issues such as environmental regulations is often criticized for failing to account for the geographic and climatic diversity across states, which makes uniform policies impractical or even counterproductive.
In addition to these governance complexities, fiscal federalism remains a persistent area of friction. The Goods and Services Tax (GST), a central initiative aimed at creating a unified tax structure, has faced criticism from some states for diminishing their revenue autonomy. States claim that while GST collections are shared, the imposition of GST has centralized a significant revenue source, creating challenges for states reliant on local taxes. Financial experts highlight that the revenue sharing formula can become a flashpoint, especially when economic downturns reduce GST collections, exacerbating financial stress at the state level. Several states have urged a re-evaluation of GST to improve the formula and protect state revenue streams, ensuring they are not disproportionately impacted by macroeconomic shifts.