In Focus by The Hindu Is federalism in retreat under single-party hegemony?
Nov 20, 2025
Yamini Aiyar, a senior policy analyst and former CEO of the Centre for Policy Research, joins A. Kalaiyarasan, an academic from the Madras Institute of Development Studies, to dissect the complexities of Indian federalism. They explore the impact of the GST on Centre-State relations and the centralization of power. Key topics include the historical shifts in federal dynamics post-1991, fiscal constraints on states, and the role of inter-state cooperation in addressing regional inequalities. The discussion also critiques the implications of one nation, one election on representation.
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Founders Chose A Centralized Federal Bargain
- India adopted a centralized federal design to manage nation-building and diversity while enabling state autonomy in implementation.
- The federal bargain combined a strong political center with fiscal dependence of states, creating long-term tensions as the economy decentralised post-1991.
GST As A Fragile Grand Bargain
- GST pooled fiscal sovereignty as a grand bargain, promising efficiency but requiring states to surrender some tax rights.
- Recent central actions around GST decisions have strained trust and appear to undercut the cooperative federal spirit of the Council.
Finance Commission Formula Drives Regional Grievances
- The Finance Commission allocates the divisible pool and uses formulae emphasizing poor-state redistribution via per-capita distance.
- Southern states claim they are penalized by per-capita and population weights as national averages diverge.