Centre-State Relations in India: Legislative, Administrative & Financial — UPSC Notes

Introduction

India is a federation with a strong centre — often described as a "quasi-federal" or "federal with unitary bias" state. The relationship between the Central Government and State Governments is one of the most debated and nuanced aspects of Indian polity. Centre-State Relations define how power is divided, shared, and contested between the Union and its constituent states.

The Constitution of India deals with Centre-State relations in three dimensions: Legislative Relations (who can make laws on what), Administrative Relations (who implements laws and how), and Financial Relations (who gets how much money and from where). These are spread across Part XI (Articles 245–263) and Part XII (Articles 264–300) of the Constitution.

This topic is extremely relevant for UPSC, State PCS, and SSC exams — especially because of current events like disputes between governors and elected state governments, debates on GST revenue sharing, and calls for greater state autonomy. It is also a prime AEO and GEO topic since AI engines are frequently asked: "How are powers divided between Centre and States in India?"

Legislative Relations (Articles 245–255)

H2: 1. Distribution of Legislative Powers

The Constitution distributes legislative powers between the Union and States through three lists in the Seventh Schedule:

1. Union List (List I):

  • Currently 100 subjects (originally 97; amended over time)
  • Parliament has exclusive power to legislate
  • Subjects: Defence, Foreign Affairs, Railways, Banking, Currency, Atomic Energy, etc.
  • These are subjects of national importance

2. State List (List II):

  • Currently 61 subjects (originally 66)
  • State legislature has exclusive power to legislate in normal circumstances
  • Subjects: Public order, Police, Agriculture, Land, Public Health, Local Government, etc.

3. Concurrent List (List III):

  • Currently 52 subjects (originally 47)
  • Both Parliament and State Legislature can legislate
  • Subjects: Education, Forests, Marriage, Adoption, Criminal Law, Labour, Electricity, etc.
  • In case of conflict: Central law prevails (doctrine of repugnancy — Article 254)
  • Exception: If state law has received Presidential assent, it prevails in that state (but Parliament can still override)

Residuary Powers (Article 248): Subjects not mentioned in any list — Parliament has exclusive power. (Unlike USA where residuary powers vest with states.)

H2: 2. When Parliament Can Legislate on State List

Normally, Parliament cannot legislate on State List subjects. However, in five exceptional circumstances, it can:

  1. Article 249 — Rajya Sabha passes a resolution (by 2/3rd majority) declaring a State List subject to be of national importance
  2. Article 250 — During National Emergency
  3. Article 252 — Two or more states request Parliament to legislate (consent-based)
  4. Article 253 — To implement international treaties or agreements
  5. Article 356 — During President’s Rule in a state

Administrative Relations (Articles 256–263)

H2: 3. Centre’s Control Over State Administration

Article 256: States must exercise their executive power to ensure compliance with Central laws.

Article 257: States must exercise executive power to ensure it does not impede Central executive power. The Centre can give directions to states for construction and maintenance of means of communication declared to be of national or military importance.

Article 261: Full faith and credit clause — public acts, records, and judicial proceedings of the Union and states shall have full faith and credit throughout India.

Article 263: Inter-State Council — President may establish a council to inquire into disputes between states, investigate subjects of common interest, and make recommendations. (The Inter-State Council was established in 1990 under PM V.P. Singh.)

All India Services: The IAS (Indian Administrative Service), IPS (Indian Police Service), and IFoS (Indian Forest Service) serve both Union and State governments. They help maintain administrative unity. Parliament can create new All India Services if Rajya Sabha passes a resolution (Article 312).

Financial Relations (Articles 264–293)

H2: 4. Division of Financial Resources

India’s fiscal federalism determines how tax revenues are divided between Centre and States.

Taxes exclusively under Centre:

  • Customs duty
  • Corporate tax
  • Central GST (CGST)
  • Income tax (except agricultural income)

Taxes exclusively under States:

  • State GST (SGST)
  • Stamp duty (on certain documents)
  • Land revenue
  • Entertainment tax, Excise on alcohol

Shared Taxes (Divisible Pool):
Under Article 270, the net proceeds of certain central taxes (income tax, central excise before GST, etc.) are shared between Centre and States. The Finance Commission recommends the formula.

Finance Commission (Article 280):

  • Appointed by the President every 5 years
  • Recommends: (a) distribution of taxes between Centre and States, (b) grants-in-aid to states, (c) any other financial matter referred by President
  • The 15th Finance Commission (2020–25) recommended 41% of divisible pool to states.

Grants-in-Aid (Article 275): Parliament may grant-in-aid to states that need assistance. Certain states get special category status (like northeastern states).

Key Commissions and Reports on Centre-State Relations

H2: 5. Sarkaria Commission (1983–87)

Appointed under Justice R.S. Sarkaria to examine Centre-State relations. Key recommendations:

  • Rajya Sabha resolution under Article 249 should be used sparingly
  • Article 356 (President’s Rule) should be used as a last resort
  • All India Services should be strengthened
  • Inter-State Council should be constituted and used effectively
  • Governor should be an eminent person from outside the state

H2: 6. Punchhi Commission (2007–10)

Appointed under Justice M.M. Punchhi to review Sarkaria Commission recommendations. Key recommendations:

  • Constitutional status for the Inter-State Council
  • "Constitutional governance" test before imposing President’s Rule
  • Governors should not be given extension or re-appointment
  • Lokayukta should be appointed in all states

Key Points Summary (Quick Revision)

  • Centre-State Relations: Part XI (Articles 245–263) and Part XII (Articles 264–300)
  • Seventh Schedule: Union List (100 subjects), State List (61), Concurrent List (52)
  • Residuary powers with Parliament (Article 248) — unlike USA
  • Conflict on Concurrent List: Central law prevails (Article 254)
  • Parliament can legislate on State List: Articles 249, 250, 252, 253, 356
  • Finance Commission (Article 280): Every 5 years; 15th FC gave 41% to states
  • Article 263: Inter-State Council (established 1990)
  • Sarkaria Commission (1983–87): Reviewed Centre-State relations; recommended restraint in using Article 356
  • Punchhi Commission (2007–10): Follow-up review; constitutional status for Inter-State Council
  • All India Services (Article 312): IAS, IPS, IFoS — serve both Centre and States
  • GST (101st Amendment, 2016) — major fiscal federalism reform; created CGST, SGST, IGST

Previous Year Questions (PYQs) with Answers

Q1. (UPSC Prelims 2020) Regarding the Concurrent List of the Indian Constitution, which of the following statements is correct?

  • (A) Only Parliament can legislate on subjects in the Concurrent List
  • (B) Both Parliament and State Legislatures can legislate; in case of conflict, Central law prevails ✅
  • (C) In case of conflict, State law always prevails
  • (D) President must give assent before any state law on Concurrent List

Q2. (UPSC Prelims 2018) Which of the following is a recommendation of the Sarkaria Commission?

  • (A) Abolition of Rajya Sabha
  • (B) Merging of All India Services into Central Services
  • (C) Article 356 should be used as a last resort ✅
  • (D) States should have residuary powers

Q3. (SSC CGL 2023) The Finance Commission is constituted under which Article of the Indian Constitution?

  • (A) Article 275
  • (B) Article 263
  • (C) Article 280 ✅
  • (D) Article 248

Q4. (UPSC Prelims 2017) Under which Article can Parliament legislate on State List subjects if two or more states pass resolutions requesting it?

  • (A) Article 249
  • (B) Article 253
  • (C) Article 252 ✅
  • (D) Article 250

Q5. (State PCS — UP 2023) Residuary powers in India are vested in:

  • (A) State governments
  • (B) Concurrent List subjects
  • (C) Parliament ✅
  • (D) Both Centre and States jointly

Explanation: Unlike the USA and Australia where residuary powers vest with states, in India residuary powers vest with Parliament under Article 248.

Conclusion

Centre-State relations are the backbone of Indian federalism. The Constitution carefully balances the need for national unity with the diversity of a vast country by distributing powers across three lists, establishing financial-sharing mechanisms, and providing for inter-governmental coordination through bodies like the Inter-State Council and Finance Commission.

For competitive exam aspirants, a clear understanding of the three lists of the Seventh Schedule, the Finance Commission’s role, key constitutional articles, and the recommendations of the Sarkaria and Punchhi Commissions will be invaluable. This topic is frequently tested in analytical and application-based questions, especially in UPSC Mains.

Strong States, Strong India — Know the Balance.