India’s extraordinary journey as the world’s most vibrant democracy has been anchored in two foundational principles enshrined in our Constitution: democracy and federalism. Democracy has given citizens the power to express, participate, and hold institutions accountable. Federalism, on the other hand, has enabled governance to be responsive to India’s immense diversity, linguistic, cultural, social, and economic, spanning 28 states and 8 union territories.
The framers of our Constitution, with remarkable foresight, designed a model that was neither rigidly federal nor entirely unitary. Instead, they created a “Union of States” where powers are shared but unity is preserved. This model has enabled India to manage vast diversity while ensuring political stability, economic progress and national integrity.
As India looks towards Viksit Bharat @2047, the centenary of independence, the Union Government has rightly emphasized that this journey must be collaborative, inclusive, and future-oriented. The vision of a developed India, articulated by the Hon’ble Prime Minister and detailed through consultations led by NITI Aayog, calls for a renewed compact between the Centre and the States. The Union Government has consistently emphasized that true national development cannot be achieved without the transformation and empowerment of every state, every district and every citizen.
The Government of India has delineated an ambitious vision for Viksit Bharat @2047, a developed nation characterized by economic prosperity, social inclusivity, environmental sustainability, and global eminence. The objectives are multifaceted and aspirational, drawing from extensive consultations involving NITI Aayog, state governments and civil society. Key targets include:
These goals align with the Sustainable Development Goals (SDGs) and aim to position India as a Vishwa Guru (global leader) by 2047. Although national policy directives are pivotal, their execution is predominantly devolved to the states. States account for more than 60% of public expenditure and are entrusted with the delivery of essential services, including education, health, infrastructure, skill development, agriculture, and urban administration. In essence, India’s ascent to developed status is inextricably linked to the transformation of each state into a robust engine of growth. The nation’s development is coterminous with that of its constituent states, as evidenced by varying growth trajectories: high-performing states contribute disproportionately to national GDP, while laggards require accelerated support.
The vision of a developed India, articulated by the Hon’ble PM and detailed through consultations led by NITI Aayog, calls for a renewed compact between the Centre and the States.
India’s federal framework is delineated by its quasi-federal Constitution, which establishes a Union of States with a predominant Centre to ensure national integrity amid diversity. The framers, influenced by models like Canada and Australia, opted for a flexible federalism that allows for centralized interventions in emergencies. Over successive decades, the praxis of federalism has undergone evolution through structural reforms and political transformations:
The replacement of the Planning Commission with NITI Aayog in 2015 was expressly intended to advance cooperative federalism, shifting from a top-down to a collaborative approach. Recent developments, such as the 2024-25 Union Budget’s emphasis on state-specific incentives and the push for ‘One Nation, One Election’ in 2025, further illustrate this evolution. These institutional evolutions signify the maturation of India’s federal democracy. Nevertheless, as emergent challenges ranging from climate adaptation to digital governance proliferate, the apparatuses for federal coordination and confidence-building must correspondingly adapt.
Schemes like PMJAY and PMAY have delivered significant national-level outcomes, but future improvements can include providing states greater room. This refinement will help align national objectives with regional priorities
Notwithstanding advancements, India’s federal system confronts enduring structural and operational impediments. These necessitate systematic redress to catalyse the subsequent phase of national metamorphosis, particularly in light of contemporary dynamics like coalition politics post-2024 elections.
India’s federal architecture entrusts states with the bulk of social sector responsibilities, while the Union Government retains key taxation instruments like income tax, corporate tax and customs duties. Recognising this structural design, the Centre has consistently sought to strengthen state finances through higher tax devolution, Finance Commission transfers and predictable support via centrally sponsored schemes (CSS). Even under GST, which represents a historic milestone of cooperative federalism, the Union has repeatedly demonstrated its commitment by ensuring compensation mechanisms, stepping in during periods of stress (such as post-pandemic shortfalls) and working with states to improve buoyancy. The 2024-25 Economic Survey underscores that while states’ share in overall expenditure remains high, Union-state coordination in fiscal planning is essential to reduce borrowing pressures and sustain development momentum.
Significant differences in per capita income and social outcomes continue across states, reflecting India’s diversity and developmental journey. For example, Bihar’s per capita NSDP for 2023-24 is estimated at `70,000, compared to Maharashtra’s `354,000 and Goa’s `674,000. Yet, the Union has actively supported bridging these gaps through special category allocations, aspirational district programmes and targeted infrastructure initiatives that prioritise lagging regions. The role of Finance Commission grants, GST sharing and sectoral missions has been critical in enabling less-developed states to converge with the national average. Going forward, Union and states together can deepen these equalisation mechanisms to ensure balanced growth, while encouraging states to harness their own comparative advantages.
CSS remain the most visible manifestations of Centre-State cooperation. While implementation has sometimes been challenged by rigidities or compliance burdens, the Union Government has already initiated reforms, such as consolidation of schemes in the 2025 Budget to reduce fragmentation and increase flexibility. Schemes like PMJAY (health) and PMAY (housing) have delivered significant national-level outcomes, but future improvements can include providing states greater room for contextual adaptation. These refinements will help align national objectives with regional priorities, ensuring more efficient delivery of benefits to citizens.
The GST Council has emerged as a global exemplar of cooperative decision-making, ensuring all states have an equal voice. Building on this success, similar institutional platforms can be further strengthened in other domains. The Inter-State Council, for instance, has significant potential to serve as a proactive forum for policy coordination and dialogue.
The Union has signalled openness to revitalising such bodies, ensuring fiscal and governance issues are resolved through structured consultation. By fostering regular, empowered forums for dialogue, India can further enhance trust and efficiency in Centre-State relations.
Strengthening consultative mechanisms, ensuring transparency in fiscal transfers and maintaining impartiality in institutional processes will continue to bolster trust and national unity
Political differences between Union and state governments are inevitable in a vibrant democracy. Yet the constitutional vision of federalism anchored by the Union’s consistent support to all states irrespective of political complexion has remained a guiding principle. Initiatives like “double-engine growth” emphasise the benefits of alignment, but the Union has also extended full cooperation to opposition-led states in times of crisis, from disaster relief to pandemic management.
As India enters an era of coalition politics and regional assertiveness, it is imperative to nurture cooperative federalism as a shared ethos. Strengthening consultative mechanisms, ensuring transparency in fiscal transfers and maintaining impartiality in institutional processes will continue to bolster trust and national unity.
India’s rise towards Viksit Bharat@2047 rests on a robust Centre–State partnership, anchored in the Constitution and enriched by international best practices. The Union Government has consistently demonstrated leadership in steering national development, from GST’s cooperative architecture to mission-mode programmes in infrastructure, health and digital governance. Building on these, the renewed federal compact must rest on the following guiding principles:
While governance should be delivered at the closest effective level, the Union provides the overarching framework ensuring equity, efficiency and standards across the country. States and local bodies can adapt interventions such as tailoring agricultural practices to local ecologies within the broad, nationally defined policy contours that safeguard unity of purpose.
Going forward, predictable, transparent transfers can be further complemented by long-term Union commitments that enable states to design context-specific policies, while remaining aligned with the national development roadmap
The Union has already institutionalised rule-based transfers through Finance Commissions, GST compensation and centrally sponsored schemes. Going forward, predictable, transparent transfers can be further complemented by long-term Union commitments that enable states to design context-specific policies, while remaining aligned with the national development roadmap.
The Union has consistently shifted the focus of governance from outlays to outcomes. Extending this approach, greater flexibility for states can be paired with performance-linked Union allocations tied to SDGs, climate goals and flagship missions. This dual emphasis on autonomy and accountability strengthens cooperative federalism without diluting national priorities.
The Union’s initiatives like Digital India and India Stack already provide the backbone for data-driven governance. Extending this to a federal scale through shared dashboards, federated databases, and joint monitoring systems will allow real-time collaboration. Union stewardship ensures interoperability, security, and trust across states.
Public finance reforms are pivotal for state empowerment, particularly amid rising debt levels post-COVID.
Extend conditional borrowing thresholds (e.g., 0.5% of GSDP) contingent upon reform benchmarks in sectors such as power, agricultural marketing and urban governance. The 2025 budget’s incentives for mining and financial sectors provide a template.
Augment transparency and scrutiny of off-budget liabilities and guarantees. Develop preemptive indicators for state indebtedness vulnerabilities, integrating RBI oversight.
Bolster state proficiencies in outcome-oriented budgeting; digital treasury operations; and real-time expenditure monitoring. Collaborate with the Reserve Bank of India (RBI), Comptroller and Auditor General (CAG) and state finance commissions for capacity augmentation, including training programs.
Cultivate inter-state knowledge ecosystems through innovation indices; sectoral performance analytics; and peer collaboration networks. Promote state-initiated innovations in universal basic services; sustainable transition frameworks; and digital governance and citizen engagement mechanisms.
India’s odyssey toward 2047 must be collaborative. The Centre should not unilaterally orchestrate the agenda; states must serve as equitable collaborators in conceptualisation, implementation
Inherent in a pluralistic democracy are political variances between the Centre and states. Nonetheless, federalism must be consecrated as a constitutional precept, rather than subordinated to political expediency. Cooperative governance demands political sagacity; administrative impartiality; and institutional protections.
The 2024 elections’ coalition outcomes have revitalised federal discourse, emphasising consensus over centralisation. Challenges like delimitation and census delays in 2025 highlight the need for apolitical reforms.
India’s odyssey toward 2047 must be collaborative, multilevel and institutionally resilient. The Centre neither can nor should unilaterally orchestrate the agenda; states must serve as equitable collaborators in conceptualisation, implementation and oversight. The ensuing iteration of federalism must transition from compliance-centric to outcome-centric modalities, from hierarchical control to mutual co-creation and from vertical subordination to horizontal interdependence.
By addressing fiscal imbalances, enhancing institutions and fostering trust, India can realise Viksit Bharat – a beacon of inclusive development. This renewed compact will not only propel economic targets but also uphold democratic values, ensuring prosperity for all citizens by 2047.
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