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Centre-State
Relations-
Legislative,
UPSC Polity Notes
Administrative
& Financial
Aspects &
Issues during
COVID- 19
Center-State Relations- Legislative, Administrative &
Financial Aspects & Issues during COVID- 19

About Centre-State Relations

• All the powers are divided into three parts: legislative, executive and financial between the
centre and the states but the system is integrated.
• Therefore, Centre-state relationship can also be studied in 3 Parts - Legislative relations,
administrative relations and financial relations.
• States have immense power to take decisions on various matters with the limitation that the
centre can put restrictions on these.
• On some matters, decisions are taken exclusively by the State which are listed under the state
list.
• Similarly, there is a union list in which the centre takes major decisions on the subjects included
in it.
• A separate list, called concurrent list, is present on which both centre and state can make
decisions.
• From the UPSC CSE point of view, it is important to know detailed information on this topic.
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Legislative relations
These are mentioned in articles 245 to 255 in part 11, which deals with legislative relations between
centre and states. Legislative relations are further divided into two parts - On the basis of territorial extent
and On the basis of Legislative subjects.

On the basis of territorial extent - Article 245

• Laws made by parliament are applicable to whole India and also on matters related to
extraterritorial legislation.
• Laws made by Parliament are not applicable in the following cases:- In five union territories
(Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli Daman and Diu and
Ladakh).
• Only the president can make regulations/ amend or repeal any act of parliament for them.
• Governor can direct that an act of Parliament does not apply to scheduled areas in that state.
• Governor of Assam may direct that a certain act of Parliament does not apply to a tribal area of
the state similarly the same power is enjoyed by the president with respect to Tribal areas and
Meghalaya Tripura and Mizoram.
• Laws made by the State are applicable to its own state only or territorial extension.

Know more about Schedules Of Indian Constitution here.

On the basis of Legislative subjects

There are 3 kind of lists provided in the seventh schedule in constitution:

• The union list includes approximately 98 subjects. Example - Defence, banking, atomic energy
etc. Only Parliament can make laws on these subjects.
• The state list includes approximately 61 subjects. Example - Politics, fisheries, police. Only the
state legislature has powers to make laws on these subjects.
• The concurrent list includes approximately 52 subjects. Example - population control, civil
procedure. Both Parliament and state can make laws on these subjects. In cases of disputes,
the laws made by the Parliament prevails.

Residual subjects

• Article 248 - Those subjects which are not included in any of the three lists are called residual
subjects and Parliament has power to legislate on these subjects.
• Article 200 - Governor can reserve a bill for assent of the president.
• Article 201 - President can give assent or or disapprove the bill reserved by the governor.

Centre can make laws on state list under 5 conditions

• Article 249 - If Rajya Sabha passes a resolution by 2/3rd of the members present and voting.
• Article 250 - If National Emergency prevails (result of 352 article).
• Article 252 - If two or more States request Parliament to make laws on subjects of state list.
• Article 253 - To fulfill the terms of international agreement or treaty.
• Article 356 - If president rule prevails in any state.

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Administrative Relations
These are mentioned in article 256 to 263 in part XI of the constitution; these can be studied in two parts
- On the basis of territorial extent and on the basis of subjects.

On the basis of territorial extent:

• Administrative power of centre or Union prevails on the whole of India or any State or UT.
• Administrative power of States prevails on its Territory or State only.

Also read: Child Marriage Restraint Act here

On the basis of subjects

• Laws on subjects listed in the union list will be executed by central officer Union officials.
• Laws on subjects listed in state list will be executed by States officers.
• Laws on subjects listed in concurrent lists will be executed by States officers.

Under Centre - State Administrative relation Centre can give directions to state/s for execution of:

• Article 257 (1) - not to make any hurdle in the way of Central execution power.
• Article 257 (2) - maintenance of structure of national importance and military importance.
• Article 257 (3) - protection of Railways.
• Article 250 (A) - regarding mother language.

Read about Fundamental Rights here.

If state is unable or doesn't follow these directions then - Article 365 states:

• It will be assumed that it is a failure of the constitutional system in that state and on this basis
the president can use power mentioned in article 356 and rule in that state.
• Under executive / administrative Centre-state relation by mutual understanding centre and state
can transfer their power with each other for administration in following ways:
o Governor can request centre for administration in state
o President can request the state for administration.

Financial relations
These are mentioned in article 268 to 293 in part XII of the constitution these can be studied under the
following heads-

Allocation of taxing powers between centre and state

• Parliament has power to levy taxes on subjects listed in union list (13 in number).
• State legislature has power to levy tax on subjects listed in the state list (18 In number).
• After the 101st amendment act of 2016, both Parliament and state legislature can make laws
governing goods and services tax.
• Residuary power of taxation is vested in Parliament (gift tax, wealth tax and expenditure tax).
• Restrictions on taxing powers of state.

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• State legislature can impose taxes on professions, trades, employment but not more than 2500
per annum.
• State legislature is prohibited from imposing the tax on supply of goods or services, when
supply takes place outside the state OR when supply takes place in the course of import or
export.
• State legislature can impose tax on consumption or sale of electricity but it cannot impose on
consumption or sale of electricity which is consumed by the centre or sold to the centre or
consumed in maintenance of railways.
• The state legislature can impose any water tax but that water should not be distributed or sold
by any authority established by Parliament.

Also read: Biosphere Reserves in India for UPSC here.

Distribution of tax revenues

• 80th Amendment Act of 2000, enacted to give effect to recommendation of tenth finance
commission, (out of total income obtained from certain Central taxes and duties 29% should go
to the state).
• The 101st amendment has introduced a new tax regime ( goods and services tax GST).
1. Taxes levied by Centre but collected and appropriated by the states:
o Bill of exchange, cheque, promissory note, insurance policies, shares, etc.
1. Taxes levied and collected by Centre but assigned to the states:
o Sale or purchase of goods in the course of inter state trade consignment of goods in the
course of interstate trade.
o Levy and collection of goods and services tax in the course of interstate trade.

Grant-in-aids to States

• Statutory grants - Under Article 275, the Parliament can make grants to states in need of
financial assistance. Example - grant for Welfare of scheduled tribes in a state.
• Discretionary grants - Under Article 282, the centre and state can make any grant for a public
purpose.

Borrowing by Centre and States

• The Central Government can borrow within the country or outside up to a certain limit fixed by
the parliament.
• The state government can borrow only within the country from the central government.

Also read: Mid day Meal Scheme for UPSC here

Punchhi Commission Recommendations

The commission gave recommendations for Centre state relations which include the following-

• There should be a broad agreement between centre and state on concurrent list laws.
• The centre should follow the principle of subsidiary.
• Selection of governors should be on the basis of their apolitical personality.
• The tenure for Governor should be fixed for 5 years.
• The impeachment process for the president should be extended to the Governor.
• The Governor should not be chancellor of the university.
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• There should be equal seats for all states in the Rajya Sabha.
• The zonal council should meet at least twice a year.
• All India services for health education and Judiciary should be created.

Federal issues accentuated during the Covid 19 Pandemic:

• Central government was the sole entity responsible for regulating the manufacture and
distribution of the vaccine and oxygen, it was the center's exclusive obligation to assure
adequate and wise distribution.
• However, numerous states are protesting about prejudice in vaccination distribution,
pharmaceutical supply, and oxygen availability, among other things.
• Furthermore, under the guise of loosening regulations, the new vaccination policy tries to shift
the burden to the states by requiring states to purchase vaccinations directly from
manufacturers and allowing for differential pricing.
• This would not only add to the financial constraints of already-strapped governments, but it may
also lead to inter-state violence.
• The Epidemic Diseases Act and the Disaster Management Act had been invoked by the
center, centralizing the powers to cope with the epidemic.
• State consultation, on the other hand, is a legislative requirement imposed on the centre by
these acts, and the Centre has issued binding COVID-19 instructions to the states.
• Covid-19 Arrives in Rural India: The first wave of Covid-19 saw a large migration of migrant
laborers back to their home states of Uttar Pradesh and Bihar.
• Now that these workers have been forced to return to their home states, there are fears that
Covid-19 will penetrate rural India.
• Furthermore, in the absence of a majority of the workforce, agricultural, industrial, and
construction operations would be difficult to sustain in the wake of the easing of limitations,
given that these workers are returning to their hometowns.
• The severe impacts of this catastrophe may have been avoided if both the federal and state
governments had learned from the previous wave.

Also read: Political Parties in India for UPSC here.

Early Phase of Centre-State Relations Trends (1950-67)

• This phase was totally dominated by the Centre, with the Party system serving as possibly the
most important intervening factor in the functioning of a federal political system.
• During this time, the Congress party controlled both at the center and in the states, thanks to
Nehru's charismatic leadership.
• As an internal matter, disagreements in center-state relations were resolved at the leadership
level.
• The Planning Commission and the National Development Council (NDC), both established by
executive resolutions, were the Centre's state supremacy vehicles.
• The Planning Commission was in charge of managing state-run social services such education,
medicine, health, agriculture, collaboration, social welfare, and industrial housing.
• The first phase of Indian Federalism was marked by central domination over the states, which
even relinquished some of their powers to the center.
• The States Reorganization Act established the Zonal Councils as advising institutions to
improve cooperative federalism in the establishment of standard policies in socioeconomic
concerns. They were, however, formed within the framework of a central dominance system
over the states.

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National Development Council-NDC:

• It is neither a constitutional body nor a statutory body as it was constituted by executive
resolution in 1952.
• The Prime Minister of India is its chairman and as its members all Union Ministers, Chief
Ministers of all States and Union Territories and Administrators of NITI Aayog are included.
• Its purpose Its aim
• Ensuring the cooperation of the states in the implementation of the plan
• To help strengthen and mobilize the nation's efforts and resources in support of the plan
• Promote common economic policies in all important areas and
• To ensure balanced and rapid development of all parts of the country and states.
• work | Functions
• To lay down guidelines for the formulation of a national plan including assessment of resources
for the plan
• To consider the National Plan prepared by NITI Aayog
• Estimate the resources required to implement the plan and suggest ways to manage them
• To consider important questions of social and economic policy affecting national development
• To review the working of the plan from time to time and recommend measures necessary to
achieve the goals and targets set out in the national plan and
• To recommend measures to achieve the goals and targets set out in the national plan.

NITI Aayog:
• NITI Aayog was formed on January 1, 2015.
• Its full form is "National Institution for Transforming India".
• It is the main policy-making body of the country, which is expected to accelerate the economic
development of the country. Its aim is to build a strong state which will help in building a
dynamic and strong nation.
• This helps India to emerge as a major economy of the world.
• There are two centers named "Team India Hub" and "Knowledge and Innovation Hub" in the
building of NITI Aayog.
• It is also known as the think tank of the government.
• NITI Aayog is based on 7 pillars of effective governance. which are the following:
• Pro-People: It fulfills the aspirations of the society as well as the individuals.
• Pro-Activity: To increase anticipation and response to citizen's needs.
• Participation: Ensuring the participation of citizens.
• Empowerment: Empowerment, especially women in all aspects.
• Inclusive of all: Inclusive of all people irrespective of caste, creed and gender.
• Equality: To provide equal opportunities to all especially the youth.
• Transparency: To make the government visible and accountable.

Structure:
• Chairman: Prime Minister
• Vice President: Appointed by the Prime Minister. Presently Dr. Rajeev Kumar is its Vice
President.
• Governing Council: consists of the Chief Ministers of all the states and the Lieutenant
Governors of the Union Territories.
• Regional Council: To address specific regional issues, consisting of the Chief Minister and the
Lieutenant Governor headed by the Prime Minister or his nominee.

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• Special Members: 2 members in ex officio capacity from premier research institutes on rotation
basis.
• Ex-officio Members: A maximum of four persons from the Union Council of Ministers to be
nominated by the Prime Minister.
• Chief Executive Officer (CEO): Appointed by the Prime Minister for a fixed term in the rank of
Secretary to the Government of India. Presently Mr. Amitabh Kant is working in this post.
• Special Invitees: Experts with specialized knowledge to be nominated by the Prime Minister.

The States Reorganization Act, 1956:

• The states of India were originally formed as a result of historical accidents and circumstances.
• After independence, there was a growing demand for the reorganization of states on a more
rational basis, not only in terms of the financial, economic and administrative management of
independent India, but also because of the increasing importance of regional languages.
• The States Reorganization Commission (SRC) was constituted for the first time in 1953 to look
into this problem and recommend the principles and broad guidelines on which states could be
reorganized. In the month of September 1955, the commission submitted its report.
• The commission was appointed by Prime Minister Jawaharlal Nehru. SRC is headed by S.
Fazal Ali and its two members M. Panikkar and H.N. Kunzru was there.
• The States Reorganization Act, 1956 was enacted by Parliament under Article 3 of the
Constitution of India, the Seventh Constitutional Amendment Act, 1956, to give effect to the plan
of reorganization that emerged from the consideration of the proposals contained in the report.
• The scheme of reorganization of the states was implemented by this act. Article 350A has been
added to this, which has been made to implement one of the important recommendations of the
States Reorganization Commission regarding safeguards for linguistic minorities in the states
after the reorganization.
• The new states formed as a result of the reorganization of the states in 1956 are Andhra
Pradesh, Bombay, Kerala, Madhya Pradesh, Madras, Mysore, Punjab and Rajasthan.

The SRA, 1956 also provides for the following:

• Amendments to the First and Fourth Schedule
• Provision of High Courts for new states
• zonal council
• delimitation of constituencies
• All India Services
• Services under State Public Service Commission

Second Phase of Centre-State Relations (1967-77)

• The country's federal dynamics were dramatically altered by the fourth general election, which
reduced the Congress party's overwhelming majority to a slender majority at the center while
losing over half of India's states to the opposition or coalitions.
• The nature of the relationship between the center and the states shifted dramatically as a result.
• This era was defined by the rise of state assertiveness and the center's response to such
pronouncements by demonstrating its effective strength.
• The Congress party attempted to restore political control through defections and other tactics,
including Article 356.
• For example, in Rajasthan, the Governor recommended establishing the president's rule to
prevent a coalition of opposition parties from forming a government.

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• Between 1967 and 1971, the Union-state conflict reached a pinnacle, with the government
refusing to accept non-Congress state governments' assertions of rights.
• Mrs. Gandhi took use of the Congress's power to help the center, and the contentious 42nd
Amendment to the Constitution helped the center at the expense of the states. The disastrous
Emergency of 1975-77 was the culmination of this centralized course.

Also check: Electoral Reforms in India here

Third Phase of Centre-State Relations Trends (1977-89)

• The Congress lost control at the center for the first time since independence in 1977, when the
Janata Party was elected.
• The Janata Party campaigned for economic and political decentralization.
• The government's first move, however, was to dissolve nine state governments led by the
Congress, arguing that they had lost the faith of the people, as indicated by their performance in
the 10th Lok Sabha elections.
• Article 357(A), which enabled the central government to deploy the army and paramilitary
forces to deal with any significant law and order issue in the states, was likewise repealed by
the 44th Amendment Act.
• In the 1980 midterm elections, Congress reclaimed power and ousted Janta party governments
in nine states, alleging the same spurious rationale as its predecessor.
• In a number of states, including Andhra Pradesh, Tamil Nadu, Karnataka, West Bengal, and
others, regional parties desiring increased autonomy formed governments.
• The four southern states announced the formation of a regional council to support the push for
further autonomy.
• As a result of all of this, the Sarkaria Commission was formed to explore the relationship
between the center and the states.
• The Rajiv Gandhi government attempted to build alliances with regional parties due to political
imperatives, as evidenced by the Rajiv-Longwal pact and the Assam accord.
• He also tried to consolidate power by summoning a meeting of District Magistrates to deal with
them directly, bypassing state administrations.
• When he launched the Panchayati Raj Bill and the Jawahar Rojgar Yojana, he did the same
thing.

Final Phase of Centre-State Relations (1989-onwards)

• The general election of 1989 marked a watershed moment in Indian politics, ushering in a new
era of multiparty politics and setting the country on a course toward greater federalism.
• The defeat of the Congress party signaled the end of one-party control at the center and the
beginning of a coalition government.
• Regional parties grew in importance within the federal cabinet and began to wield greater
influence at the national level.
• This movement toward increasing federalism can be divided into two categories: political and
economic federalism.

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Also check related Polity articles in the table below:

National Investigation Agency Central vigilance Commission

Indian Foreign Policy National Human Rights Commission

Central Information Commission Major Amendment of the constitution

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