India: From Political Federalism and Fiscal Centralization to Greater Subnational Autonomy

Abstract

The adoption of a federal system in independent India was essentially a foregone conclusion. The Government of India Act of 1935 created a decentralized system of governance for the units of colonial India that were directly ruled, and the incorporation of the indirectly controlled Princely States would have been much more difficult without the expectation that subnational units would have some political independence. But India’s heterogeneous society and political federalism has obscured the extent to which taxing and spending decisions were controlled by the central government, especially during the nearly four decades of majority Congress rule, and the integrated judicial system adopted at independence also reflects this centralizing tendency. In the last two decades, the adoption of market-friendly economic reforms have opened the door for greater state autonomy in economic decision making, and the shift from majority to coalition governments at the Center have heightened these opportunities. The Supreme Court’s influence has continued to be strong during this transition, but the backlog of cases at every level of the judiciary has led to experiments with alternative systems of dispute resolution, especially at the local levels and in the area of personal law.