Narendra Modi’s Impact on Indian Federalism: A Long-Term Assessment

India’s federal structure, the division of power between the central government and the states, has faced several significant tests since 2014. This article examines the major flashpoints and how they’ve reshaped centre-state relations.

GST and the Loss of Independent Tax-Setting Power

The Goods and Services Tax, implemented in July 2017 and covered in more detail in our earlier article on its rollout, replaced individual state sales taxes and VAT systems with one unified national tax, requiring states to give up their independent power to set their own tax rates in exchange for a share of a nationally pooled tax system. Decisions under the new system are made by the GST Council, where the Centre holds one-third of the voting weight and states collectively hold two-thirds, with a three-quarters majority required to pass any decision, according to Business Standard’s explainer on the mechanism, a structure that requires broad consensus but has also drawn criticism, according to Scroll.in’s analysis, for offering states comparatively little independent room to manoeuvre on their own tax policy compared to the pre-GST system.

The GST Compensation Dispute

This tension became a major, public controversy between 2020 and 2022. Under the original GST Compensation Act, states were guaranteed 14 percent annual revenue growth for five years, with any shortfall covered by the Centre. When the COVID-19 pandemic caused cess collections to collapse, the central government initially argued it wasn’t legally obligated to cover the gap from its own consolidated funds, before eventually arranging roughly Rs 1.1 lakh crore in back-to-back loans to states in 2020, according to Business Standard’s reporting at the time. Compensation dues reportedly reached as high as Rs 2.06 lakh crore at one point, according to the same reporting, with Maharashtra owed the largest single amount, and states including Kerala, West Bengal, Punjab, Chhattisgarh, Delhi, and Tamil Nadu, all non-BJP-governed at the time, among the most vocal in protesting the delays.

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The Governor’s Office Flashpoints

Friction between opposition-ruled states and centrally appointed Governors over delayed assent to state-passed bills has produced two significant Supreme Court interventions. In a November 2023 ruling in a case brought by the Punjab government, the Supreme Court held that Governors cannot indefinitely withhold assent to bills and must return them for reconsideration rather than sit on them without action, with the bench remarking pointedly that the Punjab Governor was “playing with fire,” according to reporting by the Tribune India and the legal publication JURIST. A further, more sweeping ruling came in April 2025 in a case brought by Tamil Nadu, where the Supreme Court found Governor R.N. Ravi had acted illegally in withholding assent to ten re-passed bills, deemed those bills assented to directly under its own constitutional powers, and prescribed specific timelines Governors must follow going forward, according to the Supreme Court Observer’s detailed summary of the ruling. The central government subsequently sought a Presidential Reference questioning the Court’s authority to impose such deadlines, a request the Court had issued notice on as of mid-2025.

Article 370 and Jammu and Kashmir’s Reorganisation

The most direct reduction of a state’s autonomous status during this period came in August 2019, when the government revoked Jammu and Kashmir’s special constitutional status and reorganised it into two separate union territories, Jammu and Kashmir with its own legislature and Ladakh without one, converting what had been a full state into union territories, a change the Supreme Court upheld in a December 2023 ruling, according to the Supreme Court Observer’s summary of that judgment.

NITI Aayog and the Planning Commission

The government replaced the Planning Commission with NITI Aayog in January 2015, a shift the government has consistently framed as promoting “cooperative and competitive federalism” by giving states a more active advisory role. Critics have countered that NITI Aayog lacks the Planning Commission’s earlier power to directly allocate Five-Year Plan funding to individual states, making the newer body advisory in nature rather than fiscally empowered in the way its predecessor was.

The Delimitation Debate

A longer-term federalism concern involves the delimitation process, the periodic redrawing of parliamentary constituencies based on population data. Because seat allocations have been frozen based on 1971 population ratios, southern states including Tamil Nadu, Kerala, Andhra Pradesh, Telangana, and Karnataka, which have generally curbed their population growth more successfully than northern states, have expressed concern about losing relative parliamentary representation once delimitation eventually resumes, even as Home Minister Amit Shah has offered assurances that no state will lose existing seats in the process.

Bottom Line

Centre-state relations under Modi have been shaped by a genuinely mixed set of developments: GST’s move toward a unified but centrally coordinated tax system, a significant compensation dispute during the pandemic, two major Supreme Court rulings curbing Governors’ ability to delay state legislation indefinitely, the reduction of Jammu and Kashmir’s status from state to union territories, and an ongoing, unresolved debate over how future delimitation will affect southern states’ parliamentary representation.

FAQ

Abhyudaya Verma