The Indian Federal Fiscal Model:
A Case of Increasing Centralisation
The Formal Scheme
Under the Indian federal system—some dispute that the Indian system was ever fully federal and describe it as quasi-federal—basic to the matrix of financial relations between the Centre and the states are the provisions of the Indian Constitution providing for transfer of resources from the Centre to the states. Given the delimitation of responsibilities and functions, including the function of resource mobilization in various forms, as between the Centre and the states, and the resultant weakness of the states in regard to the access to resources relative to the responsibilities they shoulder, the Constitution makes various provisions enabling the transfer of resources from the Center to the states.
The rationale behind the approach of the Indian Constitution in regard to its financial provisions was put forth thus by the Sixth Finance Commission :
The heads of revenue and responsibilities were distributed on the basis of whether the Centre or the states was better equipped to deal with the particular head. It was however realised that the delimita-tion of resources and functions on this basis would call for appropriate corrective measures to bring about better correspondence between resources and responsibilities of the two tiers in our federal set up.
That is why, the Constitution embodies both mandatory and enabling provisions for facilitating a wide-ranging transfer of resources from the Centre to the states.
Briefly put, the Constitution envisages transfer of resources from the Centre to the States in the following forms :
(1) Through the levy of certain duties imposed by the Centre but collected and appropriated by the states (Article 268 of the Constitution).
(2) Through the levy by the Centre ; but assignment In whole to the ^Vice Chairman Sfat$ Planning Board, Kerala,