Fewer, bigger schemes
Limit the number of CSS. Keep only schemes needed as part of a broader convergence process, with large outlays that make an impact across states; weed out the rest or merge them with other schemes.
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BPSC Mains GS-2 Masterclass · Indian Polity
Centre–State RelationsPartners, Rivals and the Search for Balance
Why Centrally Sponsored Schemes divide the Centre and the states, where the friction lies today, how federalism moved through four phases, whether the states deserve more autonomy, and what the NCTC debate teaches.
Schemes29Centrally Sponsored Schemes6 ‘core of the core’ + 23 ‘core’ schemes.
Finance42%States’ Tax ShareUp from 32% of the divisible pool (14th FC).
GST1/3Centre’s GST VoteEnough to block any GST Council decision.
History4 PhasesFederal JourneyFrom one-party dominance to coalitions.
Security26/11Birth of NCTC ideaAn apex counter-terror body the states resisted.
Way aheadSarkaria& PunchhiThe commissions still guiding the debate.
Central money, state delivery
Centrally Sponsored Schemes: A Point of Contention
Centrally Sponsored Schemes (CSS) are schemes implemented by state governments but largely funded by the Central Government, with a fixed share paid by the state.
What and why
MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act)Pradhan Mantri Gram Sadak Yojana
The subject of such schemes usually lies in the State List.
They exist to achieve national objectives and uniform implementation across the country — social goals such as reducing poverty, improving health services and raising food production.
Example: For most CSS today the Centre–state funding ratio is 60:40, and 90:10 for the North-Eastern and Himalayan states.
Too many schemes
States have long criticised the growing number of Centrally Sponsored Schemes.
- 1968
A National Development Council (NDC) committee recommended capping CSS at one-sixth (1/6) of central Plan assistance to the states.
- After 1968
Central ministries kept introducing new schemes, and the financial limit was exceeded.
- 1969 → end of the Fifth Plan
The number of CSS grew from 45 in 1969 to 190 by the end of the Fifth Five-Year Plan.
451969
1905th Plan end
K. Ramamurty Expert Group (NDC)
To resolve the states’ concerns, the NDC set up an Expert Group under K. Ramamurty. It reported that the criteria for continuing old schemes or starting new ones were too broad, and that fulfilling an important national objective must be an essential criterion.
Narasimha Rao Committee
Later, the Narasimha Rao Committee laid down criteria for forming a new CSS:
- 1It must fulfil an important national objective — for example, poverty alleviation or education.
- 2The programme must have a regional or inter-state character.
- 3It should be a pace-setter, or relate to demonstration, survey or research.
The committee suggested that schemes without high national importance could be transferred to the State Plans.
Why the schemes divide the Centre and the states
6 fault linesThe rich gain more
- The NDC observed that better-off states benefit more from CSS, because they can arrange their matching share and implement schemes better than poor states.
- This can widen the gap between rich and poor states, leaving poorer states dissatisfied.
Restructuring & reform
Fixing the Schemes: Restructuring and the Chaturvedi Committee
After the 14th Finance Commission, the schemes were restructured into 29 Centrally Sponsored Schemes, in two categories: ‘core of the core’ and ‘core’ schemes.
Note: The restructuring itself followed the recommendations of a NITI Aayog sub-group of Chief Ministers (2015), after the 14th Finance Commission raised the states’ tax share.
Core of the core6
Six schemes are ‘core of the core’ — the most crucial schemes for the Government of India:
- 1National Social Assistance Programme
- 2MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act)
- 3Umbrella Scheme for Development of Scheduled Castes
- 4Umbrella Programme for Development of Scheduled Tribes
- 5Umbrella Scheme for Development of Minorities
- 6Umbrella Scheme for Development of Other Vulnerable Groups
Core schemes23
The other 23 are ‘core’ schemes, for example:
Green RevolutionWhite RevolutionBlue RevolutionPM Krishi Sinchai Yojana (PMKSY)PM Gram Sadak YojanaPM Awas Yojana (PMAY)Rural Drinking Water MissionSwachh Bharat MissionNational Health Mission…and more
What the Chaturvedi Committee suggested
The Chaturvedi Committee, appointed by the Planning Commission, suggested these measures:
Three categories
Group existing CSS into Flagship schemes (large outlays, major national issues), major sub-sectoral schemes (development problems of big sectors like agriculture, education and health), and sector-umbrella schemes (the range of problems in a sector).
Transparent sharing
Distribute CSS funds among states on transparent, notified guidelines posted on the ministries’ websites. States may be given incentives to spend more on health, education, skill development and rural infrastructure.
Flexible norms
Vary the physical and financial norms according to each state’s needs, with a mechanism for flexibility against the normal CSS prescription.
- This would meet the large variations often requested by the North-Eastern states, or states like Kerala, Rajasthan, Uttarakhand and Himachal Pradesh that have special needs.
Flexi-funds
Every CSS should have 20% flexi-funds (10% for Flagship schemes), which states use to design schemes suited to their own needs.
Innovation pool
Each Flagship programme should provide a flexible pool of money to encourage and reward innovative practices.
Independent monitoring
CSS should be monitored and evaluated concurrently by independent monitors, with results put on the websites of the ministry concerned and the Planning Commission.
Where the friction lies
Tension Areas between the Centre and the States
Friction between the Union and the states shows up in four broad areas: the use of constitutional offices and powers, money, policy and lawmaking, and security and crises.
Offices & constitutional powers
- The office and role of the Governor — not appointed in consultation with the elected state government.
- Reservation of state bills for the President’s consideration.
- Use of Article 356 (President’s Rule).
- Audit of the states by the CAG.
- Management of the All-India Services (IAS, IPS and IFS).
- Differences over important appointments.
Money & finance
- Financial autonomy of the states.
- Taxes not shared in a federal spirit.
- Centrally Sponsored Schemes.
- Arrears in GST compensation and other central grants — a pain point for many states.
- Demands for special category status.
Example: Bihar has long demanded special category status.
- The terms of reference given to the 15th Finance Commission.
Policy & lawmaking
- Industrial policy.
- The 42nd Amendment, passed during the Emergency, moved population control, forests, education and the administration of justice from the State List to the Concurrent List.
- Top-down planning.
- The Centre encroaching on the states’ autonomy — for example, the abrogation of Article 370.
- Inter-state river water disputes.
Security & crises
- Deployment of paramilitary forces such as the CRPF or BSF in the states.
- The COVID-19 response:
- Frequent guidelines from the Union Home Ministry, often without adequate consultation with the states.
- The Centre marking red, green and orange zones.
- Conditions imposed when states sought to raise their borrowing limits to meet the crisis.
- Restarting air services without fully getting the states on board.
Emerging trends
Recent Trends in Indian Federalism
Indian federalism is being pulled two ways at once: states assert themselves and gain fiscal room, while the Centre has grown stronger and more centralised in style. The GST Council shows both pulls in one institution.
01Towards the states
Rising regionalism
Regional parties are pushing regional agendas — for example, the YSR Congress in Andhra Pradesh trying to enact a law reserving jobs for locals.
02Towards the states
Cultural nationalism
An indigenous working class that can be mobilised by the politics of cultural nationalism.
03Towards the states
Pushback on central laws
States have raised their voice against the amendments to the UAPA and the NIA Act.
04Towards the states
CBI consent withdrawn
Andhra Pradesh and West Bengal withdrew the ‘general consent’ they had given to the Central Bureau of Investigation (CBI).
05Towards the states
Linguistic solidarity
Linguistic states have grown more united in asserting their identity.
06Towards the states
Regional movements
Separatist and secessionist tendencies have given rise to regional movements in many parts of India — for example, in the North-East and in Jammu and Kashmir.
07Towards the states
NITI Aayog
The formation of NITI Aayog brought the states into the planning process.
08Towards the states
More money, more freedom
On the 14th Finance Commission’s advice, the states’ share of tax devolution rose from 32% to 42% of the divisible pool, but many CSS were withdrawn. Net result: states now have more autonomy in deciding how to spend — and should spend wisely.
09Towards the Centre
Strong Centre, weaker regional parties
A strong Centre and weakened regional parties, which have not been able to stop the ruling party from implementing its agenda.
10Towards the Centre
Article 370
Changes to Article 370 in Jammu and Kashmir were made without the approval of an elected state assembly.
11Towards the Centre
CAA and NRC
The Citizenship Amendment Act and the proposed National Register of Citizens were largely unilateral decisions, taken amid strong protests from states.
12Towards the Centre
Highly centralised functioning
A highly centralised style of governance:
- COVID-19: the Centre issued guidelines and marked red, green and orange zones.
- The dominance of the PMO in policy and decision-making.
- Demonetisation.
- Recent agricultural reforms.
Note: The three farm laws of 2020 were repealed in 2021 after farmers’ protests; agriculture is a State List subject.
Cooperative — with a catch
The GST Council
The GST Council — made up of state finance ministers, with the Union Finance Minister as chairperson — is a superb template for cooperative federalism. It charts a new course for fiscal federalism, built on cooperation instead of self-interest.
How a decision is passed
Centre 33.3%
All states 66.6%
Every decision needs a majority of at least three-fourths (75%) of the weighted votes of members present and voting.
The Centre’s vote carries one-third (33.3%) of the total weight and the states together carry two-thirds (66.6%). So the states cannot reach 75% without the Centre — the Centre has kept an effective veto.
32%13th FC
42%14th FC
Fiscal federalism
States’ share of central taxes rose by ten percentage points — but many Centrally Sponsored Schemes were withdrawn in return, so the real gain is freedom over how money is spent.
1950 to the coalition era
The Four Phases of Indian Federalism
How Centre–state relations changed as politics changed: from one-party dominance, through confrontation and the Emergency, to demands for autonomy and finally the coalition era.
Phase 1
Central domination1950–67
Congress dominance
- The Congress party dominated both the Centre and the states.
- Nehru held undisputed sway over national affairs, and there was a strong reaction against the colonial power’s earlier attempts to encourage divisive forces.
- The Planning Commission and the National Development Council, both created by executive resolutions, became the Centre’s instruments of domination over the states.
- The Planning Commission handled social services — education, medicine, health, agriculture, cooperation, social welfare and industrial housing — all state subjects.
- The NDC was seen as an experiment in cooperative federalism.
- Article 356 was misused against the Communist government in Kerala in 1959.
Example: The government dismissed was E.M.S. Namboodiripad’s.
- Nehru took democracy seriously: his monthly letters to Chief Ministers informed them of the state of the nation and sought their views, to build national consensus.
- Zonal Councils were created under the States Reorganisation Act as advisory bodies to foster cooperative federalism.
- Overall, this phase was marked by central domination; the states even ceded some of their powers to the Centre.
The case for decentralisation
Do the States Need More Autonomy?
Yes — for reasons of principle, of practice and of development. Here is the case, with examples from Bihar and other states.
Subsidiarity
The principle of subsidiarity says social and political issues should be handled at the most immediate, local level.
Diversity
India is multi-regional and multilingual, with people of many hues; decentralisation is the need of the hour.
First responders
States are the first to respond in a crisis.
Local knowledge
States know local issues better.
Laboratories of policy
More autonomy means more diverse policies, from which best practices emerge:
- Organic farming in Sikkim.
- Bihar’s 50% reservation for women in local government — other states and the Centre are planning to adopt it.
Central policies can hurt
Some central policies, such as the freight equalisation policy, obstructed industrial development in states like Bihar.
Example: Under freight equalisation (1952–1993), minerals like coal and iron cost the same anywhere in India, so mineral-rich Bihar (including today’s Jharkhand) lost its natural advantage for setting up industries.
Sub-nationalism
Sub-nationalism helps states develop: it is said to have contributed to the development of Tamil Nadu, Kerala and Maharashtra, while backward states like Bihar and Uttar Pradesh lack such sub-national consciousness.
The Bihar lens
For the 2016 question on Union–Bihar relations, these points from the answer apply directly to Bihar:
Freight equalisation held back Bihar’s industrial development.
Bihar’s 50% reservation for women in local bodies has become a model for other states and the Centre.
Bihar is cited as lacking the sub-national consciousness that helped southern states develop.
The demand for special category status is one of the live tension areas.
The way ahead
Indian political modernisation seems to have reached a stage where an open, decentralised system can cope with its problems while pushing ahead towards economic, social and political modernity.
Ultimately, Indian federalism — in the future as in the past — is likely to remain cooperative in nature. Going forward, the measures suggested by the Sarkaria and Punchhi Commissions should be taken into consideration.
Administrative relations · case study
The National Counter Terrorism Centre (NCTC) Debate
The idea of a National Counter Terrorism Centre (NCTC) was born after the 26/11 Mumbai attacks, where many intelligence and operational failures showed the need for a federal agency with real-time, actionable intelligence to counter terrorist acts.
The proposal
- Conceived by the then Home Minister P. Chidambaram, it was proposed as an apex body — a single, effective point of control for all counter-terrorism measures.
- It was modelled on American and British bodies and was to be placed under the administrative control of the Intelligence Bureau (IB).
Example: The 26/11 attacks took place in November 2008; the government notified the NCTC order in February 2012, but it was put on hold after opposition from several Chief Ministers.
Why the states objected
1
Law and order is a state subject
Giving the NCTC powers to search, arrest and investigate independently, without involving the state government, is seen as infringing the states’ powers — and it raised a political storm.
2
Spies should not arrest
It breaks the principle of not giving intelligence agencies the power of arrest, which may cause operational problems for them.
3
Planning and execution must be separate
The NCTC could be an ideal agency for all counter-terror intelligence, but that needs a strategic planning body, investigation and execution arms besides the intelligence unit — and the planning body must be kept separate from the execution agencies, each under its own professional head.
4
Operations need local police
Any operation to search, catch or arrest a militant should include the state police for local help — navigation, translators, medical aid, and handling the dead, wounded and legal issues. Sustained investigation and surveillance are hard without local police.
Why the state police cannot be left out
The role of state police in prevention, containment and investigation cannot be ignored.
1
Prevention
- Prompt, actionable intelligence alone cannot prevent an attack; effective policing, reliable technical monitoring and people’s efforts are the other side of the same coin.
- Who would do the policing, monitor the technical infrastructure in an area, or bring the public together — without the local police and state government?
2
Containment
- The first to reach the site of a terrorist attack is invariably the local police.
- The resources needed to contain violence, manage crowds and traffic, and stop further attacks are beyond a central agency.
3
Investigation
- Preserving evidence, securing witnesses, and handling the media and the families of victims can only be done by the state police.
- So why should the states not be part of investigations?
State police capacity should be strengthened — intelligence, surveillance, sophisticated weapons, modern technology and trained manpower.
Unified control vs federal reality
- For administrative efficiency, unified control is always better — provided there is political unanimity on it.
- In a federal structure that is not easy; a centralised agency would be more prone to misuse, which would be dangerous for the country in the long run.
The verdict
So the central agency should work in coordination with the state police, not independently. A centralised NCTC is not acceptable to the states; we need a balanced approach with more local involvement.
Exam preparation
BPSC Mains Previous Year Questions
Every question this page prepares you for, with the parts that answer it.
Q1BPSC (2019)
Centrally Sponsored Schemes have always been a point of contention between the Centre and States. Discuss by citing relevant examples.
Q2BPSC (2016)
Analyse tension areas between Centre and States in the Indian federal system. Describe the current state of relations between the Union Government and Bihar State.
Q3BPSC (2009)
Explain the recent trends in Indian federalism. Do the states need more autonomy?
Q4BPSC (1997)
Analyse the emerging trends in Indian federalism.
Q5BPSC (2012)
Discuss the Indian federal system and Centre–State administrative relations with special reference to the National Counter-Terrorism Centre (NCTC).
“Indian federalism — in the future, as in the past — is likely to remain cooperative in nature.”
Curated for BPSC, UPSC & State PCS Civil Services Aspirants | Indian Polity Master Module