FEDERALISM AT CROSSROADS

As GST reforms swell Centre's revenue kitty, many states say two-rate structure unevenly burdens their economies; fund onus on states under G-RAM-G Act raises queries over fiscal stress on welfare measures

- VISMAY BASU

INDIA'S federal structure rests on a calibrated balance between a strong Union and fiscally and politically empowered states.

Although states shoulder wide responsibilities in health, agriculture, law and order, and welfare, revenue-raising powers are increasingly being centralised. Over the past year (late 2024-2025), this latent imbalance has crystallised into political and economic contention.

Fiscal Federalism: GST, Cesses and the Erosion of State Space

Introduced in 2017 as a putative "grand federal bargain", the Goods and Services Tax has emerged as the principal arena of Centre-state recrimination. Although constitutionally conceived as a shared levy, states often claim that they retain little effective autonomy over rates and remain dependent on timely compensation and transfers.