Federalism Erosion: Centre-State Finances Post-15th Finance Commission

Abstract

This article examines whether the 15th Finance Commission's recommendations erode India's federal structure through constitutional and institutional analysis. India's federal architecture, enshrined in Articles 268-293, establishes a framework for Centre-State financial relations with the Finance Commission as the constitutional mechanism under Article 280 to balance vertical and horizontal fiscal distribution. The 15th Finance Commission (2021-2026) introduced significant reforms including reduced vertical devolution from 42% to 41%, performance-based grant conditionalities, and sector-specific earmarking that fundamentally altered the fiscal autonomy of states. This paper analyzes these recommendations against constitutional principles of federalism, examining their impact on state fiscal independence, the proliferation of cesses and surcharges bypassing divisible pool, and the shift toward conditional grants. Through doctrinal analysis and comparative constitutional examination, this research argues that while the 15th Finance Commission's approach responds to legitimate governance concerns, it marks a concerning departure from cooperative federalism toward centralized fiscal control. The article concludes by proposing reforms to restore federal balance while maintaining accountability mechanisms.