Policy-making Structures and Processes in Inter-governmental Relations

Making policy in a country as vast and varied as India is never the work of a single institution. From the corridors of Parliament in New Delhi to the Gram Sabha of a village in Odisha, multiple layers of government must talk to each other, negotiate, and often compromise before a policy takes shape and reaches the citizen. This is the essence of inter-governmental relations – a continuous dialogue across the Union, state, and local tiers that shapes how the country is governed.

The constitutional foundation: Federal in form, unitary in spirit 🔗

The Constitution establishes what scholars often describe as a federal system with a strong unitary bias. While Article 1 declares India a Union of States rather than a federation, the document clearly divides legislative powers across the Union List, State List, and Concurrent List. Yet several provisions tilt the balance towards the Centre – including Parliament’s power under Article 249 to legislate on State List subjects when the Rajya Sabha declares it a matter of national interest, the single judicial system, All-India Services, and emergency provisions.

This structural design means policy cannot flow in a single direction. The Union may hold supremacy, but states retain significant autonomy, and local bodies – empowered constitutionally since 1992 – add a third voice to the process. Understanding how policy is crafted therefore requires looking at each tier separately before examining how they connect.

Policy-making at the Union level 🔗

At the apex, the Union government drives policy through two interlinked institutions: the Cabinet and Parliament. The Cabinet, headed by the Prime Minister, is where policy directions are conceived. Ministries and departments prepare draft proposals, consult with stakeholders, and circulate them through inter-ministerial committees before the Cabinet grants approval.

The legislative process 🔗

Once the Cabinet approves a proposal, it typically travels to Parliament as a Bill. The Bill passes through three readings in each House – introduction, detailed examination (often in Standing Committees), and passage after debate. Only after both Houses approve it and the President gives assent does it become law. Money Bills follow a modified path, with the Lok Sabha holding primary authority.

This process is not merely procedural. Standing Committees allow cross-party scrutiny, expert witnesses shape technical content, and opposition members force amendments. The final policy is almost always different from the draft that first entered Parliament.

The role of the bureaucracy 🔗

Behind every minister sits a permanent civil service that translates political intent into workable policy. Secretaries, Joint Secretaries, and Directors in ministries prepare background notes, analyse implementation feasibility, and coordinate with state counterparts. Without this administrative machinery, no Cabinet decision would ever reach the citizen.

Policy-making at the state level 🔗

State governments mirror the Union in structure but operate within a different scope. The state legislature – bicameral in a handful of states like Uttar Pradesh, Maharashtra, and Karnataka, and unicameral in the rest – debates and passes laws on subjects in the State List and Concurrent List. State Cabinets, led by Chief Ministers, initiate policy in areas such as agriculture, public health, police, and land revenue.

Because agriculture, public order, and local government are primarily state subjects, much of the policy that actually affects daily life is made in state capitals rather than Delhi. A scheme to reform tenancy laws, a new industrial policy, or an education regulation for government schools – these are typically born in state secretariats.

State-level policy also carries an important coordinating function. State governments translate Union schemes into local implementation plans, modify them to suit regional realities, and channel funds to districts and local bodies. A centrally-sponsored scheme like the National Health Mission, for instance, takes on different operational shapes in Kerala and Bihar because each state adapts it to local conditions.

The rise of local governments as policy actors 🔗

For much of independent India’s history, local bodies existed without constitutional protection, leading to irregular elections, weak finances, and unpredictable powers. This changed with the 73rd and 74th Constitutional Amendments, passed in 1992, which gave rural and urban local bodies formal constitutional status.

The 73rd Amendment and Panchayati Raj 🔗

The 73rd Amendment created a uniform three-tier structure of Panchayati Raj – the Gram Panchayat at the village level, the Panchayat Samiti at the intermediate block level, and the Zilla Parishad at the district level. It also introduced the Gram Sabha as a deliberative body, making it the foundation of grassroots democracy.

The Eleventh Schedule lists 29 subjects that states may devolve to panchayats, ranging from agriculture and minor irrigation to primary education, drinking water, rural housing, and social welfare. Notably, the actual extent of devolution varies – each state legislature decides which of these subjects to transfer and how much autonomy to grant.

The 74th Amendment and urban local bodies 🔗

The 74th Amendment did for urban areas what the 73rd did for villages. It inserted Part IX-A, covering Articles 243-P to 243-ZG, into the Constitution. Municipalities – structured as Nagar Panchayats for transitional areas, Municipal Councils for smaller urban areas, and Municipal Corporations for larger cities – were given a formal framework. The Twelfth Schedule assigns 18 subjects to urban local bodies, including urban planning, regulation of land use, water supply, and slum improvement.

Both amendments also mandated State Election Commissions to conduct local body elections and State Finance Commissions to recommend how revenues should be shared between state and local governments.

The gap between design and reality 🔗

Despite a strong constitutional framework, the devolution of functions and finances has been uneven. More than two and a half decades after the amendments, significant gaps remain between the constitutional vision and ground-level functioning. Many panchayats still rely heavily on state transfers because citizens resist paying local taxes, and delays in conducting timely municipal elections in some cities have weakened accountability.

Inter-governmental coordination agencies 🔗

A federal system with three tiers needs institutions that stitch the levels together. Over the decades, India has relied on several such bodies.

The Planning Commission and its successor NITI Aayog 🔗

Established in 1950 by an executive resolution, the Planning Commission was the main engine of centralised economic planning through Five-Year Plans. It allocated funds to states and ministries, often attracting criticism for its top-down character.

In January 2015, the Commission was replaced by NITI Aayog – the National Institution for Transforming India. NITI Aayog positions itself as the apex public policy think tank, working through a bottom-up approach and actively involving state governments. Unlike its predecessor, it does not allocate funds; that authority now rests with the Finance Ministry.

The Aayog’s Governing Council includes the Prime Minister, Chief Ministers of all states, Lieutenant Governors of Union Territories, and full-time members. This composition reflects a deliberate shift toward cooperative federalism, replacing the earlier one-way flow of policy from the Centre.

The National Development Council 🔗

The National Development Council, set up in 1952, was historically the highest body for endorsing Five-Year Plans. Chaired by the Prime Minister and composed of Union Cabinet Ministers, Chief Ministers, and Planning Commission members, it acted as a forum where plans were reviewed and consensus was built. After NITI Aayog’s creation, the NDC’s functions have effectively merged into the Aayog’s Governing Council.

The Finance Commission 🔗

The Finance Commission is the only one of these bodies with explicit constitutional backing. Set up under Articles 270, 273, 275, and 280, it is appointed by the President every five years. Its main role is to recommend how tax revenues should be shared between the Centre and the states, and how grants-in-aid should flow to state governments. Successive Finance Commissions have also made recommendations on grants to local bodies, strengthening the fiscal backbone of panchayats and municipalities.

The Inter-State Council 🔗

Under Article 263, the President may establish an Inter-State Council to investigate and discuss subjects of common interest between the Union and states. Following the Sarkaria Commission’s recommendation, the Inter-State Council was established in 1990 by Presidential order. It provides a forum for deliberating on matters where Centre and states must coordinate, from internal security to administrative reforms.

How the three levels actually interact 🔗

In practice, policy-making rarely unfolds as a neat hierarchy. Ministries at the Centre convene conferences with state secretaries. Chief Ministers’ meetings thrash out points of friction. Local bodies send feedback through State Finance Commissions and development departments. As scholars observing intergovernmental mechanisms have noted, much of the real substance of coordination actually happens in ministerial and secretaries’ meetings rather than in the more formal gatherings of the Inter-State Council or NDC.

Consider how a new education policy takes shape. The Ministry of Education drafts broad national guidelines, NITI Aayog contributes research and cross-state comparisons, states modify the framework based on their own school systems, and ultimately Zilla Parishads and municipal school boards implement the programme on the ground. Each tier leaves its fingerprint, and friction at any stage can slow or reshape the outcome.

Persistent challenges in the coordination machinery 🔗

The structures are in place, but coordination is rarely frictionless. Tensions flare when the Centre uses Article 356 to dismiss state governments, when Governors play politically controversial roles, or when states resist central schemes as intrusions on their autonomy. The structural-functional balance tilts so strongly in favour of the Centre that persistent tension between the Union and states often strains governance itself.

Finance is another flashpoint. States argue for larger shares of central taxes, local bodies complain of inadequate devolution from states, and the Finance Commission’s recommendations often spark debate. The introduction of GST added a new layer of cooperation through the GST Council, but also new sources of disagreement over revenue compensation and rates.

The shifting landscape of inter-governmental relations 🔗

The nature of federal relations has evolved with political realities. The era of single-party dominance under the Congress produced a strong Centre. The rise of coalition politics in the 1990s gave regional parties unprecedented influence over national policy. Today, with strong regional parties in key states and an equally assertive Union government, inter-governmental policy-making is a continuous negotiation rather than a routine administrative exercise.

Digital platforms, performance indices like the SDG India Index, and platforms such as Direct Benefit Transfer have also changed how policies are coordinated and implemented, bringing real-time data and feedback into the loop.

What do you think? Given the deep tensions between central authority and state autonomy, do you believe the current coordination mechanisms – NITI Aayog, the Finance Commission, and the Inter-State Council – are adequate to handle the complex policy challenges of the coming decades? And how do you see the role of local governments evolving as cities grow larger and village economies become more connected to national and global markets?

References

1. https://www.owlgen.org/discuss-the-various-models-of-inter-governmental-relations/
2. https://en.wikipedia.org/wiki/Local_government_in_India
3. https://graam.org.in/73rd-and-74th-constitutional-amendments-how-local-self-governance-works-on-the-ground/
4. https://unacademy.com/content/upsc/study-material/polity/all-about-74th-amendment-act/
5. https://link.springer.com/chapter/10.1007/978-981-16-2203-8_1
6. https://niti.gov.in/
7. https://www.pmindia.gov.in/en/news_updates/government-establishes-niti-aayog-national-institution-for-transforming-india-to-replace-planning-commission/
8. https://inclusiveias.com/upsc-polity-inter-state-relations/
9. https://www.forumfed.org/document/mechanisms-of-intergovernmental-relations-in-india/
10. https://egyankosh.ac.in/bitstream/123456789/25658/1/Unit-10.pdf