RECONFIGURING INDIAN FEDERALISM: THE IMPACT OF LIBERALIZATION, PRIVATIZATION, GLOBALIZATION AND COALITION GOVERNMENT

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Anubhav Sharma

Federalism, Liberalisation, Privatisation, Globalization

At the time Constitution of India was drafted, there was a debate pertaining to the structure of India i.e. whether it should adopt a unitary model or a federal model. The framers of the Constitution decided to adopt a middle path and made India a quasi-federal state ensuring a balance between unity and diversity. However, what followed immediately after independence was a system which was completely dominated by Centre. The Centre through mechanisms like Planning Commission, industrial licensing and Centrally Sponsored Schemes exercised complete control over state’s development, planning and fiscal transfers. The States on the other hand was reduced to a role of implementation agencies for centrally designed programs ultimately resulting in “hegemonic federalism”. The 1990s were a turning point in this respect. In response to a severe balance of payments crisis, India launched the New Economic Policy of 1991 which marked the beginning of Liberalization, Privatization and Globalization (LPG). The goal of these reforms was to dismantle the command-and-control economy, lessen bureaucratic intervention and integrate India into the global market system. Although they aimed mostly at the economy, these reforms also changed the federal structure of India. Liberalization curtailed centralized economic regulation, privatization reduced the Centre’s dominance in production and investment, and globalization expanded the policy space of states, enabling them to attract investment and engage directly with domestic and foreign enterprises. Simultaneously, the decline of single-party dominance at the national level, and the entry of coalition governments in the 1990s resulted in a new equilibrium. Never before in India's history have regional parties accumulated so much power to influence the decision-making. The frequent need for consensus and power-sharing curtailed unilateral central actions particularly the arbitrary use of Article 356 and encouraged consultation, negotiation, and coordination between the Centre and the states. Coalition politics thus reinforced the decentralizing tendencies of economic reform, promoting a more participatory and balanced federal relationship. The combination of LPG reforms and coalition politics thus altered the nature of Indian federalism. Economic liberalization shifted the federal dynamic from hierarchical control to competitive participation. States were no longer obliged to follow the commands of the Centre, as they used to. Instead, they began to formulate their own industrial policies. Moreover, they also offered incentives to investors, while working towards building infrastructure to attract capital. The Centre's role changed from that of a commanding planner to that of a regulator. Meanwhile, coalition governments helped in creating a political environment of shared governance, which institutionalized principles of cooperative and competitive federalism. This paper explores how Indian federalism was impacted by the reforms of the 1990s and coalition politics. Together, these two forces transformed the fiscal, administrative and political relations between the Union and the states. It focuses on key legislative and constitutional change such as the 80th and 101st Amendments, Finance Act 1994 and establishment of NITI Aayog, and argues that together these changes reshaped the hold of political pluralism and economic restructuring on federalism.

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Anubhav Sharma (May-2026). RECONFIGURING INDIAN FEDERALISM: THE IMPACT OF LIBERALIZATION, PRIVATIZATION, GLOBALIZATION AND COALITION GOVERNMENT. INTERNATIONAL JOURNAL OF NOVEL RESEARCH AND DEVELOPMENT, 11(5), g686-g703. https://ijnrd.org/papers/IJNRD2605683.pdf

Volume 11 Issue 5, May-2026

Pages : g686-g703

Paper Reg. ID: IJNRD_325605

Published Paper Id: IJNRD2605683

Research Area: Other area not in list

Author Type: Indian Author

Country: Ghaziabad, Uttar Pradesh, India

Published Paper PDF: https://ijnrd.org/papers/IJNRD2605683.pdf

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