Examine the evolving pattern of Centre-State financial relations in the context of planned development in India. How far have the recent reforms impacted the fiscal federalism in India? (Answer in 250 words)

Indian fiscal federalism has moved from centralised planning and discretionary transfers toward formula-based devolution, though asymmetry persists.

Evolution and reforms

• Planning-era grants and centrally sponsored schemes gave the Centre strong priority-setting power.
• Finance Commission devolution, the 73rd–74th Amendments and GST created more structured sharing.
• GST harmonised indirect taxation but reduced States’ independent tax space and exposed compensation dependence.

Assessment

Predictability and integration have improved, but cesses outside the divisible pool, vertical imbalance and conditional schemes constrain autonomy. Rationalise cesses, strengthen local bodies, ensure timely transfers and make schemes flexible and outcome-based.

Keywords: polity, federalism, fiscal federalism, Centre-State finances