The centre-state economic relations have assumed special significance in the context of the states asking for greater decentralisation of powers to manage their economies. The economic reforms programme, emergence of strong regional parties, the governance through political coalitions, and the constitutional amendments to empower the local bodies, have raised many economic and political issues regarding the centre-state relations. It is time that the major political parties develop a broad consensus at the centre and the states and blend good economics with politics. This is the background in which the centre-state relations are to be considered.