Since India's independence much of the responsibility for educating the population has shifted from the Indian states to the central federal government. While education remains constitutionally identified as a state matter, and while the federal government controls most of higher education as well as vocational, professional, and technical training, it also provides significant financial support to the states. This support is funneled through two commissions: the Finance Commission, which distributes resources guaranteed by statute and aimed primarily at program maintenance, and the Planning Commission, which distributes discretionary funds directed toward development. Increasing reliance on this federal support weakens the states' autonomy in education. Although originally intended to encourage equity by redistributing wealth among the states, the federal government's educational finance system actually serves political purposes that lead to increased disparities. Reform should involve an increasing federal role in financing accompanied by a decreasing federal control of policy formation. A brief review of the historical development of government responsibility for education in India, beginning in the colonial period, provides the background for this paper's analysis of the current relationship between federal and state authority. Principles of resource allocation are also briefly reviewed. Tables display comparative data on educational finance in the various Indian states. (PGD)