According to Article 1 of Indian Constitution, India is defined as Union of States. In Union of States, Union Government is more powerful and the states do not have powers to secede from Union. However, Federation is a group of states with a central government but independence in internal affairs.
The Recent 15th Finance Commission has raised South Indian States voices to turn India into a Federation by providing Financial Autonomy to states.India is federal Republic with some Inclination towards centre Government.

Why Should States have Financial And Cultural Autonomy ::

a) To make the States function freely in Administration and Financial Spheres.

b) To Accumulate the Regional and Cultural Diversity of the nation.

c) For Decentralisation of India where majority of powers would rest with states and Union Government keeping an eye on their Functioning.

Merits of federation of states ::

a) The richer states would be able to extract more Revenues and would benefit immidiately.

b) The States would be able to take Long-Term Infrastructural and Developemntal Projects to benefit its citizens.

c) It would increase Co-operation and Co-ordination among States and Union Governments.

Demerits of federation of states ::

a) It would adversely impact the poor and populous states as they would not have adequate resources for revenue generation.

b) The system would contribute to Migiration of People from Poorer to Richer states because of Better Life and Employment opportunties along with Infrastructural Facilities.

India has Quasi-Federal Setup with balance inclined towards center. The need of hour is Providing more Opportunities of Financial Autonomy to states to promote Co-operative federalism among States and Center Governments.

The pattern of administation which fits to developed small countries,India does not have that luxury to adopt that one. India in a complex geographical position with hostile neighbours, and a country riddled with various socio-economic complexities demand a stronger centre to prevent the infringement of rights of one group for the deeds of other.