Federalism is a system of government where power is divided between a central authority and constituent units. In India, power is shared between the union and state governments according to the constitution. The constitution outlines three lists that distribute powers - the Union List grants the central government authority over national issues, the State List gives states control over local matters, and the Concurrent List allows both to legislate on shared subjects. The judiciary plays an important role in resolving disputes between the two levels of government.