In discussions about post-war Nepal policymakers have suggested federalism as an institutional form that accommodates different ethnic groups within the boundaries of one state. The theoretical justification derives from the possibility of federal systems to combine self-rule with shared-rule, leaving the federal state intact while recognizing territorial ethnic groups. Based on the two cases of the Punjab and Nagaland conflict, the article shows how this played out in the case of India. These case studies show that the way in which federalism might help to transform ethno-political conflict depends on the legitimacy of political elites in the multi-level system as well as the informal possibilities to tame federalization processes of the central elites.
