Some of the importance of Federation are as follows:
(1) Federation alone is suitable for Big States:
It is the most suitable system for all big states. In fact, almost all big states of our times, with few exceptions like China, have adopted federalism. It alone provides strength to the idea of the World State. A world state, if and when it gets attained, can be only a World Federation. The sovereign independent states of the world can, at the most, be expected to join into a world federation and not in a World State.
(2) Can help small States to Unite and become Strong:
The federal system constitutes the only hope for the small states of the world to combine to secure the gains of union and yet maintain their individual autonomous entities. It alone offers hope to small nationalities claiming the right of self- determination and seeking independence. These can fruitfully secure their objectives by agreeing to form federal unions.
(3) Combines Strength with Autonomy:
Moreover, federation constitutes the best possible means to secure strength and autonomy for the small states. By uniting into a federation they can secure their security against possible external threats to them, their economic development through collective efforts, and their individual entities enjoying internal freedom of action as parts of the federation.
(4) Based on Division of Work:
Federation involves a division of work between the national government and the governments of the federal units. The national government concentrates upon the task of satisfying the collective national needs and goals of development, the governments working at the state level concentrate upon the satisfaction of local needs. The national government and state governments together combine their efforts to fruitfully exploit all resources and secure rapid and big economic industrial, and technological development through the optimum utilisation of these resources.
(5) More Democratic:
A federal system is indeed a truly democratic system. It divides powers between the central government and the state governments and as such ensures democratic process by securing decentralisation of powers. Each government works within its limited and definitely defined sphere of powers as demarcated by the constitution. As such their powers remain limited and restrained. Neither can become despotic or even behave arbitrarily and despotically. Division of powers between the centre and the states is a source of unity in diversity, strength with autonomy, and full local-central participation and efficiency.
(6) Favours Unity in Diversity:
With the principle of unity in diversity as its backbone, the federation makes it possible for the states like India, with social, cultural, linguistic, religious and regional diversities to maintain themselves as states. It makes it possible for the state with such diversities to successfully balance the centripetal and centrifugal forces and maintain its unity and integrity as a nation-state. Thus, the federation constitutes the best means for harmonising these diversities with national unity. The self-government at the regional/local levels help the diverse interests to get satisfied without, in any way, restraining the unity and integrity of the nation as a whole.
(7) Natural Form of State:
Laski describes federation as a natural form of organising the state. He holds, since the society is federal, constituted by groups of individuals, for it federation alone can be the most suitable form.
(8) Provides Political Educations:
Above all, Federation constitutes the best school of political education. The working of several governments within it ensures greater participation of the people in the political process. Being based upon the democratic principles—decentralisation, equal and free participation of all the people, limited government and unity in diversity —the federation acts as an excellent school of political education. Thus there are several merits of a Federation.