Which of the following statements is correct about federalism?

All of the above.

The correct answer is Option 4 - All of the above.

Option 1- Federalism is an institutional mechanism to accommodate two sets of polities—one at the regional level and the other at the national level.
Option 2- Each level of the polity has distinct powers and responsibilities and has a separate system of government.
Option 3- To prevent conflicts between the centre and the State, there is an independent judiciary to settle disputes.
Option 4- All of the above.

Federalism does not consist of a set of fixed principles, which are applied, to different historical situations. Rather, federalism as a principle of government has evolved differently in different situations. American federalism – one of the first major attempts to build a federal polity – is different from German or Indian federalism. But there are also a few key ideas and concepts associated with federalism:

Essentially, federalism is an institutional mechanism to accommodate two sets of polities—one at the regional level and the other at the national level. Each government is autonomous in its own sphere. In some federal countries, there is even a system of dual citizenship. India has only a single citizenship.

The people likewise, have two sets of identities and loyalties—they belong to the region as well as the nation, for example we are Gujaratis or Jharkhandis as well as Indians. Each level of the polity has distinct powers and responsibilities and has a separate system of government.

The details of this dual system of government are generally spelt out in a written constitution, which is considered to be supreme and which is also the source of the power of both sets of government. Certain subjects, which concern the nation as a whole, for example, defence or currency, are the responsibility of the union or central government. Regional or local matters are the responsibility of the regional or State government.

To prevent conflicts between the centre and the State, there is an independent judiciary to settle disputes. The judiciary has the powers to resolve disputes between the central government and the States on legal matters about the division of power.