The word federal is derived from a Latin term foedus which means covenant or compact. Federalism is sometimes used interchangeably with decentralization. Federalism is a system in which political power is shared between a central (national) government and smaller governmental units. The central government is often called the federal government and smaller units called states or provinces. The division of power between the federal government and states or provinces is defined in the constitution. The principal objective of federalism is to balance the interests of different ethnic and language groups, regions, etc and between different groups or regions and the central government.
Central or unitary governments hold principal powers and choose what to give to states or provinces. Some governments that appear federal use unitary systems, making states or provinces serve as administrative rather than political units. In a federal system, citizens usually owe their loyalty directly to the central government.
Federal systems are classified as coming-together like the American-style federalism and holding-together like India, Belgium, Nigeria and Spain designed to hold multicultural societies together by devolving powers constitutionally and forming a federation. Federalism whether democratic or not is the result of bargain involving an element of give and take. In other words, to have lasting impact federal systems of government should not be imposed by stronger members on weaker ones. Different regions in a country or different states should come to the table as equals and bargain a win-win outcome.