In an apparent reference to demands by parties based on local interests, Prime Minister Manmohan Singh [Images] on Monday said 'narrow political considerations' based on regional or sectional loyalties could distort national vision.

"Sometimes the resolution of problems acquires an excessively political hue, and narrow political considerations, based on regional or sectional loyalties and ideologies, can distort the national vision and sense of wider collective purpose," he said after inaugurating the fourth International Conference on Federalism in New Delhi.

The conference was attended by delegates from 26 countries.

Addressing delegates, Dr Singh asked whether a single party State had any advantages in managing Centre-state relations smoothly as opposed to a multi-party system.

"Or is a multi-party model, with national parties dominating the police scene, superior where one can hope that all of them will take a national view on policy issues and help to reinforce the unity of the federation," he asked.

Advocating smooth management of Centre-state ties, he said the Indian experience suggested that relations between the two could give rise to 'serious tensions.'

The prime minister also spoke of pulls and pressures and various challenges on account of river water sharing, natural resources and fiscal federalism.

Dr Singh, whose Congress party heads the United Progressive Alliance coalition at the Centre, spoke of a multi-party model where parties with varying national reach and many with a very limited sub-national reach form a coalition at the national level.

The prime minister said the government continues to have 'some difficulty' in eliminating fiscal barriers to inter-state movement of goods and in the utilisation of natural resources. "This has posed a major challenge in the management of federal polity."

Another 'major challenge,' Dr Singh said, was that of inter-regional disparities and added that reducing such disparities was essential for the success of a federation. "This has been an important challenge in India," he said.

Referring to various water disputes among states, the prime minister felt it would not be an exaggeration to say that it was easier to manage bilateral agreements with neighbours on river water sharing than domestic disputes between states.

"Similar issues arise in the management of our mineral and hydrocarbon resources," he said, adding that an extremely important function in a federation was the mediation of disputes between different levels and identities.

The prime minister said technological developments had their bearing on the evolution of federalism as recent developments in IT have enabled smaller communities to maintain their distinct identities and communicate with each other.

Dr Singh noted that economic development has been one of the biggest unifying drivers of the past few decades and pointed out to the creation of large unified market like the European Union.

He said unification of economic activity impinged on almost all other spheres of human activity and added that there was need for gradual harmonisation, if not unification.

"When I see the world getting increasingly globalised, I wonder whether the day is not far away when the concept of absolute sovereignty may itself come into question...we may see States giving up sovereign rights for the larger benefit of mankind. This is in many ways, necessary when managing issues such as climate change," he said.

In his key note address, Home Minister Shivraj Patil said federalism helps a country at the global level in various activities. He pointed out that India has adopted a federal form of government -- federalism in times of peace and unitary in times of difficulties.

Noting that new situations were developing in the world, he said federalism has to address the new demands. Welcoming the delegates, Delhi Chief Minister Sheila Dikshit said formal mechanisms had been ensured to maintain balance of power between the Centre and the states.