Emboldened by the formation of a strong new regional lobby--and by Prime Minister Indira Gandhi's initially compliant response to it--the leaders of four southern Indian states are pressing for a major overhaul of their relationships with the federal government.

The reform movement is still in its early stages and could die out or disintegrate into partisan squabbling. But people on both sides of the issue have acknowledged that the potential is present for fundamental changes in federal-state relations and a resurgence of federalism in the Indian union.

The movement, in the view of leaders from the southern states, could reverse what they regard as an alarming concentration of power by Gandhi's ruling Congress Party in New Delhi and pave the way for the kind of strong state leadership encouraged under the rule of her father, Jawaharlal Nehru, India's first prime minister.

Other Indian leaders, however, have considered far-reaching central powers a necessity, given the strong and growing separatist and regionalist tendencies of many of the country's nationalistic states.

The catalyst for the neofederalist movement was a 10-hour, closed-door meeting in Bangalore in March of the chief ministers of the states of Tamil Nadu, Andhra Pradesh, Karnataka and Pondicherry. Chief ministers are functionally equivalent to governors in the United States.

An outgrowth of the meeting was the creation of the Southern Council of Chief Ministers, a regional lobby. Its first declared intention was to discuss common financial problems, but it has quickly evolved into a united front for pressing the Gandhi government for more decision-making powers and a greater share of federal funds.

The chief minister of the Congress-dominated state of Kerala did not attend the meeting, reportedly under orders from Gandhi. The four Southern Council chief ministers represent either regional or opposition parties.

Initially, the state leaders were relatively conciliatory, emphasizing that they would seek to avoid a confrontation and wanted to work with the central government for changes in relations.

"We should not run to the center every other day to solve our problems. The center must be kept at a respectable distance to ensure the spirit of federalism," said Karnataka Chief Minister Ramakrishna Hegde at the time.

But Congress' reaction was sharp and swift, with party General Secretary C.M. Stephen calling the chief ministers' meeting "highly dangerous, because it panders to the rising regionalist tendencies." The meeting, he warned, "seems to have set the stage for a north-south fight."

But after the first wave of protests subsided, Gandhi, who has been bothered by the centrifugal forces of regionalism in the Punjab and the far northeastern Indian states, unexpectedly formed a high-level commission to examine the entire range of federal-state relations.

The surprise stemmed from Gandhi's departure from a long-standing pattern of ignoring strident reform movements until they vanish, particularly those that have strong regional tendencies or that have challenged central authority.

The commission is headed by a prominent retired Supreme Court justice, R.S. Sarkaria.

The southern chief ministers demand changes in provisions of the Indian constitution that define federal-state relations, particularly those declaring that "the executive power of the union shall extend to the giving of such directions to a state as may appear to the government of India to be necessary for that purpose."

The chief ministers also are preparing a new offensive against a constitutional article known as the "president's rule" provision, under which the central government may dissolve state legislatures and assume the powers of state government, much as Gandhi did during the 19-month "emergency" of 1975-77.

Tamil Nadu Energy Minister S. Ramachandran, political adviser and closest confidant to Chief Minister M.G. Ramachandran (no relation), who proposed the idea of the Southern Council, called the article "a Damocles sword hanging over the head of every chief minister."

"It has been used as a political weapon before, and it can be used again. They can pull down any non-Congress government anytime they want to assure their continuation in power," S. Ramachandran said in an interview.

Standing alone, S. Ramachandran said, none of India's 22 states has the political clout to exert its will on the central government. Tamil Nadu, he noted, has only 39 seats in the 542-member Parliament.

"What can we do alone? We have to band together and fight all these issues as a united front," he said, adding that the southern states comprise 150 million people with vast natural resources and a large proportion of India's defense and high-technology industry.

Asked whether the regionalism movement could eventually evolve into separatism, he replied, "It depends on how the center handles it. We're not for splitting the union, but the center cannot solve the problem without taking the people into its confidence."

While there is no evidence yet that the Southern Council will exacerbate regionalism based on linguistic and cultural differences--much less stimulate separatist feelings--the formation of the strong lobby already has appeared to encourage local assertiveness elsewhere.

Kashmir Chief Minister Farooq Abdullah has said he was "moved" by the southern states' action, adding, "The harsh fact is that the center does not appreciate or even understand the hopes and aspirations of the states."

Political leaders from West Bengal, the Punjab and other states have expressed support for the Southern Council movement.

The southern states also are planning to press for a bigger slice of federal disbursements, which, state officials say, favor the northern states in the Hindi-speaking belt where Congress has an overwhelming parliamentary majority and controls state assemblies.

It is unclear how far the southern states will be able to take their reform movement. Internal disputes and language chauvinism in the south are commonplace and could undermine the council's early unity. Or Gandhi's strategy could be to halt the momentum of the southern lobby with a drawn-out inquiry by a commission.

But the movement's tacticians say that by appointing a prestigious national commission to reexamine federal-state relations, Gandhi has given regionalism a legitimacy it had never enjoyed, and that the movement can only gain in strength.

"Now the presence of this issue is officially recognized," said Ramachandran, adding that Gandhi "now understands that the issue has come to stay, and unless she does something about it, she will be in trouble."