Correct option is A
Statement 1is correct.
The Government of India Act, 1935, indeed proposed the establishment of an All India Federation. This federation was intended to include both the British Indian provinces and the princely states. The idea was to create a federal structure where the provinces and princely states would be part of a single political entity with a division of powers between the federal government and the provinces/states. However, the federation never materialized because the princely states, which were semi-autonomous and had their own agreements with the British Crown, were reluctant to join. Their lack of participation meant that the federation could not be formed as envisioned in the Act.
Statement 2 is incorrect.
Under the Government of India Act, 1935, certain critical areas like Defence and Foreign Affairs were classified as 'Reserved Subjects.' These reserved subjects were not under the control of the federal legislature. Instead, they remained under the direct control of the Governor-General, who was appointed by the British government. The federal legislature, which was part of the proposed All India Federation, would have had limited powers, and key areas like Defence, External Affairs, and certain other matters were kept outside its purview. This arrangement allowed the British government to maintain significant control over critical areas, despite the move towards a more representative government structure.