Gandhi said there will be a "calamity" if the fight against coronavirus is centralised.
Addressing a press conference through video conference, he also asked the government to adopt transparency in its actions to tackle coronavirus and work together with states.
His remarks came after complaints by Congress-ruled states that they were being pushed into fiscal distress in the absence of the Centre providing them resources to fight the pandemic.
Gandhi also called upon the government to immediately put money into the hands of the poor and provide a financial package to the industry to help revive the economy.
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He said the lockdown is not an on/off switch, but is a transition which requires cooperation of all - Centre, states, district magistrates and the people of India.
"We need to decentralise power in dealing with the virus. If we keep this fight in PMO, we will lose. The PM must devolve power. If we centralise, there will be a calamity. PM has to trust chief ministers and chief ministers have to trust district magistrates," he said.
Gandhi also asked the government to tell the people what criteria it would use to open the lockdown or continue it post May 17, as the transition out of it is a serious challenge before the country.
He said the government needs to work on a psychological change and if it has to open lockdown, it has to convert people's fear of the disease into confidence, as it is not deadly for most of them.
Noting that the country is facing an emergency situation, the Congress leader said the idea of injecting immediately a sum of Rs 7500 directly into the hands of poor is critical.
He also called for providing a financial package soon to protect the industry which provides jobs.
"We have to protect the job creators and have to build a wall for them to protect jobs and wages of workers. We have to give them financial support," Gandhi said.
The former Congress president said the economic package is being delayed as the government feels India could be downgraded by international agencies.
"We need to start our domestic economy soon, the more time we lose, the worse impact it will have," he noted.