Why Did Provincial Autonomy Begin in 1937 but Not the Federation Proposed in the 1935 Act?

While revising modern Indian history for UPSC, I keep seeing two statements about the Government of India Act 1935: it provided for an All-India Federation, and provincial autonomy came into operation in 1937.

I understand that elections were held and ministries took office in the provinces, but the proposed federation never came into existence. How could one major part of the Act operate while the other remained unimplemented?

1. What conditions had to be met before the federation could be established?
2. How did the position of the princely states differ from that of British Indian provinces?
3. What constitutional arrangements continued at the centre while provincial autonomy was operating?

I’m looking for a clear distinction between the Act’s provisions and what was actually brought into force. That distinction seems especially easy to miss in a prelims statement about the Government of India Act 1935.