The Thirteenth Finance Commission – a game changer for devolution.

Posted on:16-05-15

The report of the Thirteenth Finance Commission (TFC) can be considered as a game changer in the manner in which devolution of funds from the Union government to the local levels was configured. For one thing, the allocation of funds over the five year period of its implementation, was sharply increased from Rs. 20000 crore, to around Rs. 87,519 crore for five years from 2010 to 2015. While the increase of funds for local governments was welcomed, the manner in which these were configured brought more cheer. For the first time, the considered the demand by the States and local bodies for giving a share from the divisible pool of central revenues, to the latter. Having accepted that landmark change, at the time of actually making the recommendation, the TFC did convert this share into grants under Article 270 of the Constitution. They did so on the strength of a legal opinion that they obtained, in which they came to the conclusion that the Constitution did not provide scope to them to give LGs funds as revenue shares. This was not merely a semantic change; it did change the character of the devolved funds into ‘grants’. Read more »

Participative budgeting: things to be kept in mind by the Delhi Government

Posted on:04-05-15

The decision by the AAP government in Delhi to undertake a process of participatory budgeting is welcome. However, some things need to be kept in mind, to ensure that the process does not dissolve into empty political rhetoric and becomes a meaningful exercise. There are five such points that need to be kept in mind. Read more »

The game of diversion of Finance Commission funds

Posted on:24-04-15

The results of the Twelfth Finance Commission’s directive that funds meant for the Local Governments should reach them within 15 days of their release, and that the Comptroller and Auditor General should verify compliance, did have a salutary effect. States, including those that had acquired a bad reputation for such diversions, did assiduously adhere to these stipulations. The major disincentive for them to delay funds was the additional directive that the States ought to pay interest to the local governments, for the delays caused due to transfers later than 15 days, from the State to the Local Government.

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The Twelfth Finance Commission and Command and Control over States

Posted on:20-04-15

By the time that the Twelfth Finance Commission report was released, late in December 2004, the game of many states in diverting funds meant for the local governments had been exposed. Read more »

Why the Fourteenth Finance Commission did what it did.

Posted on:10-04-15

It was not always that Central Finance Commissions gave pointed directions on how and what for, the funds recommended to be granted to the local governments were to be spent. Initial reports of Finance Commissions immediately following the Constitutional amendment that expanded their scope to recommending grants to local governments, were more sanguine about the manner in which funds were to be transferred to them.

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Pushing the Envelope; the Fourteenth Finance Commission’s Conditions on Local Government Grants

Posted on:04-04-15

I concluded last week’s blog with the observation that the FFC has the leeway to suggest ‘measures’ to ‘augment’ the Consolidated funds of States, to ‘supplement’ the finances of Local Governments. On a plain reading, these words seem to convey two critical aspects of the Finance Commission arrangement:

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Increased local government grants – the good and the bad news

Posted on:30-03-15

At first sight, it seems that there is nothing but good news for the local governments from the report of the Fourteenth Finance Commission (FFC). The report has been accepted by the Union government and will be implemented from 2015 to 2020. 

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The Fourteenth Finance Commission and its implications on the Local Governments

Posted on:24-03-15

There is no doubt that the recent report of the Fourteenth Finance Commission represents a watershed in the evolution of centre-state-local fiscal relations in India. Two of its landmark recommendations that pertain to the Centre-State design have been already accepted by the Central Government; the first is the sizeable increase in the State share of central revenues from 32 percent to 42 percent, and the second is the forgoing of special category status that has been conferred to some States. Both these recommendations are bound to have their political fallouts too, and were not free from controversy. A dissent by one of the members of the Commission showed that the decision to go in for such dramatic changes was not unanimous. Read more »

A pre-Budget reflection

Posted on:28-02-15


In 2004, in the first flush of enthusiasm following the UPA’s unexpected victory in the Lok Sabha elections, the Government of India, for the first time in its history, created a separate Ministry for Panchayati Raj. This was done by carving this ministry out of the leviathan Ministry for Rural Development. An ardent supporter of the ideal of strengthening local governments, Mr. Mani Shankar Aiyar, was put in charge of the fledgling Ministry. Cynics might say that what was being handled reasonably competently by one Joint Secretary in the Ministry of Rural Development was being now shared with a rambling bureaucratic hierarchy comprising of a Secretary, two additional secretaries and three joint Secretaries, with all their attendant support systems and staff. Read more »

Free Urban Transportation as a Case Study for Policy Making

Posted on:21-02-15

In my last blog, I suggested that making public transport completely free would be a good idea, though at first sight, this might seem irresponsible and amount to shallow political opportunism. Today let me take this issue as an example to illustrate what the making of public policy entails. Read more »