The recommendations put forth by the 13th Finance Commission mark a significant departure from its predecessors in their approach towards bolstering local government finances. Unlike prior commissions, the 13th Finance Commission emphasized a more decentralized approach, recognizing the pivotal role played by local governments in fostering sustainable development at the grassroots level. One of its key recommendations involved substantially increasing the share of central taxes allocated to states, thereby enhancing the fiscal capacity of local bodies. Moreover, the commission advocated for greater autonomy and flexibility in fund utilization, empowering local governments to tailor their spending priorities according to regional needs. Additionally, it introduced performance-based incentives aimed at encouraging fiscal discipline and efficiency at the local level. This departure from traditional top-down fiscal planning underscores a paradigm shift towards empowering local authorities and promoting bottom-up governance. By prioritizing fiscal decentralization and incentivizing local fiscal responsibility, the recommendations of the 13th Finance Commission pave the way for a more inclusive and sustainable approach to strengthening local government finances, thus facilitating equitable development across the nation.
Tag: Governance.
Decoding the Question:
- In Introduction, try to briefly write about the Finance Commission.
- In Body,
- Write about the 13th Finance Commission.
- Mention how its recommendations have been a departure from the previous commissions for strengthening the local government finances.
- Write the concerns of the recommendations given.
- In Conclusion, write the significance of such recommendations.
Answer:
The union Finance Commission (FC) is a Constitutional body, appointed under Article 280 of the Constitution, every five years by the President of India for the purpose of resource sharing between the Center and the states is unique to the Indian federal structure.
13th Finance Commission and its Departure from the Recommendations of Previous Commissions:
The Thirteenth Finance Commission (2010-15) was appointed by the President of India under the Chairmanship of Dr Vijay Kelkar.
- It suggested raising the states’ share in Union Tax revenues from 30.5% to 32%.
- It also called for a 2.5% share of the divisible pool for local bodies in the form of grants, as the Constitution does not allow the sharing of tax revenues with them. While 1.5% will be constant, 1% will be based on performance.
- The revenue was previously divided between rural and urban bodies in the ratio 4:1, the commission has suggested raising the latter’s share to match their share of the population according to the 2001 census.
Recommendations of 13th FC Strengthen Local Government Finances:
- It will empower local bodies by turning the grants they receive into an entitlement, reducing the control that the state governments exercise over them.
- The local governments will get their grants based on their performance and their share from the tax revenues.
- The Commission’s recommendations also seek to balance the share of urban bodies in total revenue.
- It will help in addressing issues like increasing urbanization, emigration from rural to urban areas, etc.
- Competition among states due to performance-linked incentives will push the State governments to utilize the Central funds more effectively.
Concerns with Recommendations of 13th FC:
- The latest Delimitation of Parliamentary and Assembly Constituencies has raised the political clout of urban voters.
- It may have the potential to benefit the political party in power at the national level.
The recommendations of the 13th Finance Commission redefine the existing structure of fiscal federalism in the country, setting the stage for a different political dynamism by vesting greater powers with the third tier of government, local bodies, both urban and rural. The inclusive growth requires a fiscally strong Centre, States as well as third tier i.e., local governments.
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