Finance Commission grants to cities remain limited, hindering urban development and governance
The article examines why Finance Commission (FC) grants to cities remain limited, despite the growing importance of urban areas. It highlights that cities receive a disproportionately small share of the country's GDP and central transfers, with per capita devolution showing no significant change. The 16th FC emphasizes that cities must find avenues to increase their own revenue and expand the tax base. The article points out that while FCs recommend grants for specific services like water supply and sanitation, they often lack objective parameters for allocation and do not adequately address the overall financial needs of cities. This limitation hinders urban development and effective local governance.
Key Points
- Indian cities receive a disproportionately small share of central transfers and GDP, limiting their financial autonomy.
- Finance Commissions recommend grants for specific urban services but often lack objective parameters for equitable allocation.
- The 16th Finance Commission emphasizes cities' need to enhance their own revenue generation and expand their tax base.
- The limited and conditional nature of FC grants hinders comprehensive urban development and effective local governance.
Exam Facts
- 90% of total government revenue and nearly 67% of the country's GDP is generated through urban centres.
- The 16th Finance Commission recommends that cities increase their own revenue.
- Under the 16th FC, urban local bodies are to receive around ₹3.56 lakh crore between 2025 and 2031.
- The 15th FC total grants to local bodies amounted to ₹4.36 lakh crore.
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