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State Finance Commissions: How successful have they been in Empowering Local Governments?

Author

Listed:
  • Gupta, Manish

    (National Institute of Public Finance and Policy)

  • Chakraborty, Pinaki

    (National Institute of Public Finance and Policy)

Abstract

While the Constitution provides for setting up of SFCs at regular intervals, this has not been adhered to by the states. The paper reviews the reports of the latest SFCs of 25 states in India. This involves examining the status of constitution of SFCs, their functioning and the approach adopted by them in carrying out their task and the principles adopted by them in allocating resources to local governments both vertically and horizontally. It also quantifies the devolution recommended by the SFCs in order to get a comparative picture of funds devolved by them across states. It is observed that there is huge variation in the recommended per capita devolution across States. We do not find any relation be-tween the recommended per capita devolution and per capita income of States, but per capita devolution is in general very low across states in India. Is it that the state govern-ments arbitrarily reject the recommendations or are the SFCs themselves to be blamed for non-acceptance of their recommendations? The paper also examines the quality of SFC reports from the point of view of their implementability and finds that at times state gov-ernments are constrained to implement these recommendations on the grounds of poor quality of SFC reports.

Suggested Citation

  • Gupta, Manish & Chakraborty, Pinaki, 2019. "State Finance Commissions: How successful have they been in Empowering Local Governments?," Working Papers 19/263, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:19/263
    Note: Working Paper 263, 2019
    as

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    File URL: https://www.nipfp.org.in/media/medialibrary/2019/05/WP_263_2019.pdf
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    References listed on IDEAS

    as
    1. Shrestha, Ruzel & Chakraborty, Lekha, 2019. "Practising Subnational Public Finance in an Emerging Economy: Fiscal Marksmanship in Kerala," Working Papers 19/261, National Institute of Public Finance and Policy.
    2. Chakraborty, Lekha S, 2019. "Indian Fiscal Federalism at the Crossroads: Some reflections," MPRA Paper 93516, University Library of Munich, Germany.
    3. Patnaik, Ila & Pandey, Radhika, 2019. "How much equity capital should a central bank hold?," Working Papers 19/262, National Institute of Public Finance and Policy.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Fiscal Decentralisation ; Local governments ; State Finance Commissions;
    All these keywords.

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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