GS Question

The 13th Finance Commission was constituted in India to make recommendations on the sharing of tax revenues between the central and state governments, as well as to suggest measures to improve the finances of local governments. Some of the key recommendations made by the 13th Finance Commission aimed at strengthening the local government finances were:

1. Increase in the share of revenue: The commission recommended an increase in the share of tax revenues to be distributed to local governments. It suggested an increase in the share from 29.5% to 32% of the divisible pool of taxes, thereby providing more resources to local bodies.

2. Grants to local governments: The commission recommended providing grants to local governments for specific purposes like basic services, infrastructure development, and maintenance. It introduced a separate grant for urban local bodies to improve the quality of urban infrastructure facilities.

3. Focus on capacity building: The Commission laid emphasis on strengthening the capacity of local bodies to manage their finances effectively. It recommended support for training programs, technical assistance, and financial management systems to improve financial planning and governance at the local level.

4. Fiscal discipline and accountability: The commission emphasized the need for local bodies to maintain fiscal discipline and adhere to financial accountability norms. It recommended the implementation of measures like double-entry accounting, external auditing, and the establishment of state finance commissions to oversee the financial health of local bodies.

5. Incentives for reforms: The commission suggested providing incentives to local bodies that undertake fiscal and governance reforms. It recommended performance-based grants to encourage local governments to improve service delivery and financial management practices.

These recommendations were a departure from the previous finance commissions as they focused on providing greater autonomy and resources to local governments. The 13th Finance Commission recognized the importance of strengthening local bodies to ensure effective delivery of public services and promote local development. By recommending a higher share of revenue, grants, capacity building, and incentives for reforms, the commission aimed to empower local governments and enable them to play a more significant role in promoting local economic growth and governance.