15th FC vs 14th FC: Central shares in revenue receipts of states

[divya_chirayath]

Between 2016-17 and 2021-22, states also have seen changes in the share of revenue receipts which comes from the Union government. This period also includes the changes brought on the recommendation of 15th Finance commission which was implemented in 2020-21.
This visualisation depicts the change in share of revenue receipts coming from centre in the 15th finance commission period (2020-21 and 2021-22) vs in the 14th finance commission period (2016-17 to 2019-20). Out of 25 states/UT for which data has been compiled, 16 have seen increase in the share of resources which comes from centre, while 9 have seen a reduction. Punjab and Uttarakhand have seen the largest increase while Karnataka and Jharkhand have seen the highest reduction.

@smukho, @anjana_r, @mnkgaur- How has the criteria for inter-state distribution of 15th FC Grants for local bodies changed from previous commissions? Has this had an impact on horizontal equity in the distribution of grants?

[smukho]

The criteria used by FCs in distributing CFC grants among states have seen a change, right from the 10th FC. The CFCs design the horizontal distribution of grants among states based on composite criteria that take into account several factors such as population, area, measures of decentralization and need, etc. Every CFC has adopted a different ideological approach towards inter se distribution among states- while some CFCs have taken used criteria that reward or incentive democratic decentralization in states, some CFCs have steered clear of promoting any particular model of decentralization.

Here are the criteria used by different Finance Commissions for inter state allocation of grants to local bodies:

[divya_chirayath]

Thanks, @smukho for the overview of the criteria of distribution of grants for local bodies. How has the trend of allocation been in terms of vertical devolution of grants to local bodies?

[anjana_r]

While the 73th and 74th Constitutional Amendment Acts recognised the role of local bodies in development, Article 243G of the Constitution of India empowers the Legislature of a State to make provisions for devolution of power and responsibilities upon Panchayat at appropriate level, for preparation and implementation of plans for economic development and social justice. The 13th Finance Commission was the first to recognize the need for local bodies to have buoyant sources and it was also the first to introduce a basic and performance component in the grants. Here is an overview of the funds provided to the States for distribution among Panchayati Raj Institutions (PRIs) awarded by different FCs:

Source: PIB - https://pib.gov.in/PressReleasePage.aspx?PRID=1784195

[divya_chirayath]

Thanks, Anjana. The amount devolved to rural local bodies has a large increase from 2015. This data and the visualisation are both helpful in deciphering trends in devolution of funds both to the states and local bodies.