Model Answer
0 min readIntroduction
Local bodies in India, envisioned as the third tier of governance under the 73rd and 74th Constitutional Amendment Acts (1992-93), have historically suffered from financial inadequacy. This has hampered their ability to effectively discharge their constitutionally mandated functions. The 13th Finance Commission (2005-2010), chaired by Dr. Vijay Kelkar, recognized this critical gap and recommended a substantial increase in the share of divisible pool of taxes to local bodies. The core premise was that greater financial autonomy would empower them to perform better and, consequently, become more accountable to their constituents. However, the question remains: does increased financial devolution inherently lead to enhanced accountability in the discharge of their functions?
Financial Devolution and the Rationale Behind It
Prior to the 13th Finance Commission, the financial position of RLBs and ULBs was precarious. They were heavily reliant on state governments for funds, leading to delays, uncertainties, and a lack of autonomy in planning and execution. The 13th Finance Commission addressed this by:
- Increased Devolution: Recommended a significant increase in the share of the divisible pool of taxes to local bodies – 2.5% of gross tax receipts for Panchayats and 1% for Municipalities.
- Untied Funds: A substantial portion of the funds devolved were untied, meaning local bodies had the discretion to allocate them based on local needs and priorities.
- Performance-Based Grants: Introduced performance-based grants to incentivize improvements in service delivery and financial management.
The rationale behind this approach was rooted in the principles of fiscal federalism and decentralization. It was believed that providing local bodies with greater financial resources would:
- Enhance their capacity to deliver essential services like water supply, sanitation, education, and healthcare.
- Promote local economic development.
- Strengthen democratic participation and responsiveness.
Accountability Mechanisms and Their Impact
The 13th Finance Commission’s recommendations were expected to bolster accountability through several mechanisms:
- Increased Transparency: Greater financial autonomy necessitated greater transparency in financial management, including public disclosure of budgets, expenditures, and audit reports.
- Enhanced Citizen Participation: With more control over resources, local bodies were expected to be more responsive to citizen needs and actively involve them in the planning and monitoring of projects.
- Strengthened Audit Mechanisms: The Commission emphasized the need for strengthening local fund audits and ensuring independent scrutiny of financial transactions.
- Capacity Building: Funds were also allocated for capacity building of local body officials in areas like financial management, planning, and monitoring.
Evidence of Impact: Studies following the implementation of the 13th Finance Commission’s recommendations showed a positive correlation between increased financial devolution and improvements in service delivery in some areas. For example, the availability of funds for sanitation projects led to increased toilet construction in several states. However, the impact varied significantly across states and local bodies.
Challenges to Enhanced Accountability
Despite the positive intentions and some demonstrable improvements, several challenges hindered the realization of full accountability:
- Weak Institutional Capacity: Many local bodies lacked the necessary administrative and technical capacity to effectively manage increased funds and implement projects.
- Lack of Transparency: Despite recommendations, transparency remained a major issue in many areas, with limited public access to information and weak social audit mechanisms.
- Political Interference: State governments often exerted undue influence over local bodies, undermining their autonomy and accountability.
- Corruption: Misappropriation of funds and corruption remained prevalent in some areas, diverting resources away from intended beneficiaries.
- Inadequate Monitoring and Evaluation: The monitoring and evaluation mechanisms were often weak, making it difficult to assess the impact of projects and hold local bodies accountable for their performance.
State-Level Variations: States like Kerala and Karnataka, with stronger local governance institutions and greater citizen participation, were able to leverage the increased financial devolution more effectively than states with weaker institutional frameworks.
The Role of Subsequent Finance Commissions
Subsequent Finance Commissions (14th and 15th) have built upon the recommendations of the 13th Finance Commission, further increasing the share of funds devolved to local bodies and emphasizing the importance of performance-based grants. The 15th Finance Commission (2020-2026) has focused on improving health grants to ULBs and RLBs, especially in the wake of the COVID-19 pandemic.
Conclusion
The 13th Finance Commission’s emphasis on improving the finances of rural and urban local bodies was a crucial step towards strengthening local governance in India. While increased financial devolution did contribute to enhanced accountability in some areas, it was not a panacea. Realizing the full potential of fiscal decentralization requires addressing the underlying challenges of weak institutional capacity, lack of transparency, political interference, and corruption. A holistic approach that combines financial empowerment with institutional strengthening, capacity building, and robust monitoring mechanisms is essential to ensure that local bodies are truly accountable to their citizens and effectively discharge their functions.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.