wl-6956-Empowering Local Governments: Role of Union Finance Commissions

The Local Governments' financial sustenance crucially relies on transfers from the Union Finance Commission (UFC), governed by the Article 280(3) (bb) and (c) of the Indian Constitution, introduced in conjunction with the 73rd and 74th Amendments in 1992. This article evaluates the devolution of funds and the approaches employed by the UFC in augmenting the resources available to the Local Governments. It observes that these constitutional provisions have become pivotal in guiding the allocation of UFC transfers. However, the approaches employed by these commissions have fallen short in substantially bolstering the augmentation of resources. While population and area serve as primary criteria for horizontal distribution, their predominant influence on state transfers hasn't uniformly progressed the service delivery systems across regions.