“India has one of the lowest shares in local government expenditure at 5%”
Vice-President Hamid Ansari on Tuesday expressed concern that the institution of State Finance Commissions in the country had “not been harnessed well enough” to achieve the required fiscal devolution at the local government level.
Delivering the Satyendra Narayan Sinha Memorial Lecture here, Mr. Ansari said that despite the success of political federalism at the third tier of the local government through regular elections, granting of constitutional rights and reservation for women and marginalised communities, a corresponding movement towards fiscal federalism had not taken place.
Urging for more funds to be committed at this level, Mr. Ansari noted that the issue of devolution to local governments was often submerged amid criticisms of devolution of finances between the Centre and the States.
He pointed out that India had one of the lowest shares in local government expenditure — a mere five per cent as compared with the total public sector expenditure.
This stood in poor contrast with a 50 per cent fund allocation to local governments in China, 15 per cent in Brazil, and an average 30 per cent in the 34 Organisation for Economic Cooperation and Development (OECD) block countries.
Likewise, the share of local government expenditure in the country's Gross Domestic Product was less than two per cent as compared with a 14 per cent share of the GDP in the OECD countries, 10 per cent in China and six per cent in Brazil, the Vice-President noted.
Touching upon the need to fully tap Constitutional mechanisms with a view to improving inter-State relations, he commented that a case in point was the institution of the Inter-State Council, established by a Presidential Order under Article 263 in 1990, which has remained “somewhat dormant” till now.
Mr. Ansari said utilisation of such instruments could ensure better resolution of contentious issues like water management and help solve inter-state water disputes in a cooperative manner.