While the reasons for intergovernmental grants are similar across nations, the applicability of and emphasis on each of these reasons may vary with the way public finances are organised in particular cases. An evaluation of the transfer system or a part of it thus requires an understanding of these objectives and an assessment of the extent to which these objectives are being met. This paper examines the transfer system that operates in India through the institution of the Finance Commission. The focus is on an evaluation of the need, appropriateness and manner of use of various socio-economic criteria in the design of transfers mandated by Finance Commissions over the years, placing them in the context of international experience.
