Impact of Grants on Tax Effort of Local Government

that higher grants are given to more populous, and hence, more needy panchayats. Impact of Grants on Tax That is as it should be and there is certainly nothing wrong with such a design. The negative relationship between un- Effort of Local Government GR An important prerequisite of fiscal empowerment of local bodies is to design and implement a formula-based, equitable and efficient transfer system. Unfortunately, despite the constitutional amendment to empower rural local bodies, designing an appropriate fiscal transfer system has not received the attention it deserves. The reason for this has to be found in the paucity of systematic analysis of the impact of the transfers from states to local bodies. From this perspective, the study by Rajaraman and Vashishta (RV) on