The Third Tier and the Fourteenth Finance Commission

As a multilayered federal system, India needs a comprehensive and coordinated intergovernmental transfer system that includes the third tier as a dynamic component. This is particularly important because of the multiplicity of channels and the bewildering typology of transfer arrangements that exist today. This article points out that the Fourteenth Finance Commission's real challenge is to persuade state governments to carry on with the task of democratic decentralisation, while spelling out some issues it may consider to improve public fi nance and local democracy.