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Fiscal Decentralisation and Finances of Gram Panchayats and Municipalities
Based on a sample of 56 gram panchayats and 14 municipalities, it is concluded that the fiscal decentralisation implemented in Kerala is partial. In the case of intergovernmental fiscal transfers through state finance commissions, there has been delayed implementation of SFC reports, rejection of devolution recommendations, implementation of very few recommendations and non-implementation of accepted recommendations indicating a distorted implementation of fiscal decentralisation. B
Kerala implemented decentralisation of powers and functions to local governments following the 73rd and 74th amendments to the Constitution of India. Since 1994, in some aspects of decentralisation, Kerala has made substantial progress in comparison to other states in India. The state government transferred a number of functions, institutions and staff to the rural and urban local governments, conducted elections once in five years, constituted state finance commissions (SFCs) to devolve funds, strengthened local governments in several ways, entrusted additional functions and implemented decentralised planning through local governments. However, the fiscal decentralisation implemented in Kerala is partial and distorted. This is because of the non-transfer of adequate powers and resources to meet additional functions, non-transfer of financial powers to revise the rate of tax and non-tax items of local governments, distorted implementation of the SFCs recommendations and restrictive policy pursued by state government with respect to borrowing by local governments. This paper examines the implementation of fiscal decentralisation and its effects on the finances of gram panchayats and municipalities in Kerala.
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