Preserving the Incentive Properties of Statutory Grants

This paper investigates flows from the centre in respect of the two-part grant for local governments prescribed by the Thirteenth Finance Commission with unconditional and conditional components, covering 2010-15. There is evidence that fiscal compulsions at the centre bent the structure of the grant away from that envisioned by the TFC, and that its incentive properties were thereby not preserved. Local governments are the nodes at which the sustainable development goals for improved sanitation and public health have to be delivered. This is the level at which public finance attention has to be focused.