Why in the News
The Finance Commission of India (16th FC) has significantly increased grants for Urban Local Bodies in recognition of rising urbanisation.
Key Highlights
-
Higher Share for Urban Bodies
- 16th FC: 45% of local body grants to urban areas
- 15th FC: 36%
- 13th FC: 26%
-
Sharp Rise in Funds
-
- ₹3.56 lakh crore recommended for urban local bodies
- More than double the 15th FC allocation
- Nearly 15 times the 13th FC allocation
Why the Shift?
- Projected urbanisation: 41% by 2031
- 2011 Census urban population: 31%
- Increasing migration and expansion of cities
- Need for stronger grassroots urban governance
Distribution Pattern
- Grants distributed using population based formula
- Significant variation among states
- Kerala up over 400%
- Maharashtra up over 300%
- Odisha up 13%
- Bihar down 8%
Significance
- Aligns fiscal transfers with demographic trends
- Strengthens municipal capacity for infrastructure and service delivery
- Prepares cities for higher urbanisation post Census 2027
Prelims Pointers
- Finance Commission constituted under Article 280 of the Constitution.
- Reconstituted every five years.
- Recommends tax devolution and grants to states and local bodies.
- 73rd and 74th Constitutional Amendments institutionalised local governments.
| [2025] Which of the following statements with regard to recommendations of the 15th Finance Commission of India are correct?Â
I. It has recommended grants of ₹4,800 crores from the year 2022–23 to 2025–26 for incentivizing States to enhance educational outcomes. II. 45% of the net proceeds of Union taxes are to be shared with States. III. ₹45,000 crores are to be kept as performance-based incentive for all States for carrying out agricultural reforms. IV. It reintroduced tax effort criteria to reward fiscal performance. Select the correct answer using the code given below: (a) I, II and III (b) I, II and IV (c) I, III and IV (d) II, III and IV |
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