India's 16th Finance Commission needs to prioritize urbanization

It should demystify its work, widen public participation and address the need for significantly better funded towns and cities

- KESAVAN SRINIVASAN & SRIKANTH VISWANATHAN

The wheels have been firmly set in motion for the 16th Finance Commission (FC) with the publication of the Terms of Reference and notification of its chairperson and members. Unlike for the 15th FC, the terms for the latest FC hold no surprises. It sticks to the constitutional mandate, unlike the previous FC, where certain additions triggered debates.

Central FCs have also contributed to the country immensely through thought leadership and policy innovations, governance reforms and the like to advance equitable human development in India, besides discharging their core function of recommending formulae for government resource allocation. They are effective in addressing the gap between the Centre and states on their collected resources, referred to as a 'vertical imbalance,' and inter-state gaps (which states get how much), or 'horizontal imbalances. The central FC also determines specific allocations for local governments, even as state-level FCs do the same in the context of state finances under Articles 243(I) and 243(Y) introduced by the Constitution (74th Amendment) Act, 1992.

Over the years, central FCs have also pushed the envelope on governance and public finance reforms. Streamlining centrally sponsored schemes and unbundling power utilities, for example, and advocating other power-sector reforms and measures for fiscal sustainability at the central as well as state levels.