Centre-state relations emerge as talking point

Ahluwalia for more funds to panchayats, local bodies for delivery of health care, education; Subramanian says friction in fiscal federalism, agri requires renegotiation of social contract

Montek ME Singh Ahluwalia, the erstwhile Planning Commission deputy chairman, on Thursday batted for a transfer of a portion of central taxes to the third tier of the government - panchayats and other local bodies to enable them to deliver key services such as education and health care to the people.

At a panel discussion on "Contours of the Centre-state relations necessary for India's successful journey towards 2047" with former chief economic advisor Arvind Subramanian, Ahluwalia said various arrangements of the Finance Commission had ignored this aspect. He said many would say the Finance Commission could not transfer central taxes to this level but some innovative way could be thought of.

He suggested a portion of central taxes be set aside for this transfer and the remaining be shared between the Centre and the states.

While health and education are state subjects, the delivery of these services is done by the sub-state authorities such as panchayats, Ahluwalia pointed out.

The 16th Finance Commission is interacting with stakeholders to work out its recommendations for transferring resources from the Centre to the states for 2026-27 to 2030-31.