Challenges faced by local bodies in India

Source: The post challenges faced by local bodies in India has been created, based on the article “Decentralisation: India’s struggle with persistent challenges” published in “Business standard” on 4th May 2024.

UPSC Syllabus Topic: GS Paper 2– polity-devolution of powers and finances up to local levels and challenges therein.

Context: The article discusses challenges faced by local governments in India. It highlights issues like lack of data on finances, low revenue collection, and insufficient funds from higher levels.

What are the challenges faced by local bodies in India?

Fiscal Data Challenges: Local bodies lack detailed financial data, making budget management and planning difficult. Creating an accessible database for local financial data is critical. The Eleventh Finance Commission has provided grants for this purpose.

Revenue Generation Issues: Local bodies struggle with generating their own revenue, and there is limited information available due to the absence of a comprehensive database. Recommendations have been made to enhance local bodies’ taxing powers and improve the collection of property taxes and user charges.

Fund Devolution from Central and State Governments: Support from state and central governments in fund allocation to local bodies is inconsistent. Issues include delayed setup of State Finance Commissions (SFCs) and incomplete implementation of their recommendations. Additionally, grants from Union finance commissions are often conditional, leading to underutilization.

Capacity to Utilize Funds: There are concerns about local bodies’ capacity to effectively utilize allocated funds, leading to the creation of parastatals to oversee certain programs.

For details information on challenges faced by local bodies in India read Article 1, Article 2, Article 3

What is the significance of decentralization in addressing these challenges?

Empowering Local Decision-Making: Decentralization allows local bodies to prioritize expenditure based on local needs, enhancing service delivery effectiveness.

Enhancing Fiscal Capacities: By decentralizing powers, local bodies can have access to adequate resources and autonomy in financial decisions, thus overcoming challenges like low revenue collection and inadequate devolution of funds.

Improving Accountability: Decentralization promotes transparency and accountability in local governance by creating frameworks for local accountability and disseminating information on local body activities and finances.

For details information on Decentralization in India read this Article here

Question for practice:

Examine how decentralization can improve the effectiveness and accountability of local bodies in India?