Summary
Distribution of fiscal powers between the union and the states in such a manner so that both of them can function autonomously/independently on matters under their jurisdiction in an effective manner.
Principles
- Existence of resource responsibility parity.
- Elasticity of resources.
- Independence and autonomy to spend the money as per one’s priority.
- Vertical and horizontal parity to address the inequitable distribution of resources.
- Aspects of accountability to ensure efficient and proper utilization of funds.
Concerns
- grants often come with a number of unreasonable conditions
- A large portion of Vertical transfers are made through this route therefore sidelining the role of finance commission.
- States often complain that they are required to match the proportion of grants but do not have the liberty to decide the priorities.
- Grants made under this route are not released on a timely basis therefore delaying the execution of various initiatives by the states.
- Often these grants are one-time in nature and recurring expenditure has to be made by the states.