Paper: GS – II, Subject: Society and Social Justice, Topic: Urbanization – Problems and remedies, Issue: 16th FC Boosts Urban Local Governments.
Context:
The latest report of the 16th Finance Commission, tabled in Parliament on February 1, highlights renewed support and strengthened financial backing for urban local governments.
Key Takeaways:
Grant Allocation Increase:
- 16th FC: 45% of grants to urban local bodies (up from 36% in 15th FC and 26% in 13th FC)
- Absolute amount: Rs 3.56 lakh crore (over 2x the 15th FC’s Rs 1.55 lakh crore; 15-fold rise from 13th FC)
- Data Challenges:
- Lack of credible urbanization data hampers policy initiatives
- Estimates vary substantially across sources
- Rapid annual migration patterns not captured in Census data
Rising Urbanisation and the Need for Greater Urban Funding:
- The 16th Finance Commission’s higher allocation to urban local bodies acknowledges India’s projected urbanisation level of 41% by 2031.
- With each decade, a larger share of India’s population is moving to cities, increasing the demand for stronger urban governance.
Data Gaps and Policy Challenges:
- Urbanization Context:
- 2011 Census: 31% of India’s population in urban areas
- Global comparison: China (45%), Indonesia (54%), Brazil (87%)
- World Bank 2015 estimate: 54% in cities + 24% in urban clusters = 78% total
- Inconsistent data hampers effective policy planning and resource allocation. Urban local bodies are particularly affected due to uncertain funding projections.
16th FC’s Financial Cushion:
- The increased 45% share for urban bodies is seen as a buffer against future demographic revisions.
- If Census 2027 data show higher urbanization – say 48%: the enhanced allocation would prevent urban governments from being financially underprepared, unlike earlier cycles when allocations were lower (36% or 26%).
The 16th Finance Commission’s recommendations reflect India’s accelerating urban transition, though variations in state-level allocations highlight ongoing complexities in balancing demographic trends and fiscal federalism.
Source: (The Hindu)
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