16th Finance Commission on Urbanisation
Context:
The 16th Finance Commission (FC) has significantly boosted the financial allocation for urban local governments in its latest report tabled in Parliament.
This marks a strategic shift in resource distribution, acknowledging the rapid pace of urbanisation in India
Key Recommendations:
The Commission has sharply increased the proportion of grants for urban local bodies (ULBs) to 45%, up from 36% in the 15th FC and 26% in the 13th FC.
In monetary terms, the 16th FC recommends Rs 3.56 lakh crore in grants to ULBs.
This is more than two times the allocation of the 15th FC (Rs 1.55 lakh crore) and a 15-fold rise over the 13th FC's grant.
Rationale for the Shift:
Rising Urbanisation:
The higher share for urban bodies is a recognition of projected urbanisation levels.
The last Census was conducted in 2011, and since then, urban populations have grown significantly.
Addressing Gaps:
Experts note that this increased share will help bridge financial gaps in urban governance.
It ensures that when the Census 2027 data is released—potentially pegging urbanisation at around 48%—urban governments will not be left behind financially.
State-wise Variations:
The grants are distributed based on a population-based distribution formula, leading to significant variations among states:
Gainers:
For Kerala, grants have grown by over 400%.
For Maharashtra, grants have increased by over 300%.
Losers:
For Odisha, grants have grown by a modest 13%.
Bihar is facing a reduction as its grants have been cut by 8%.