Impact Assessment of Central Finance Commission (CFC) Grants at Grassroots Level

Action Research & Research Studies wing of the Ministry of Panchayati Raj (MoPR) has awarded the study to the National Council of Applied Economic Research (NCAER) to assess the impact of Central Finance Commission’s (CFC) grant to the Rural Local Bodies (RLBs). The idea of fiscal devolution in India revolves around transferring financial resources from the central government to states and subsequently to local governments, with the goal of empowering grassroots-level governance to address development needs effectively. This process has been a cornerstone of India’s federal structure, aiming to ensure equitable resource distribution across diverse regions.

The Central Finance Commission (CFC) plays a critical role in India’s fiscal federalism by recommending the distribution of resources between the central and state governments, as well as allocations to Panchayati Raj Institutions (PRIs).

When analysing the impact of CFC grants at the Panchayat level, it is essential to examine how these funds affect various sectors critical to rural development and governance.

Objectives

• To study the impact of Central Finance Commission (CFC) grants at the Panchayat levels across different sectors
• To examine/ascertain if CFC funds are being utilized by Panchayats have resulted in assets for OSR generations
• To examine the current state of assets created in Panchayat from CFCs and the state of their operations and maintenance
• To highlight the progress of States on compliance of recommendations made by the 15th Finance Commission
• To assess the effectiveness of the CFC grants with other schemes in the GPs such as MGNREGA, NRLM, JJM, SBN (G)), if the effective utilization of CFC funds is linked.
• To identify major problems / challenges faced by RLBs and make recommendations for the considerations of the 16^th Finance Commission
• To analyse effectiveness of attaching conditionalities to grants (tied grants).