The report calls for establishing a strong information architecture that enables data-driven fiscal decentralisation via SFCs and strengthens grassroots governance.
About State Finance Commissions (SFCs):
- Mandate: SFCs are constitutional bodies established under Article 243-I of the Indian Constitution.
- Function: Recommend the distribution of state revenues between the state government and local bodies.
Key Challenges Faced by State Finance Commission:
- Data Fragmentation and Silos: Preventing SFCs from accessing a holistic view performance of local bodies.
- Lack of Disaggregated Data: Absence of Panchayat level and sector-wise expenditure tracking limits performance-based fiscal analysis.
- Non-Standard Accounts: Across states and a lack of consolidated financial statements complicate cross-state comparisons.
- Local Capacity Gaps: Shortage of trained staff at the grassroots level hinders proper digital record-keeping.
- Others: Delays in setting up SFCs, lack of devolution, etc
Key Recommendations:
- Performance Audit: The CAG should audit the implementation of 73rd Constitutional Amendment across states to evaluate the actual extent of local devolution.
- Permanent SFC Cells: States should set up dedicated cells to continuously maintain and update financial data.
- Standardized Accounting: Introduce uniform accounting heads for local transfers and adopt a common reporting template to ensure consistency and cross-state comparability.
- Structured Performance Indicators: Classify Panchayat Advancement Index metrics into "needs," "performance," and "equity" to help refine fiscal devolution formulas.
