Tied and untied grants
Also called: Conditional grants, Unconditional grants · Topic: Fiscal Federalism: Finance Commission, Devolution and Centre-State Finances · NCERT: Beyond NCERT
Meaning
Tied grants (also called conditional grants) must be spent on a named purpose or only after certain conditions are met. Untied grants (also called unconditional grants) can be spent as the recipient chooses. Tied grants help the giver push national priorities. Untied grants respect the recipient's own choices. In the Union Budget, all grants to states count as Union revenue expenditure, even when they are used to build assets.
Example
The 15th Finance Commission (2021-26) split rural basic grants to local bodies into 40% untied and 60% tied to sanitation and drinking water. The 16th Finance Commission (2026-31) splits basic grants 50% untied and 50% tied to sanitation, solid waste management and/or water.
Don't confuse with
- Tax devolution: this is a share of central taxes given under a formula, and states can spend it freely. It is not a grant at all.