Tied and untied grants to local bodies
Topic: Panchayati Raj: Rural Local Government · NCERT: Beyond NCERT
Meaning
Finance Commissions recommend grants for local bodies. Under Art. 280(3)(bb), the Union Finance Commission suggests ways to add to state funds for panchayats. A tied grant can be spent only on set purposes. An untied grant can be spent on whatever local needs the body chooses. This split is a balance: the Centre secures national priorities, while panchayats keep some freedom.
Example
The 15th Finance Commission gave ₹2.36 lakh crore to rural local bodies for 2021-26. Of this, 60% was tied to sanitation and drinking water, and 40% was untied.
Don't confuse with
- Basic and performance grants: a different way of splitting grants. A basic grant is given anyway, while a performance grant depends on meeting conditions. The 14th FC split its grants 90:10 this way, and the 16th FC split ₹4.35 lakh crore 80:20.
Related concepts
- Eleventh Schedule
- Devolution of powers to panchayats
- Activity mapping
- State Finance Commission
- Own source revenue of local bodies