Citing examples of China and the US, Rajan pointed out that the number of local government employees in these countries is significantly higher

PTI New Delhi

The 16th Finance Commission should focus on devolving more funds to local bodies, municipalities and panchayats to enable them effectively deal with problems facing the people, former RBI Governor Raghuram Rajan has said.

Observing that previous finance commissions devolved more funds to  states, Rajan told PTI Videos, "Now we need to focus also on devolving funds from states to municipalities to panchayats, etc. That third level of devolution is what we need far more of." Citing examples of China and the US, Rajan pointed out that the number of local government employees in these countries is significantly higher than the share of local government employees in India.

Emphasising on the need for more decentralisation in a large country like India which is overly governed from the Centre and state capitals, he said,"I think the 16th Finance Commission should focus on making that happen through carrots and potentially sticks."  

Recently, 16th Finance Commission Chairman Arvind Panagariya had said that a majority of states have recommended that the Centre increase their share in tax revenue distribution to 50 per cent. Currently, states receive 41 per cent of the divisible tax pool, while the remaining 59 per cent is retained by the Centre.