An autonomous research institute under the Ministry of Finance


Rural Fiscal Decentralization in Karnataka State

Publication date

Jan, 2003


Report submitted to the World Bank


M.Govinda Rao, H. K. Amar Nath, B. P. Vani


A major shortcoming in Indian fiscal literature is the lack of attention to fiscal issues at local levels, particularly in rural areas. Much of the literature on fiscal decentralization is focused on fiscal arrangements between the centre and the states. Very little is known about public finances of Panchayat Raj institutions and fiscal relationship between state and Panchayat Raj institutions at district, block and village levels. The few studies that look at these issues are descriptive and impressionistic and are not based on reliable data.

This study is an attempt to undertake a comprehensive analysis of sub-state rural fiscal decentralization and Panchayat finances in Karnataka. It critically examines the delegation of functions in terms of various schemes and recommends reform options in consolidating the schemes. The analysis also shows virtual non-existence of fiscal autonomy at district and block levels. The analysis of own revenues, expenditures and transfers at the village level, based on the primary data collected from 636 village panchayats brings out very interesting insights. The study makes a number of reform proposals to enhance own revenues, redesign transfers and improve efficiency of expenditures.

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