Shift in India's Fiscal Federalism Increases State and Urban Local Government Roles

India's fiscal federalism is evolving as the Union government reduces reliance on Centrally Sponsored Schemes (CSSs) for social service delivery, shifting greater responsibility to states and local governments. The 16th Finance Commission has increased grants to urban local bodies, aiming to reduce their dependence on CSS funding. While Union budgets emphasize fiscal consolidation and capital expenditure, allocations for social sectors relative to GDP have declined, prompting concerns about financing and implementation gaps in welfare programs.