CONTENTS Acknowledgements iv List of abbreviations v Abstract vii 1.0 INTRODUCTION 1 2.0 REVIEW OF THE APPROACH AND RECOMMENDATIONS OF THE PREVIOUS FINANCE COMMISSIONS 3 3.0 FINANCIAL DEVOLUTION TO PRIs AND INCENTIVISING STATES 12 4.0 ISSUES CONCERNING BROADER DECENTRALISATION 17 5.0 CAPACITY BUILDING, AND ACCOUNTING AND AUDITING PRACTICES OF PRIs 23 6.0 ANALYSIS OF THE CONSTITUTIONAL ASYMMETRY II DEVOLUTION BETWEEN THE CENTRE AND THE AND BETWEEN THE STATES AND LOCAL BODIES 29 7.0 FINANCIAL AND FUNCTIONAL DEVOLUTION OF URBAN LOCAL BODIES34 8.0 WORKING OF THE STATE FINANCE COMMISSIONS41 8.1 Sharing by SFC Representatives43 9.0 CONCLUSION: LESSONS FOR THE 13th FINANCE COMMISSION 49 9.1 Summary of Major Recommendations 52 Annexure-1: Conference Schedule58 Annexure-2: List of Participants61