The Thirteenth Finance Commission's recommendations on the use of grants-in-aid in the transfer of resources to states seem relatively very generous when compared to those of its predecessors. This paper looks at the issue from various angles, including the alternative options it could have used, and assesses their implications. In particular, it examines whether the commission's underlying rationale for resorting to grants-in-aid for a variety of purposes is justified in terms of actually giving states an additionality of resources and ensuring that the sums will be spent for what they are intended. It points out that the grants-in-aid have widened the scope for growth-enhancing social spending in the long run and constricting the insidious spread of centrally-sponsored schemes, which encroach on the domain of states.
