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As a facet of decentralisation the empowerment of the 'third-tier of government' entails strengthening fiscal responsibility & stability with regard to local bodies both in urban and rural areas. It would be pertinent to note that 2011 Amendment Act has been made pursuant to recommendations of the 13th Finance Commission 2010 - 2015 (December 2009) which reads as under:

"For achieving a greener and more inclusive growth path we need a fiscally strong Centre, fiscally strong states and fiscally strong local bodies, or the third tier of government... The intent is to ensure that the states and local bodies have the fiscal potential to provide comparable levels of public services, at reasonably comparable levels of taxation...Only some states have significantly empowered local bodies by transferring expenditure obligations, taxation powers and staff resources to them. It has been contended that decentralization is not fiscally neutral as it will generate increased demands in the scope, scale and quality of services provided by the local bodies. Thus, more funds devolved to local bodies would encourage State Governments to accelerate their decentralization efforts. Transfer of functions and functionaries may then follow transfer of funds"