16th Finance Commission Finalizes Five-Year Fiscal Formula, Submits Report to President

The Sixteenth Finance Commission (XVIFC), led by noted economist Dr. Arvind Panagariya, submitted its report for the 2026–27 to 2030–31 award period to President Droupadi Murmu on Monday. The panel’s recommendations will shape how Union tax revenues are shared with states over the next five years, a key determinant of fiscal stability for both levels of government.

Commission members Annie George Mathew, Dr. Manoj Panda, T. Rabi Sankar and Dr. Soumyakanti Ghosh, along with Commission Secretary Ritvik Pandey, were present during the submission. After meeting the President, the panel handed over copies of the report to Prime Minister Narendra Modi and Union Finance Minister Nirmala Sitharaman.

Constituted under Article 280 of the Constitution, the commission was tasked with recommending the vertical sharing of the net proceeds of central taxes between the Centre and states, the horizontal distribution among individual states, and norms for grants-in-aid. Its mandate also included reviewing financial arrangements for disaster management and examining fiscal issues affecting the Union and state governments.

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Over its term, the XVIFC held extensive consultations with central ministries, state governments, local bodies, economists, multilateral agencies and former Finance Commission members. It also drew on research from academic institutions and assessments by an advisory council. The panel reviewed revenue trends, expenditure pressures and debt levels before finalising its recommendations.

The report, arranged in two volumes, contains the commission’s formula for tax devolution, proposed grant structures and annexures detailing the data and analysis used in drafting the recommendations. Volume I contains the main proposals, while Volume II compiles supporting documents and technical assessments.

As required under Article 281, the report will be made public after it is tabled in Parliament by the Union Finance Minister. Its recommendations, once accepted, will guide fiscal transfers for the five-year period beginning April 1, 2026, and will play a significant role in determining the resources available to states for development, welfare and infrastructure spending.