{"id":65715,"date":"2026-02-02T18:30:55","date_gmt":"2026-02-02T13:00:55","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=65715"},"modified":"2026-02-03T12:41:22","modified_gmt":"2026-02-03T07:11:22","slug":"16th-finance-commission-report","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/02-02-2026\/16th-finance-commission-report","title":{"rendered":"FM Tables 16th Finance Commission Report"},"content":{"rendered":"\n<p><strong>Syllabus: GS2\/ Polity<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>In News<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The 16th Finance Commission, constituted in 2023 under the chairmanship of Dr. Arvind Panagariya has had its key recommendations accepted by the Government for implementation during 2026\u201327 to 2030\u201331.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is the Finance Commission?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Constitutional Body:<\/strong> Established under <strong>Article 280 of the Indian Constitution.<\/strong><\/li>\n\n\n\n<li><strong>Formation:<\/strong> Constituted by the President of India every five years (or earlier).<\/li>\n\n\n\n<li><strong>Composition<\/strong>: A Chairman and four other members.<\/li>\n\n\n\n<li><strong>Core Function:<\/strong> It serves as a balancing wheel of fiscal federalism by recommending:\n<ul class=\"wp-block-list\">\n<li><strong>Vertical Devolution<\/strong>: The distribution of net tax proceeds between the Centre and the States.<\/li>\n\n\n\n<li><strong>Horizontal Devolution:<\/strong> The allocation of these proceeds among the States themselves.<\/li>\n\n\n\n<li><strong>Grants-in-Aid: <\/strong>Principles governing financial assistance to States from the Consolidated Fund of India (Article 275).<\/li>\n\n\n\n<li><strong>Local Bodies:<\/strong> Measures to augment State Consolidated Funds to support Panchayats and Municipalities.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Nature of Recommendations: <\/strong>Advisory (not legally binding), though traditionally accepted by the Government.<\/li>\n\n\n\n<li><strong>Note:<\/strong> Cesses and surcharges levied by the Centre are not part of the divisible pool.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Highlights<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Vertical Devolution (Tax Sharing):<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Retained at 41%:<\/strong> The Commission recommended keeping the states&#8217; share of the divisible tax pool at 41% (the same as the 15th FC).<\/li>\n\n\n\n<li><strong>The &#8220;Grand Bargain&#8221; Proposal:<\/strong> The report highlighted that while the share is 41%, the actual pool has shrunk because the Centre\u2019s cesses and surcharges (which are not shared) have risen. It suggests folding these into the regular tax pool in the future.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img data-dominant-color=\"d6d1d1\" data-has-transparency=\"false\" loading=\"lazy\" decoding=\"async\" width=\"600\" height=\"580\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/02\/image-9.png\" alt=\"\" class=\"not-transparent wp-image-65716\" style=\"--dominant-color: #d6d1d1; width:275px;height:auto\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/02\/image-9.png 600w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/02\/image-9-300x290.png 300w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><\/figure>\n<\/div>\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Disaster Management Grants:<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>New Disasters:<\/strong> The 16th FC recommended <strong>including Heatwaves and Lightning in the list of nationally notified disasters<\/strong>, allowing states to access central funds for these events.<\/li>\n\n\n\n<li><strong>Total Corpus:<\/strong> Rs 2,04,401 crore for the five-year period.<\/li>\n\n\n\n<li><strong>Allocation:<\/strong> 80% to the State Disaster Response Fund (SDRF) and 20% to the State Disaster Mitigation Fund (SDMF).<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Grants to Local Bodies:<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Total Allocation<\/strong>: Rs 7,91,493 crore for rural and urban local bodies.<\/li>\n\n\n\n<li><strong>Performance Linked: <\/strong>Grants are split into Basic (80%) and Performance (20%) components.<\/li>\n\n\n\n<li><strong>Urbanization Premium:<\/strong> A Rs 10,000 crore fund to incentivize the merger of peri-urban villages into larger Urban Local Bodies (ULBs).<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Fiscal Roadmap:<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>State Deficit:<\/strong> Recommended capping states&#8217; fiscal deficit at 3% of GSDP.<\/li>\n\n\n\n<li><strong>Union Deficit: <\/strong>A target to bring the Union&#8217;s fiscal deficit down to 3.5% of GDP by FY31.<\/li>\n\n\n\n<li><strong>End of Revenue Deficit Grants:<\/strong> Unlike previous commissions, the 16th FC has discontinued Post-Devolution Revenue Deficit Grants, urging states to improve their own tax administration.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><strong>Source: TH<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong> In News <\/strong><\/p>\n<li class=\"ms-5\"> The 16th Finance Commission, constituted in 2023 under the chairmanship of Dr. Arvind Panagariya has had its key recommendations accepted by the Government for implementation during 2026\u201327 to 2030\u201331. <\/li>\n<p><\/p>\n<p><strong> What is the Finance Commission? <\/strong><\/p>\n<li class=\"ms-5\"> Constitutional Body: Established under Article 280 of the Indian Constitution. <\/li>\n<li class=\"ms-5\"> Formation: Constituted by the President of India every five years (or earlier). <\/li>\n<li class=\"ms-5\"> Composition: A Chairman and four other members. <\/li>\n<p><a href=\" https:\/\/www.nextias.com\/ca\/current-affairs\/02-02-2026\/16th-finance-commission-report \" class=\"btn btn-primary btn-sm float-end\">Read More<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-65715","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/65715","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=65715"}],"version-history":[{"count":3,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/65715\/revisions"}],"predecessor-version":[{"id":65759,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/65715\/revisions\/65759"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=65715"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=65715"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=65715"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}