India Forms 16th Finance Commission Under Economist Arvind Panagariya

January 2, 2024

The Indian government has formed the 16th Finance Commission to review fiscal distribution between the Union and States for 5 years from 2026. Dr Arvind Panagariya, former NITI Aayog Vice Chairman, will helm the panel.

Constitutional Mandate

Under Article 280(1) of the Constitution, the Finance Commission is constituted every 5 years for:

Determining States’ share in central tax revenue
Laying principles governing central grants to States
Recommending measures to augment local government resources

The 16th Commission was created vide a January 2023 notification. Former Columbia University professor Dr Panagariya is the Chairman.

Areas of Focus

Key aspects of the Commission’s terms of reference include:

Tax devolution framework between Center and States
Grants-in-aid disbursal norms
Enhancing funds to rural and urban local bodies
Reviewing 2005 Disaster Management Act financing

The panel will suggest the 2026-2031 fiscal distribution and grants architecture. Recommendations are due by October 2025.

Significance

The Commission shapes vital financial contours stirring economic growth across India’s federal structure. An eminent economist helming policy strategy for enabling responsible, equitable resource allocation underscores the priority on cooperative fiscal federalism.

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