The 16th Finance Commission’s decision to change the tax devolution formula to states on Sunday got a mixed response with some states welcoming the changes resulting in higher shares for some provinces while others criticized the move to eliminate fiscal deficit grants and state-specific grants.
There has been no change in the state’s share of central taxes since the 15th FC and will continue to be 41 per cent. (PTI file photo for representation)There was no change in the share of states at the Centre tax From 15th FC and it will continue to be 41%.
But contribution to India’s GDP was introduced as a new benchmark with 10% weightage. Demographic performance was given less weight and will be determined by population growth figures between the 1971 and 2011 censuses, not changes in the total fertility rate.
As a result, the five biggest losers among the big states are Madhya Pradesh, Uttar Pradesh, West BengalBihar and Odisha. The five biggest gainers are Karnataka, Kerala, Gujarat, Haryana and Punjab,
Kerala Finance Minister KN Balagopal welcomed the commission’s handover formula and Madhya Pradesh Finance Minister Jagadish Deora called the recommendation “fair”.
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Marginal growth in Balgopal Dr KeralaIts share in the divisible tax pool was a welcome increase from 1.92% to 2.38%.
“Increasing Kerala’s share in the tax pool will be good for the state. This is the result of our collective efforts. We demanded 2.79%. But still this increase will benefit us. Even the Finance Commission said we have done very well in submitting all data and documents. But the downside is that as part of the FC grant, we will not get any deficit in the revenue report.” Kollam.
KeralaThe share of divisible pool has steadily declined from 3.88% under the 10th Commission to 1.92% under the 15th Commission. Tamil Nadu Chief Minister MK Stalin has expressed disappointment that the state’s demand to increase the transfer of funds from the current 41% to 50% has not been accepted.
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“Despite the Commission’s efforts to give due recognition to the contribution of states to India’s economic growth, it is unfortunate that Tamil Nadu, which is the second largest. the economy In the country and contributes significantly, given a lower percentage of financial allocation than other developed states,” Stalin said.
Said Karnataka Chief Minister Siddaramaiah Karnataka Contributes 8.7% to national GDP and ranks first in per capita tax collection but continues to receive low allocation.
“For disaster relief under the State Disaster Response Fund for 2026-31, it said Maharashtra was allocated ₹31,597 crore and Uttar Pradesh ₹16,342 crore, Karnataka received ₹5,135 crore. In grants from local bodies for five years, Karnataka has received ₹37,372 crore compared to Rs ₹1.16 lakh crore for Uttar Pradesh and Rs ₹79,620 crore for Maharashtra,” he said in a statement.
Chief Minister of Himachal Pradesh Sukhvinder Singh Sukhu The recommendations marked a “dark day” for the state as the fiscal deficit freezes grants.
“It will cause damage ₹40,000 crore for Himachal Pradesh,” said Sukhu. Under the 15th Finance Commission, Himachal Pradesh received its assistance ₹35,000-40,000 crores.
Madhya Pradesh Finance Minister Jagdish Deora said, “By retaining the state’s share of tax revenue at 41%, the pace of development across the state will be maintained, ensuring continuity of growth and progress.”
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Haryana Chief Minister Nayab Singh Saini said, “Haryana will get stronger and more stable financial support through a significant contribution from central taxes. This money will be used for education, health, rural development, roads and other infrastructure projects.”
Finance Minister of Uttar Pradesh Suresh Khanna Said, “There will be no major impact but yes the share of central funds will be 17.6% instead of earlier 17.9%. But the fact is that Uttar Pradesh is a revenue surplus state and the government has decided to give more help to weaker states or those in need. The ratio also indicates that UP is developing.”
Rajasthan Finance Minister Divya Kumari did not respond to queries.
“We had high expectations from the commission, but its recommendations were unfulfilled. Being a border state, we wanted a special package for border areas, especially for the development of an industrial corridor, which was not provided…we expected more from the commission,” said Punjab Finance Minister Harpal Singh Cheema.
(with input from State Bureau)
