2026-27 Budget Shows Meager ₹17,285 Crore Increase under 16th Finance Commission

On February 19, the 2026-27 budget, presented along with the recommendations of the 16th Finance Commission, saw a meager increase of ₹17,285 crore for the states. This figure falls short of the states' expectations, which had hoped for an increase in their share from 41% to 50%. The central government, however, maintained the 41% share in the divisible pool.

Key Highlights of the 16th Finance Commission:

• Stable Share: The 16th Finance Commission has kept the states’ share in the distribution of taxes between the center and states (Vertical Devolution) fixed at 41%.
• Grant Increase: The central budget for 2026-27 allocated ₹1.4 lakh crore as grants for states for local bodies and disaster management.
• Benefit for Southern States: The 16th Finance Commission introduced changes rewarding economic performance, benefiting southern states like Karnataka, Kerala, and Andhra Pradesh, while some other states saw a reduction in their share.
• Major Blow: 18 states had demanded an increase in their share of central taxes from 41% to 50% for their developmental activities. However, the commission rejected this demand, leaving the states disappointed and not receiving the expected funds.