End of revenue deficit grants not to impact states' finances: Official on FinComm suggestion ...Middle East

The 16th Finance Commission's recommendation to eliminate post-devolution revenue deficit grants will not have any implications on finances of states as only few of them were getting these grants and the total amount involved has come down to only about Rs 13,000 crore in FY26, a top official said on Monday. In a post-Budget interview with PTI, Expenditure Secretary V Vualnam said the post-devolution revenue deficit grants was a ''tapering grant'' and was supposed to come to an end by 2025-26 as per the recommendation of the 15th Finance Commission. The 16th Finance Commission, headed by Arvind Panagariya, has suggested a 41 per cent share of states in central taxes for five years beginning April 1, 2026. It has also suggested doubling of local bodies' grants, while doing away with the post-devolution revenue deficit grants for states. The secretary said even the 15th Finance Commission had suggested tapering of revenue deficit grant, which by the end of the 5th year, which is the current year, is about Rs 13,000 crore, and only for a few states. ''I am confident that the recommendations of the 16th Finance Commission in total, in toto, would put the state finances in good and quite a stable kind of platform,'' Vualnam said. He said about Rs 14 lakh crore would be the share of states in central tax collection as per the devolution formula of the Finance Commission. Taking into account the grants as well as other schemes, like the centrally sponsored schemes and central sector schemes, the amount which will go to the states from the government will be upwards of Rs 25 lakh crore. ''The government has accepted (the recommendations), and we will have to tread very carefully so that our fiscal targets, our glide path and all are abided by,'' Vualnam said. The central government, he said, will have to tread very carefully so that its fiscal targets and debt glide path are adhered to, considering the huge amounts that will be given to states after the implementation of the Finance Commission's recommendations. Continuing on the path of fiscal consolidation, Finance Minister Nirmala Sitharaman on Sunday pegged fiscal deficit at 4.3 per cent of the GDP for the next fiscal year, as against 4.4 per cent for the financial year ending March 2026. The debt-to-GDP ratio is estimated to be 55.6 per cent of the GDP in Budget Estimate (BE) 2026-27, compared to 56.1 per cent of GDP in Revised Estimate (RE) 2025-26. A declining debt-to-GDP ratio will gradually free up resources for priority sector expenditure by reducing the outgo on interest payments, Sitharaman said. The central government targets to bring down the debt-to-GDP ratio to 50±1 per cent by 2030-31. The 16th Finance Commission has recommended total grants for duly constituted Rural Local Bodies (RLBs) and Urban Local Bodies (ULBs) of Rs 7,91,493 crore for the period 2026-27 to 2030-31.

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End of revenue deficit grants not to impact states' finances: Official on FinComm suggestion ...Middle East

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