16th Finance Commission Report Explained (2026–31) | Tax Devolution, Grants 16 వ ఆర్ధిక సంఘం నివేదిక

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The 16th Finance Commission Report was tabled in Parliament on 1 February 2026 along with the Union Budget and accepted by the Government for the award period 2026–27 to 2030–31.

In this video, we explain the complete report in a simple, analytical, and exam-ready manner, covering all static + current linkages relevant for UPSC Prelims & Mains.

🔍 What you’ll learn in this video:

📌 Constitutional Basis
• Finance Commission under Article 280
• Role of Article 281 and Parliamentary accountability

📌 Composition of the 16th Finance Commission
• Chairmanship of Dr. Arvind Panagariya
• Appointment by the President of India

📌 Vertical Devolution
• States’ share retained at 41% of central taxes
• Meaning of divisible pool

📌 Horizontal Devolution – Major Shift
• Reduced weight to Income Distance
• New 10% weight to Contribution to GDP
• Weights for Population (2011), Demographic Performance, Forest & Ecology
• Why southern and economically stronger states benefit

📌 Grants-in-Aid Reforms
• Total grants: ₹9.47 lakh crore
• Discontinuation of revenue deficit & sector-specific grants
• Shift towards outcome-based fiscal transfers

📌 Local Body Grants (₹7.91 lakh crore)
• Rural vs Urban allocation
• Basic grants vs Performance grants
• New Urbanisation Premium & Special Infrastructure Grant

📌 Disaster Management Funding
• SDRF & SDMF
• Climate resilience and cost-sharing formula

📌 Fiscal Roadmap & Debt Targets
• Fiscal deficit targets for Centre & States
• End of off-budget borrowings
• Debt-GDP trajectory till 2031

📌 Power Sector, Subsidy & PSE Reforms
• DISCOM privatisation & SPV model
• Subsidy rationalisation
• Closure/privatisation of inactive State PSEs

📌 Overall Significance
• Strengthening cooperative but accountable fiscal federalism
• Balancing equity + efficiency
• Promoting long-term fiscal sustainability

🎓 Useful for:

✔ UPSC CSE (Prelims & Mains)
✔ GS Paper II – Polity & Federalism
✔ GS Paper III – Economy & Public Finance
✔ State PSCs & Competitive Exams

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