16th Finance Commission (FC) of India
- Constitutional Provision: Established under Article 280 of the Constitution of India.
- Chairman: Arvind Panagariya (Former Vice-Chairman of NITI Aayog).
- Secretary: Ritvik Ranjanam Pandey.
- Operational Period: Recommendations will cover a five-year period starting April 1, 2026.
- Deadline: The Commission is mandated to submit its final report by October 31, 2025.
Terms of Reference (ToR)
- Vertical Devolution: Determining the division of net tax proceeds between the Union and the States.
- Horizontal Devolution: Formulating the principles for the distribution of taxes among different States.
- Grants-in-Aid: Establishing guidelines for grants-in-aid of the revenues of the States from the Consolidated Fund of India.
- Local Bodies Support: Recommending measures to augment the State Consolidated Fund to supplement resources for Panchayats and Municipalities.
- Disaster Management: Reviewing the funding and institutional arrangements for Disaster Management initiatives.
Devolution History (Recent Commissions)
| Commission | Chairman | Devolution Share to States |
|---|---|---|
| 13th FC | Vijay Kelkar | 32% |
| 14th FC | Y.V. Reddy | 42% |
| 15th FC | N.K. Singh | 41% (Adjusted for J&K/Ladakh) |
Key Focus Areas & Challenges
- Data Utilization: Addressing the debate over using the 2011 Census data versus newer demographic trends.
- Fiscal Discipline: Balancing state-level welfare spending ("freebies") with long-term fiscal sustainability.
- Cess and Surcharge: States have raised concerns over the increasing share of Cess and Surcharges in the Union's gross tax revenue, which are not part of the divisible pool.
- Performance Incentives: Potential inclusion of incentives for states achieving targets in population control, GST collection, and ease of doing business.
India-Middle East-Europe Economic Corridor (IMEC)
- Announcement: Launched on the sidelines of the G20 Summit 2023 in New Delhi.
- Participants: India, USA, Saudi Arabia, UAE, European Union, Italy, France, and Germany.
- Objective: To establish a ship-to-rail transit network for seamless trade between Asia, the Arabian Gulf, and Europe.
Corridor Components
- East Corridor: Connects India to the Arabian Gulf.
- Northern Corridor: Connects the Arabian Gulf to Europe.
- Digital/Energy Infrastructure:
- Undersea cables for high-speed data.
- Pipelines for Green Hydrogen export.
- Electricity grids to enhance regional energy security.
Strategic Importance
- Trade Efficiency: Expected to reduce transit time between India and Europe by approximately 40% and transit costs by 30%.
- Global Connectivity: Positioned as a sustainable and transparent alternative to China’s Belt and Road Initiative (BRI).
- Middle East Stability: Encourages economic integration and reduces regional tensions through shared infrastructure.
- De-risking Supply Chains: Provides a diverse route to secure global trade against disruptions in the Suez Canal.