The Sixteenth Finance Commission’s report will shape tax sharing and fund allocation between the Union and the states from 2026 to 2031
Its decisions will influence development priorities for the next five years
Southern states worry about their falling tax share
Their combined devolution has declined from 19 percent in 2010–11 to 16 percent in 2025–26, a debate likely to intensify once the report is released
Per capita spending highlights stark differences. Kerala spends over ₹86,000 per person this year, while Bihar spends around ₹24,000
Kerala spends over ₹86,000 per person this year, while Bihar spends around ₹24,000. Poorer states are catching up, but the gap remains large
Higher expenditure in poorer states has not translated into faster income growth
Southern states now have per capita incomes 2.8 times those of lagging states, up from 2.1 times in 2009–10
Private investors prefer states with strong infrastructure and predictable governance
Lagging states must use resources more efficiently, improve business conditions and build core infrastructure to attract investment
Nineteen states have liabilities above 30 percent of GSDP
In Punjab and Himachal Pradesh, the burden crosses 40 percent. High debt raises borrowing costs and complicates growth efforts