Introduction: The Government of India, under the approval of President Draupadi Murmu, has constituted the Sixteenth Finance Commission, signaling a critical juncture in determining the tax revenue sharing formula between the Centre and States for the five-year period commencing April 2026. Renowned trade economist and former Niti Aayog vice chairman, Arvind Panagariya, has been appointed as the Chairman, with detailed terms of reference specified in the official notification.
Commission’s Mandate: The Sixteenth Finance Commission holds a substantial mandate, including the distribution of net tax proceeds between the Union and States, governing grants-in-aid of State revenues, and recommending measures to enhance the Consolidated Fund of States for Panchayats and Municipalities. Notably, the Commission is tasked with reviewing financing arrangements for Disaster Management initiatives.
Appointment and Composition: Arvind Panagariya’s appointment as Chairman was officially notified by the Finance Ministry, with Ritvik Ranjanam Pandey, former joint secretary in the Department of Revenue, designated as the panel’s secretary. While other members will be announced separately, the Chairman and members are slated to serve until the report submission or October 31, 2025, whichever comes earlier.
Historical Context and Deadline: The Commission is set to submit its recommendations by October 2025, allowing ample time for the proposed tax-sharing formula to integrate into the Budget for the fiscal year 2026-27. The Fifteenth Finance Commission, chaired by NK Singh, provides historical context, having been constituted in November 2017 with a later extension to a six-year tenure in 2019.
Conclusion: Arvind Panagariya’s leadership brings a wealth of experience to the Sixteenth Finance Commission, positioning it to navigate the intricate fiscal landscape and formulate recommendations that align with India’s economic trajectory. The Commission’s role in shaping the fiscal framework for the coming years underscores its significance in steering financial harmony between the Union and States.