No more revenue-deficit grants for states: Finance Commission
The 16th Finance Commission, led by Arvind Panagariya, is shaking up how money flows from the Centre to states.
States will still get 41% of central taxes, but revenue-deficit grants are out.
This means states need to keep their deficits under 3% of their GSDP and can't borrow off the books anymore.
Local bodies get a big chunk of the pie
This isn't just about government math—these changes push states to be more financially responsible and reward those who perform better.
A big chunk (₹7.9 lakh crore) is set aside for local bodies, but now a part depends on things like audited accounts and property tax growth.
There's even a ₹10,000 crore bonus for fast-growing urban areas. Plus, extra funds are earmarked for disaster management and both rural and urban local bodies—so if your city or village manages money well, it could actually see real benefits.