India’s Federal Balance Preserved: Finance Commission Keeps State Share at 41%

Key Highlights:

Devolution retained: The Union Budget 2026-27 confirmed that the tax devolution to states will remain at 41%, as recommended by the 16th Finance Commission. This ensures continuity in fiscal transfers and provides states with predictable resources for development.

Federal balance: Retaining the 41% share underscores the government’s commitment to strengthening cooperative federalism, allowing states to plan long-term projects in infrastructure, healthcare, and education with assured funding.

Economic impact: Analysts note that maintaining the current devolution ratio will support fiscal stability, reduce uncertainty, and empower states to pursue region-specific growth strategies. It also reflects the government’s intent to balance national priorities with state-level autonomy.

Political significance: The decision is seen as a signal of trust in state governments, reinforcing their role in India’s economic roadmap. Experts highlight that this move could improve coordination between the Centre and states on flagship schemes.

Market sentiment: At 11:54 AM IST, early reactions from policy experts and economists were positive, with many welcoming the clarity and stability offered by the decision.

Sources: Economic Times Budget Live, Business Standard, Moneycontrol, Press Information Bureau (PIB)