Dehradun (Uttarakhand) [India]: The 16th Finance Commission, currently visiting Uttarakhand, has lauded the state’s financial discipline and growth trajectory. Commission Chairman Dr Arvind Panagariya highlighted the state’s balanced fiscal deficit and strong per capita income, positioning it as a model among developing regions.
“If there is a balanced fiscal deficit in any developing state, then it is not a bad situation. It is important to take care that this deficit does not increase,” Dr Panagariya said while speaking at the Media Centre in the Secretariat on Monday.
A balanced fiscal deficit implies that a government’s total expenditure matches its total revenue (excluding borrowings), thus avoiding unsustainable debt accumulation.
Uttarakhand Chief Minister Pushkar Singh Dhami presented a detailed overview of the state’s financial conditions, development challenges, and funding needs during a meeting with Dr Panagariya and Commission members at the State Secretariat, according to an official statement.
Dr Panagariya noted:
“The per capita income of Uttarakhand is good. It is more than the national average. It can be increased further.”
He emphasized that all past commissions had taken into account the unique geographical needs of Himalayan states, and explained the tax-sharing mechanisms between the Centre and states.
“The Finance Commission determines the method and formula to divide the income obtained from tax between the Centre and the states in accordance with the constitutional system and requirements,” he added.
He further detailed the parameters for tax revenue distribution:
- Demographic performance (low fertility rate): 12.5%
- Income difference: 45%
- Population and area: 15% each
- Forest and ecology: 10%
- Tax and fiscal management: 2.5%
Dr Panagariya also stressed the importance of budget allocation to local bodies and panchayats, noting that effective utilization by states was critical.
Meanwhile, Uttarakhand Finance Minister Premchand Aggrawal had presented the 2025–26 state budget on February 20, 2025.
Key highlights of the budget include:
- Gross State Domestic Product (GSDP): Estimated at ₹4,29,308 crore (13% growth from 2024–25 RE)
- Total expenditure (excluding debt repayment): ₹75,170 crore (9% increase)
- Debt repayment: ₹26,006 crore
- Receipts (excluding borrowings): ₹62,565 crore (6% increase)
- Revenue surplus: 0.6% of GSDP (₹2,586 crore), down from 0.8% in 2024–25
- Fiscal deficit: Targeted at 2.9% of GSDP (₹12,605 crore), up from 2.5% in 2024–25 RE
During the Secretariat meeting, Finance Commission members Anne George Mathew, Dr Manoj Panda, Dr Soumya Kanti Ghosh, Secretary Ritwik Pandey, and Joint Secretary K.K. Mishra also participated in discussions aimed at enhancing financial coordination between the Centre and states.
The delegation was welcomed on their arrival in Devbhoomi Uttarakhand, marking the silver jubilee year of the state’s formation.