16th Finance Commission praises Uttarakhand’s balanced fiscal management

The 16th Finance Commission has praised Uttarakhand’s financial management during its recent visit to the state. Commission Chairman Dr. Arvind Panagariya said, “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.”

A balanced fiscal deficit means the government’s total expenditure matches its total revenue, excluding borrowing, indicating no excess spending or debt accumulation.

Uttarakhand Chief Minister Pushkar Singh Dhami presented the state’s financial condition, challenges, and development needs in detail during a meeting with Dr. Panagariya and other commission members at the Secretariat, according to an official statement.

Speaking to reporters at the Media Centre in the Secretariat, Dr. Panagariya added, “The per capita income of Uttarakhand is good. It is more than the national average. It can be increased further.” He also noted that all commissions formed so far have considered the specific geographical conditions of Himalayan states. He explained the tax-sharing system between the Centre and the states, stating, “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 elaborated on the parameters used for revenue sharing: “12.5 per cent has been kept for demographic performance (based on low fertility rate), 45 per cent for income difference, 15 per cent each for population and area, 10 per cent for forest and ecology, and 2.5 per cent for tax and fiscal management.” When asked about budget allocation to local bodies, he said, “Full attention is paid to developing local bodies and panchayats during budget allocation. It also depends on how the states work according to the released budget.”

Uttarakhand Finance Minister Premchand Aggrawal had presented the state budget for the 2025-26 financial year on February 20, 2025. The Gross State Domestic Product (GSDP) for 2025-26 (at current prices) is projected at Rs 4,29,308 crore, showing a 13% growth over the revised estimate for 2024-25. Expenditure (excluding debt repayment) is estimated at Rs 75,170 crore, up 9% from the previous year’s revised estimate. Additionally, Rs 26,006 crore in debt will be repaid.

Receipts (excluding borrowings) are estimated at Rs 62,565 crore, a 6% increase over the revised estimate for 2024-25. The revenue surplus for 2025-26 is projected at 0.6% of GSDP (Rs 2,586 crore), compared to 0.8% of GSDP (Rs 2,852 crore) in 2024-25’s revised estimate. The fiscal deficit target for 2025-26 is 2.9% of GSDP (Rs 12,605 crore), up from an expected 2.5% in 2024-25, which itself exceeded the budgeted 2.4%.

During the meeting at the Secretariat, Chief Minister Dhami also met with Finance Commission members Anne George Mathew, Dr. Manoj Panda, Dr. Soumya Kanti Ghosh, Secretary Ritwik Pandey, and Joint Secretary KK. The gathering was held to improve financial coordination between the Central Government and the states. Dr. Panagariya was welcomed to Devbhoomi Uttarakhand as the state marks its silver jubilee year.