Three Officer-Level Posts Approved by Cabinet to Aid 16th Finance Commission

On January 18, 2024, the Union Cabinet, chaired by Prime Minister Narendra Modi, gave its approval for the creation of three officer-level posts for assisting the 16th Finance Commission, which was constituted on December 31, 2023, under Article 280 of the Constitution. The newly created posts are two Joint Secretaries and one Economic Adviser, who will help the Commission in carrying out its functions.

Role and composition of the 16th Finance Commission

The 16th Finance Commission is a constitutional body that gives recommendations on the distribution of tax revenues between the Centre and the States, as well as on other fiscal matters. The Commission is headed by former NITI Aayog Vice Chairman Arvind Panagariya, and has Ritvik Ranjanam Pandey as its Secretary. The Commission is expected to submit its report to the President by October 31, 2025, for the period of five years starting from April 1, 2026.

Terms of reference and challenges of the 16th Finance Commission

The terms of reference of the 16th Finance Commission include reviewing the current arrangements for financing disaster management initiatives, suggesting measures to augment the consolidated fund of States to supplement the resources of local governments, and examining whether revenue deficit grants be provided at all. The Commission also has to consider the impact of GST, the abolition of Planning Commission, and the fiscal situation of both the Centre and the States.

The 16th Finance Commission faces several challenges in balancing the competing demands of various stakeholders, such as ensuring fiscal stability and sustainability, promoting cooperative federalism and fiscal autonomy, addressing regional disparities and horizontal imbalances, and fostering inclusive and equitable growth.