1. Discuss the major changes introduced by the 16th Finance Commission in India’s fiscal transfer mechanism. Analyse their implications for fiscal federalism and regional equity.
| Syllabus: General Studies – II: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finance up to local levels challenges therein. |
IN NEWS: The Report of the 16th Finance Commission (Chair: Dr. Arvind Panagariya) was tabled in Parliament on February 1, 2026. The recommendations will apply for the five-year period between 2026-27 and 2030-31.
The Finance Commission, a constitutional body under Article 280, is central to managing India’s fiscal federalism by balancing equity, efficiency, and macroeconomic stability in inter-governmental transfers. The 16th Finance Commission (2026–31) introduces notable changes in tax devolution criteria, grant architecture, and fiscal discipline norms, reflecting a shift towards performance-oriented yet redistributive fiscal governance.
Major Changes Introduced
1. Tax Devolution Framework
- States’ share in the divisible pool retained at 41%, ensuring continuity and predictability.
- Income Distance (42.5%) remains the highest-weighted criterion, reinforcing horizontal equity.
- New criterion: Contribution to National GDP (10%), replacing tax and fiscal effort.
- Example: Economically advanced states contributing more to GDP receive recognition for growth contribution.
2. Rationalisation of Criteria
- Area weight reduced from 15% (15th FC) to 10%, limiting geographical advantage.
- Forest criterion expanded to include open forests and increase in forest cover, incentivising ecological conservation beyond dense forests.
3. Grants-in-Aid Reforms
- Total grants: ₹9.47 lakh crore (2026–31).
- Discontinuation of revenue deficit and sector-specific grants, encouraging states to strengthen own revenues.
- Performance-linked grants to local bodies introduced.
- Data: ₹1.45 lakh crore linked to performance.
- Urbanisation premium (₹10,000 crore) and special infrastructure component (₹56,100 crore) target wastewater management and rural-urban transition.
- Disaster management grants: ₹1.56 lakh crore, reflecting climate vulnerability.
4. Fiscal Discipline Roadmap
- Centre’s fiscal deficit target: 3.5% of GDP by 2030–31.
- States’ fiscal deficit capped at 3% of GSDP.
- Off-budget borrowings to be discontinued and fully accounted, improving fiscal transparency.
Implications for Fiscal Federalism and Regional Equity
Positive Implications
- Equity preserved through high weight to income distance, benefiting poorer states.
- Efficiency promoted by recognising GDP contribution and performance-linked grants.
- Transparency strengthened via inclusion of off-budget liabilities.
- Local governance empowered through conditional grants.
Concerns and Challenges
- GDP contribution criterion may favour richer states, risking dilution of redistributive justice.
- Removal of revenue deficit grants could strain fiscally weak states.
- Performance-linked grants may disadvantage states with low administrative capacity.
The 16th Finance Commission marks a calibrated shift from pure redistribution to performance-oriented fiscal federalism, while retaining equity safeguards. Its success will depend on capacity building, cooperative federalism, and complementary state reforms to ensure balanced regional development.
| PYQ REFERENCE Q. How have the recommendations of the 14th Finance Commission of India enabled the states to improve their fiscal position? (2021) |
Source:https://prsindia.org/files/budget/budget_parliament/2026/Union_Budget_Analysis-2026-27.pdf
2. Lack of access to menstrual hygiene facilities violates the dignity, bodily autonomy, and equality of girl children. Examine the ethical issues involved in menstrual poverty. What ethical principles should guide State action in implementing the Supreme Court’s directions?
| Syllabus: General Studies – IV: Strengthening of ethical and moral values in governance |
IN NEWS: A full stop – Making access to menstrual hygiene for girls a fundamental right is a big step
The Supreme Court’s judgment bringing menstrual health and hygiene within Article 21 represents a transformative constitutional moment, reframing menstruation from a social taboo to a matter of dignity, autonomy, and educational equality.
Significance of the Judgment
- Recognises menstrual health as a fundamental right, not charity.
- Links education, health, dignity, and bodily autonomy.
- Shifts responsibility squarely onto the State, with penalties for non-compliance.
- Addresses menstrual poverty as a structural injustice.
Ground Reality & Data
- NFHS-5: 77.3% women (15–24 yrs) use hygienic methods → ~25% still excluded.
- Inadequate toilets, water, disposal mechanisms in schools.
- Stigma leads to absenteeism and dropout among adolescent girls.
Challenges
- Patchy implementation of Swachh Bharat guidelines.
- Project-based, fragmented interventions.
- Deep-rooted cultural stigma and silence.
- Weak monitoring in government and private schools.
Way Forward
- Universal functional, gender-segregated toilets in schools.
- Free and regular supply of menstrual products.
- Budgetary prioritisation and outcome-based monitoring.
- Curriculum-based menstrual health education.
- Accountability mechanisms for States and school authorities.
By constitutionalising menstrual hygiene, the Court has reinforced that dignity is non-negotiable. Sustained policy commitment can ensure that a period ends a sentence, not a girl’s education.
| PYQ REFERENCE Q. We are witnessing increasing instances of sexual violence against women in the country. Despite existing legal provisions against it, the number of such incidences is on the rise. Suggest some innovative measures to tackle this menace. (2014) |