Fiscal Federalism in India
Fiscal federalism refers to the financial relationships between levels of government — the division of revenue and expenditure responsibilities between the Union and the states.
- Constitutional basis: Articles 268–293 (Part XII — Finance, Property, Contracts and Suits)
- Finance Commission (Article 280): A constitutional body constituted every five years to recommend the share of central tax revenues to be devolved to states; 16th Finance Commission is currently constituted (2024–2029)
- Vertical devolution: The 15th Finance Commission recommended 41% of central taxes be devolved to states
- Horizontal distribution: Among states, based on criteria including population, area, income distance, and demographic performance
- States have significant infrastructure responsibilities: roads, irrigation, health facilities, schools — making their capital expenditure critical to national growth
- Borrowing limits: Under Article 293, states require central government consent to borrow if they have outstanding loans to the Centre; fiscal deficit of states is capped (typically 3% of state GDP under FRBM norms)
● Tracked since February 26, 2026 · last seen June 20, 2026 · updates as the daily brief publishes
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