Finance Commission Praises State’s Financial Management
Balanced Fiscal Deficit in a Developing State Not a Concern, Says Commission
Dehradun: The 16th Finance Commission has commended Uttarakhand for its prudent financial management during its recent visit to the state. Commission Chairman Dr. Arvind Panagariya stated that a balanced fiscal deficit in a developing state like Uttarakhand is not a cause for concern, provided it remains under control.
Speaking to media personnel at the Secretariat’s Media Centre on Monday, Dr. Panagariya noted that Uttarakhand is well aware of its financial challenges and is taking appropriate steps to address them. He acknowledged that the state is actively working to enhance its revenue base, and there is strong potential for growth in income.
Highlighting the state’s economic progress, he mentioned that Uttarakhand’s per capita income is higher than the national average, and with continued effort, it can improve even further.
In response to queries, Dr. Panagariya emphasized that all previous Finance Commissions have taken into account the unique geographical and ecological challenges faced by Himalayan states like Uttarakhand while recommending fiscal policies.
He also elaborated on the system of tax distribution between the Centre and states. The Finance Commission, he said, determines the methodology and formula for tax revenue sharing as per constitutional provisions and evolving economic needs.
Dr. Panagariya outlined the key parameters included in the Commission’s proposed tax-sharing formula:
Demographic performance (low fertility rate): 12.5%
Income distance: 45%
Population: 15%
Geographical area: 15%
Forest and ecology: 10%
Tax and fiscal management: 2.5%
He further added that budget allocations for local bodies and panchayats are carefully considered, but their effective utilization also depends on how states implement the budget provisions.
