Finance Commission impressed with urban development of Telangana says economist Arvind Panagariya
The Commission completed visits to six States - Maharashtra, Chhattisgarh, Punjab, Rajasthan, Karnataka and Telangana - with 22 more States to be covered before making recommendations on tax revenues for five financial years from 2026-27 to 2030-31
Hyderabad: The Sixteenth Finance Commission is ‘very impressed’ with the urban development of Telangana and felt that the State was far ahead of others in this regard. Commission chairman and noted economist Arvind Panagariya said they were also pleased to see the road map laid by the State government.
Upon concluding the two-day discussions with various stakeholders at Mahatma Jyotiba Phule Praja Bhavan on Tuesday, Panagariya told mediapersons that urbanisation generally took a back seat in the development process in the country. Rural development could not be neglected as it was essential for the country for various reasons.”But this is a State which is also bringing urban development to the forefront,” he said adding Telangana was thinking far ahead in terms of urban development. Though this was not an area for the Finance Commission, the Commission was ‘very impressed’, he added.
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Replying to the media on requests made by the State government, Panagariya said they held frank discussions about the State finances including liabilities on budget and off budget.
The State government made numerous requests including enhancement of devolution of divisible pool of taxes to 50 per cent from the existing 41 per cent.
“At this point, I don’t know what the Commission will decide as the process to finalise the recommendations will take time,” he said.
The Commission completed visits to six States – Maharashtra, Chhattisgarh, Punjab, Rajasthan, Karnataka and Telangana – with 22 more States to be covered before making recommendations on tax revenues for five financial years from 2026-27 to 2030-31.
Responding to a query on the concerns raised by the States over the cesses and surcharges being collected by the Centre directly, the noted economist said surcharges were not part of the divisible pool.
He opined that both the Centre and the States can reach an understanding in this regard, which requires a Constitutional amendment. “So far, the union government is statutorily obligated to devolve 41 per cent of funds to the States from divisible pool,” he said.
Panagariya said all the State have been vocal about strengthening fiscal federalism and more fund allocation, during the consultations held by the Commission. He said the Commission is focusing on its terms of reference which included the distribution between the union and the States of the net proceeds of taxes and the allocation between the States of the respective shares of such proceeds, among others.
The Commission also assured to look into the requests from the State government including restructuring of existing liabilities or avail fresh loans. It will examine the requests from Telangana and Karnataka to provide additional incentives to performing States.
