The Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman, has set aside a substantial ₹1.4 lakh crore for states via Finance Commission grants, reaffirming the government’s commitment to strengthening fiscal federalism. Despite the increased allocation, the Centre’s vertical share remains at 41%, ensuring a balanced distribution of resources between the Union and the states.
The grants are designed to provide states with flexible funding for both revenue and capital expenditure. This includes supporting social welfare programs, infrastructure projects, education, healthcare, and other development initiatives that directly impact citizens at the grassroots level. By empowering states with adequate resources, the government aims to enable faster and more inclusive development across the country.
The Finance Commission grants also reflect the government’s focus on cooperative federalism, giving states greater autonomy to plan and implement their developmental priorities. This approach is expected to enhance public service delivery while promoting accountability and efficiency in governance.
With this allocation, the Budget 2026-27 seeks to ensure that states can address regional disparities, meet rising public expenditure demands, and continue investing in sectors critical for long-term growth. Experts believe that such targeted financial support will bolster state-led initiatives and strengthen India’s overall economic resilience.
Conclusion:
By earmarking ₹1.4 lakh crore for states, the government has sent a strong signal of its commitment to inclusive development and equitable resource sharing. The move highlights the importance of collaboration between the Centre and states in shaping India’s growth trajectory and improving the quality of life for its citizens.