Arvind Panagariya Takes Helm of Sixteenth Finance Commission to Shape India’s Fiscal Landscape

In a recent development disclosed by the finance ministry on Sunday, Arvind Panagariya, former vice chairperson of NITI Aayog, has been appointed to spearhead the Sixteenth Finance Commission (SFC). This commission holds the pivotal responsibility of formulating the blueprint for distributing a significant portion of the Centre’s tax revenue among states for the fiscal years from 2027 onwards.

Tasked not only with determining the share of tax receipts allocated to states but also with outlining the apportionment strategy among them, the Commission shoulders the additional responsibility of ensuring that states possess efficient financial systems for local bodies, aligning with recommendations from state finance commissions.

Panagariya, recognized as a Padma Bhushan awardee and former chief economist of the Asian Development Bank, currently holds the prestigious positions of professor of economics and the Jagdish Bhagwati Professor of Indian political economy at Columbia University. His extensive experience includes serving as India’s G20 Sherpa and leading Indian negotiation teams for G20 Communiqués from 2015 to 2018.

According to the finance ministry’s official order, Panagariya and other commission members will serve until the submission of the report or October 31, 2025, whichever comes earlier.

The commission’s broader scope extends to proposing measures to enhance the consolidated funds of states, providing supplementary resources to panchayats and municipalities. NR Bhanumurthy, vice chancellor of B.R. Ambedkar School of Economics University, emphasized the need for more state finance commissions, particularly for advising state administrations on local body fund requirements.

Additionally, the SFC has been mandated to conduct a comprehensive review of designated funds allocated at national and state levels for disaster management, established under the Disaster Management Act of 2005. This underscores the commission’s commitment to addressing critical fiscal aspects beyond tax revenue distribution.