New Delhi: The Centre will have to tread cautiously to adhere to its fiscal targets and debt glide path in view of the large transfers to states following the implementation of the 16th Finance Commission (FC) recommendations, Expenditure Secretary V Vualnam said on Monday.
The 16th FC, has recommended a 41 per cent share of states in central taxes for five years beginning April 1, 2026. It has also proposed doubling grants to local bodies while discontinuing post-devolution revenue deficit grants to states.
Vualnam said states’ share in central taxes would be around Rs 14 lakh crore under the devolution formula. “If we take into account grants and other schemes such as Centrally Sponsored Schemes and Central Sector schemes, the total amount going to states will be upwards of Rs 25 lakh crore,” he said. “The government has accepted the recommendations, and we will have to tread very carefully so that our fiscal targets and glide path are abided by.”
Finance Minister Nirmala Sitharaman has pegged the fiscal deficit at 4.3 per cent of GDP for FY27 against 4.4 per cent in FY26. The debt-to-GDP ratio is estimated at 55.6 per cent in BE 2026-27, down from 56.1 per cent in RE 2025-26. She said a declining debt ratio would gradually free resources by lowering interest outgo. The govt aims to bring the debt-to-GDP ratio to 50±1 per cent by 2030-31. Agencies