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National Current Affairs

Economy

16th Finance Commission fixed the states’ share in the divisible pool at 41%

Economy

16th Finance Commission fixed the states’ share in the divisible pool at 41%

Utkarsh Classes

Updated: 03 Feb 2026

5 Min Read

16th Finance Commission fixed the states’ share in the divisible pool at 41%

The 16th Finance Commission has recommended retaining the states’ share in the divisible pool of central taxes at 41 percent; under the new formula, Karnataka’s share in central tax transfers has been fixed at 4.13%.

The 16th Finance Commission has recommended retaining the states’ share in the divisible pool of central taxes at 41 percent, while emphasizing outcome-based expenditure, greater transparency in tax transfer data, and stronger fiscal discipline at the state level.
The panel said there is a need to improve efficiency in public expenditure and strengthen the fiscal accountability framework across all states.

States with the highest share in central tax transfers

Under the new formula, Karnataka’s share in central tax transfers has been increased to 4.13% for 2026–31, compared to 3.65% under the 15th Finance Commission.
This would mean an additional ₹7,387 crore, increasing Karnataka’s allocation to ₹63,050 crore, whereas under the previous formula Karnataka would have received ₹55,663 crore.
Kerala emerged as the second-largest beneficiary, with its allocation increasing by ₹6,975 crore and its share rising from 1.93% to 2.38%.
Gujarat (₹4,228 crore) and Haryana (₹4,090 crore) also benefited significantly, as their per capita income is higher and their contribution to GDP is substantial.
Madhya Pradesh benefited the least, with its allocation decreasing by ₹7,677 crore to ₹1.12 lakh crore. Its share in the Centre’s divisible pool declined from 7.85% to 7.35%.

16th Finance Commission

The formal constitution of the 16th FC took place on December 31, 2023, under the chairmanship of Arvind Panagariya, with the mandate to make recommendations for a five-year period from April 1, 2026 to March 31, 2031. The Finance Commission is a constitutional body under Article 280.
It submitted its report to the President of India on November 17, 2025, which was tabled in Parliament by Ms. Sitharaman on Sunday (February 1, 2026).
The fiscal deficit for the next financial year has been estimated at 4.3 percent of GDP, compared to 4.4 percent for the financial year ending March 2026.
In the Budget Estimates (BE) 2026–27, the debt-to-GDP ratio is estimated at 55.6 percent of GDP, compared to 56.1 percent of GDP in the Revised Estimates (RE) 2025–26.
The 16th Finance Commission has recommended total grants of ₹7,91,493 crore for duly constituted rural local bodies (RLBs) and urban local bodies (ULBs) for the period 2026–27 to 2030–31.

Key recommendations

It states that there is no longer any scope to reduce the states’ share in the divisible pool, as the Centre’s cesses and surcharges—which are not shared with the states—have reduced the size of the divisible pool from 89.1% of total tax revenue in 2014–15 to 74–80% during the period 2020–24, for which actual data are available.
The report states, “The Commission believes that if an efficient and comprehensive system of taxation is to be implemented, a grand bargain will have to be struck between the Centre and the states, wherein the Centre will agree to subsume a large part of the revenue from cesses and surcharges into regular taxes, and the states will agree to a smaller share of the resulting larger divisible pool, ensuring that neither side suffers any revenue loss.”
The weightage for a state’s population is now 17.5%, up from 15% earlier. The weightage for its demographic performance—i.e., how successfully it has controlled population growth—has been reduced from the earlier 12.5% to 10%. The 16th Finance Commission has given a 10% weightage to the area of a state, compared to 15% earlier.
A state’s forest area continues to receive a 10% weightage, unchanged from before. The per capita GSDP distance of a state—i.e., the gap between a state’s average per capita income and that of the state with the highest per capita income—has been given the highest weightage of 42.5%, down from 45% earlier.

Union Budget 2026: Allocation for major central schemes

The 16th Finance Commission has removed the earlier ‘tax and fiscal efforts’ category, which had a weightage of 2.5%, and replaced it with ‘contribution to GDP’, which has a weightage of 10%.
Under this new formula, all five southern states—Tamil Nadu, Kerala, Andhra Pradesh, Telangana, and Karnataka—have seen an increase in their share of the divisible pool.
According to the recommendations of the 16th FC, Andhra Pradesh will receive 4.217% of the shared amount, up from 4.047% earlier. Karnataka’s share has increased from 3.647% to 4.131%. Kerala’s share has risen from 1.925% to 2.382%. Tamil Nadu’s share has increased from 4.079% to 4.097%, and Telangana’s share has gone up from 2.102% to 2.174%.
On the other hand, Uttar Pradesh and Bihar—the two most populous states in India and the largest recipients in tax devolution—have seen a reduction in their share. Uttar Pradesh’s share has declined from 17.939% to 17.619%. Bihar’s share has decreased from 10.058% to 9.948%.

Revenue deficit grants discontinued

The Commission said that states’ revenue deficits primarily arise from committed and discretionary expenditures and emphasized that states have room to increase revenues and rationalize expenditure.
Continuing the declining trend recommended by the 15th Finance Commission, which had reduced revenue deficit grants to nearly zero by FY26, the 16th Finance Commission stated that it does not recommend revenue deficit grants, nor sector-specific or state-specific grants, during its award period.

Fiscal consolidation and borrowing discipline tightened

The Commission recommended that states’ fiscal deficit be capped at 3 percent of GSDP, while the Centre should reduce its fiscal deficit to 3.5 percent of GDP by the end of the award period.
It also recommended that states “completely discontinue the practice of off-budget borrowing and bring all such borrowings onto their budgets.”

Emphasis on subsidy rationalization and PSU reforms

The Commission expressed concern over the rising subsidy burden and stated that “borrowing to fund expenditure on subsidies and transfer schemes is not sound fiscal policy,” while urging states to rationalize schemes and introduce sunset clauses.

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Utkarsh Classes’ National Current Affairs provides the most relevant and updated coverage of important national news for all government competitive exams, including RPSC RAS, SSC, RRB ALP, RRB Group D, NTPC, Defence, Teaching, Banking, and other State and Central-level exams. Aspirants can enhance their understanding of central government policies, national welfare schemes, political developments, and social issues that shape India today.

Here, you’ll get the most accurate updates on current affairs topics, including Economy, Polity, Science & Technology, Environment, Awards & Honours, Appointments, and major national events, all in one place.

Importance of National Current Affairs in Exam Preparation

National current affairs play a big role in preparing for government exams for several reasons:

Direct Link with the Exam Syllabus: Almost all government exams, like RAS, UPSC, SSC, Railway, Defence, and Teaching (like PTET, REET, Grade 1, etc) include national current affairs and static GK questions based on the current affairs as an essential part of the syllabus. Understanding recent events in India helps candidates manage both static and dynamic sections effectively.
Improves understanding and thinking ability: For aspirants preparing for administrative services (Like RPSC RAS, UP PCS, UPSC IAS, etc.), it’s important to understand how national policies, laws, and reforms influence governance and public welfare. Analysing these national developments enhances problem-solving and analytical thinking skills.
Helps in Interview and Mains Answer Writing: During interviews for various government exams (like BPSC, UPSC, RPSC RAS), candidates are often asked questions based on the National current affairs and their implications on society, economy, and governance. A good command of current events enables you to express well-informed opinions in interviews as well as descriptive papers.
Increases awareness of India’s development: Knowledge of ongoing national initiatives, such as government schemes, infrastructure projects, national security updates, and environmental actions, helps in developing a holistic understanding of India’s progress and challenges.
Links Static GK Concepts with Daily Current Affairs: Most questions in competitive exams (like RPF SI, SSC MTS & SSC CHSL) combine static GK facts and current events topics. For instance, questions about government ministries, new schemes, or national awards often require both factual recall and contextual awareness of today’s current affairs in India.

Key Focus Areas of National Current Affairs

To make exam preparation easier, candidates must focus on the following important news as most of the questions are asked from these:

Indian Polity and Governance: Stay updated on government bills, constitutional amendments, cabinet decisions, and national policies. Learn about reforms in governance, public administration, and initiatives under programs like Digital India, Smart Cities, and Swachh Bharat Mission.
Indian Economy and Finance: Understand major trends in the Indian economy, important from the Union Budget, RBI policies, taxation changes, and economic surveys. Keep track of growth indicators like GDP, inflation, and employment reports that are often asked in exams.
Science, Defence and Technology: Stay updated about the latest ISRO missions, defence advancements, and scientific research. Stay updated on India’s progress in innovation, artificial intelligence, space exploration, and new technology initiatives under Make in India.
Environment and Sustainability: Get updates on climate policies, biodiversity efforts, renewable energy projects, and India’s national commitments under environmental conventions.
Awards, Appointments, and Important Days: Revise national-level awards (Padma Awards, Bharat Ratna), key appointments, and major national important days that are frequently covered in current affairs for competitive exams.

Why Choose Utkarsh Classes for National Current Affairs?

Utkarsh Classes provides daily national current affairs news and free downloadable PDFs to help you stay updated and revise important topics for government exams. You get all major national updates in one place, useful for Prelims, Mains, and Interview preparation.

News-Based Daily Coverage: Get reliable and exam-focused daily current affairs news covering national events, government policies, economy, banking, defence, and more. All updates come from trusted sources and are explained by the subject matter experts in simple language for better understanding.
Free PDF Downloads for Revision: Download daily, weekly, and monthly current affairs PDFs completely free. These compilations help you revise important facts, schemes, and reports quickly before the exam.
Exam-Focused Presentation: Every topic is selected after analysing previous year questions of SSC CGL, RAS, RRB Group D, Rajasthan EO & RO, Defence, and Railway exams so that you focus only on what is important for your preparation.

How to Prepare for National Current Affairs?

Preparing for national current affairs becomes easy if you follow this planned approach:

Start with PYQs: Check previous exam papers of your exam to understand what type of current affairs questions are asked, such as government schemes, committees, and budget highlights.
Study Static GK Facts linked to the National News: Try to connect national news and CA updates with the facts behind those news with subjects like Polity, Economy, and Geography. This helps you understand the background of each topic better
Regularly Revise National Current Affairs: Download Utkarsh’s Daily, Weekly, and Monthly Current Affairs PDFs to revise all important national topics quickly and easily.

Explore the latest National Current Affairs with Utkarsh Classes and make your exam preparation stronger every day.

FAQs

Why are National Current Affairs important for government exams?

National current affairs are important for government exams because they cover important recent National news, policies, and developments frequently asked in exams. Staying updated with them strengthens your general awareness, helps you think better, and supports you in both objective and descriptive parts of the competitive exams.

How many months of National Current Affairs should I study for exams?

You should prepare at least 6 to 12 months of National Current Affairs for all competitive exams.

What type of National Current Affairs questions are asked in exams?

Most exams include questions on National Current Affairs, such as government schemes, new appointments, national awards, events, health and schemes, and economic policies.

Are Utkarsh’s National Current Affairs PDFs useful for all exams?

Yes, Utkarsh’s National Current Affairs PDFs are useful for all exams that include India GK or General Awareness subjects.

How does Utkarsh Classes help in preparing for National Current Affairs?

Utkarsh Classes provides daily current affairs news and free downloadable PDFs of National Current Affairs to make your preparation and revision easier.

Home

National Current Affairs

Economy

16th Finance Commission fixed the states’ share in the divisible pool at 41%

Economy

16th Finance Commission fixed the states’ share in the divisible pool at 41%

Utkarsh Classes

Updated: 03 Feb 2026

5 Min Read

The 16th Finance Commission has recommended retaining the states’ share in the divisible pool of central taxes at 41 percent, while emphasizing outcome-based expenditure, greater transparency in tax transfer data, and stronger fiscal discipline at the state level.
The panel said there is a need to improve efficiency in public expenditure and strengthen the fiscal accountability framework across all states.

States with the highest share in central tax transfers

Under the new formula, Karnataka’s share in central tax transfers has been increased to 4.13% for 2026–31, compared to 3.65% under the 15th Finance Commission.
This would mean an additional ₹7,387 crore, increasing Karnataka’s allocation to ₹63,050 crore, whereas under the previous formula Karnataka would have received ₹55,663 crore.
Kerala emerged as the second-largest beneficiary, with its allocation increasing by ₹6,975 crore and its share rising from 1.93% to 2.38%.
Gujarat (₹4,228 crore) and Haryana (₹4,090 crore) also benefited significantly, as their per capita income is higher and their contribution to GDP is substantial.
Madhya Pradesh benefited the least, with its allocation decreasing by ₹7,677 crore to ₹1.12 lakh crore. Its share in the Centre’s divisible pool declined from 7.85% to 7.35%.

16th Finance Commission

The formal constitution of the 16th FC took place on December 31, 2023, under the chairmanship of Arvind Panagariya, with the mandate to make recommendations for a five-year period from April 1, 2026 to March 31, 2031. The Finance Commission is a constitutional body under Article 280.
It submitted its report to the President of India on November 17, 2025, which was tabled in Parliament by Ms. Sitharaman on Sunday (February 1, 2026).
The fiscal deficit for the next financial year has been estimated at 4.3 percent of GDP, compared to 4.4 percent for the financial year ending March 2026.
In the Budget Estimates (BE) 2026–27, the debt-to-GDP ratio is estimated at 55.6 percent of GDP, compared to 56.1 percent of GDP in the Revised Estimates (RE) 2025–26.
The 16th Finance Commission has recommended total grants of ₹7,91,493 crore for duly constituted rural local bodies (RLBs) and urban local bodies (ULBs) for the period 2026–27 to 2030–31.

Key recommendations

It states that there is no longer any scope to reduce the states’ share in the divisible pool, as the Centre’s cesses and surcharges—which are not shared with the states—have reduced the size of the divisible pool from 89.1% of total tax revenue in 2014–15 to 74–80% during the period 2020–24, for which actual data are available.
The report states, “The Commission believes that if an efficient and comprehensive system of taxation is to be implemented, a grand bargain will have to be struck between the Centre and the states, wherein the Centre will agree to subsume a large part of the revenue from cesses and surcharges into regular taxes, and the states will agree to a smaller share of the resulting larger divisible pool, ensuring that neither side suffers any revenue loss.”
The weightage for a state’s population is now 17.5%, up from 15% earlier. The weightage for its demographic performance—i.e., how successfully it has controlled population growth—has been reduced from the earlier 12.5% to 10%. The 16th Finance Commission has given a 10% weightage to the area of a state, compared to 15% earlier.
A state’s forest area continues to receive a 10% weightage, unchanged from before. The per capita GSDP distance of a state—i.e., the gap between a state’s average per capita income and that of the state with the highest per capita income—has been given the highest weightage of 42.5%, down from 45% earlier.

Union Budget 2026: Allocation for major central schemes

The 16th Finance Commission has removed the earlier ‘tax and fiscal efforts’ category, which had a weightage of 2.5%, and replaced it with ‘contribution to GDP’, which has a weightage of 10%.
Under this new formula, all five southern states—Tamil Nadu, Kerala, Andhra Pradesh, Telangana, and Karnataka—have seen an increase in their share of the divisible pool.
According to the recommendations of the 16th FC, Andhra Pradesh will receive 4.217% of the shared amount, up from 4.047% earlier. Karnataka’s share has increased from 3.647% to 4.131%. Kerala’s share has risen from 1.925% to 2.382%. Tamil Nadu’s share has increased from 4.079% to 4.097%, and Telangana’s share has gone up from 2.102% to 2.174%.
On the other hand, Uttar Pradesh and Bihar—the two most populous states in India and the largest recipients in tax devolution—have seen a reduction in their share. Uttar Pradesh’s share has declined from 17.939% to 17.619%. Bihar’s share has decreased from 10.058% to 9.948%.

Revenue deficit grants discontinued

The Commission said that states’ revenue deficits primarily arise from committed and discretionary expenditures and emphasized that states have room to increase revenues and rationalize expenditure.
Continuing the declining trend recommended by the 15th Finance Commission, which had reduced revenue deficit grants to nearly zero by FY26, the 16th Finance Commission stated that it does not recommend revenue deficit grants, nor sector-specific or state-specific grants, during its award period.

Fiscal consolidation and borrowing discipline tightened

The Commission recommended that states’ fiscal deficit be capped at 3 percent of GSDP, while the Centre should reduce its fiscal deficit to 3.5 percent of GDP by the end of the award period.
It also recommended that states “completely discontinue the practice of off-budget borrowing and bring all such borrowings onto their budgets.”

Emphasis on subsidy rationalization and PSU reforms

The Commission expressed concern over the rising subsidy burden and stated that “borrowing to fund expenditure on subsidies and transfer schemes is not sound fiscal policy,” while urging states to rationalize schemes and introduce sunset clauses.

About the author

Utkarsh Classes

Company

Our Offline Centers

Visit an Offline Centre Near to You.

Jodhpur

Explore

Jaipur

Explore

Importance of National Current Affairs in Exam Preparation

National current affairs play a big role in preparing for government exams for several reasons:

Direct Link with the Exam Syllabus: Almost all government exams, like RAS, UPSC, SSC, Railway, Defence, and Teaching (like PTET, REET, Grade 1, etc) include national current affairs and static GK questions based on the current affairs as an essential part of the syllabus. Understanding recent events in India helps candidates manage both static and dynamic sections effectively.
Improves understanding and thinking ability: For aspirants preparing for administrative services (Like RPSC RAS, UP PCS, UPSC IAS, etc.), it’s important to understand how national policies, laws, and reforms influence governance and public welfare. Analysing these national developments enhances problem-solving and analytical thinking skills.
Helps in Interview and Mains Answer Writing: During interviews for various government exams (like BPSC, UPSC, RPSC RAS), candidates are often asked questions based on the National current affairs and their implications on society, economy, and governance. A good command of current events enables you to express well-informed opinions in interviews as well as descriptive papers.
Increases awareness of India’s development: Knowledge of ongoing national initiatives, such as government schemes, infrastructure projects, national security updates, and environmental actions, helps in developing a holistic understanding of India’s progress and challenges.
Links Static GK Concepts with Daily Current Affairs: Most questions in competitive exams (like RPF SI, SSC MTS & SSC CHSL) combine static GK facts and current events topics. For instance, questions about government ministries, new schemes, or national awards often require both factual recall and contextual awareness of today’s current affairs in India.

Key Focus Areas of National Current Affairs

To make exam preparation easier, candidates must focus on the following important news as most of the questions are asked from these:

Indian Polity and Governance: Stay updated on government bills, constitutional amendments, cabinet decisions, and national policies. Learn about reforms in governance, public administration, and initiatives under programs like Digital India, Smart Cities, and Swachh Bharat Mission.
Indian Economy and Finance: Understand major trends in the Indian economy, important from the Union Budget, RBI policies, taxation changes, and economic surveys. Keep track of growth indicators like GDP, inflation, and employment reports that are often asked in exams.
Science, Defence and Technology: Stay updated about the latest ISRO missions, defence advancements, and scientific research. Stay updated on India’s progress in innovation, artificial intelligence, space exploration, and new technology initiatives under Make in India.
Environment and Sustainability: Get updates on climate policies, biodiversity efforts, renewable energy projects, and India’s national commitments under environmental conventions.
Awards, Appointments, and Important Days: Revise national-level awards (Padma Awards, Bharat Ratna), key appointments, and major national important days that are frequently covered in current affairs for competitive exams.

Why Choose Utkarsh Classes for National Current Affairs?

News-Based Daily Coverage: Get reliable and exam-focused daily current affairs news covering national events, government policies, economy, banking, defence, and more. All updates come from trusted sources and are explained by the subject matter experts in simple language for better understanding.
Free PDF Downloads for Revision: Download daily, weekly, and monthly current affairs PDFs completely free. These compilations help you revise important facts, schemes, and reports quickly before the exam.
Exam-Focused Presentation: Every topic is selected after analysing previous year questions of SSC CGL, RAS, RRB Group D, Rajasthan EO & RO, Defence, and Railway exams so that you focus only on what is important for your preparation.

How to Prepare for National Current Affairs?

Preparing for national current affairs becomes easy if you follow this planned approach:

Start with PYQs: Check previous exam papers of your exam to understand what type of current affairs questions are asked, such as government schemes, committees, and budget highlights.
Study Static GK Facts linked to the National News: Try to connect national news and CA updates with the facts behind those news with subjects like Polity, Economy, and Geography. This helps you understand the background of each topic better
Regularly Revise National Current Affairs: Download Utkarsh’s Daily, Weekly, and Monthly Current Affairs PDFs to revise all important national topics quickly and easily.