Union Budget: hike in divisible tax pool to 2.38% brings relief to Kerala
GS3Economy · S&T · Environment · Security· Fiscal policy, budget & taxation (GST)· Prelims + Mains·
Why in news
The 16th Finance Commission increased Kerala’s share of the divisible tax pool to 2.382% for the 2026-27 to 2030-31 period while rejecting its requests for higher devolution percentages and revenue deficit grants.
Background
The 16th Finance Commission allocated ₹2,580 crore to Kerala as Disaster Grants and ₹2,064 crore as State Disaster Response Fund allocation for the five-year period starting 2026-27. The commission revised horizontal devolution criteria to include income distance and demographic performance.
Facts for Prelims
- FactKerala's share of the divisible tax pool is set at 2.382% for the period 2026-27 to 2030-31.
- FactKerala was allocated ₹2,580 crore as Disaster Grants by the 16th Finance Commission.
- FactKerala was allocated ₹2,064 crore as State Disaster Response Fund allocation.
- BodyThe 16th Finance Commission is the body responsible for determining the tax devolution and fiscal targets.
For Mains
Q. Discuss the significance of horizontal devolution criteria in ensuring fiscal equity among states under the recommendations of the Finance Commission.
Dimensions to cover in your answer
- Fiscal federalism: Balancing state-specific demands for revenue deficit grants against national fiscal consolidation goals
- Devolution metrics: Impact of using income distance and demographic performance as primary horizontal equity indicators
Keywords: Fiscal Federalism · Horizontal Devolution · Divisible Tax Pool · Revenue Deficit · Fiscal Equity
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