Finance Commission emphasizes cooperative federalism for Viksit Bharat financing strategy

Hindustan Times - India · 20 Sept 2026 · 2 min read
Prelims · Polity Mains · GS2 Governance High relevance

Fifteenth Finance Commission chairman NK Singh stressed the need for cooperative federalism, higher savings, and private investments to finance India's development goals, proposing a new Centre-state economic compact.

Key points

Cooperative Federalism: NK Singh highlighted its critical role in financing Viksit Bharat, urging states to share policy experiences and compete on development parameters.

New Economic Compact: Singh proposed a revised Centre-state financial framework to align fiscal strategies with India's 7-8% growth target for becoming a developed economy by 2047.

Domestic Savings Rate: Current savings rate of 34% GDP is inadequate; Singh advocated increasing it to 38-40% to sustain the investment needed for Viksit Bharat.

Private Capital Mobilization: Emphasized the need to crowd in private investments alongside public finance to meet infrastructure and social development goals.

NITI Aayog's Role: Singh noted the Governing Council's success in fostering inter-state dialogue, though transition challenges from the Planning Commission era persist.

[GS3-Economy] The 7.8% Q1 FY27 GDP growth provides a favorable backdrop for implementing these fiscal strategies, though sectoral imbalances remain a concern.

GST 2.0 Implications: Conference discussions included potential impacts of GST reforms on state finances, highlighting the need for balanced revenue-sharing mechanisms.

Way Forward: States should institutionalize biennial conferences for fiscal coordination, establish inter-state knowledge-sharing platforms, and adopt outcome-based budgeting to track development goal progress.

Key terms

Cooperative Federalism

A governance model where Centre and states collaborate on policy implementation, rooted in Article 246 and Seventh Schedule of the Constitution. For UPSC, it's critical for understanding fiscal devolution (Finance Commission), GST Council dynamics, and inter-state water disputes resolution mechanisms.

Viksit Bharat

India's strategic vision to become a developed economy by 2047, requiring 7-8% sustained GDP growth. UPSC relevance lies in its intersection with SDGs, infrastructure financing (NIP), and employment generation (PLFS data analysis).

Finance Commission

Constitutional body under Article 280 determining Centre-state fiscal relations. Its recommendations on tax devolution (currently 42% to states) and grants are pivotal for GS2 (polity) and GS3 (fiscal federalism) analyses.

NITI Aayog

Policy think tank replacing the Planning Commission in 2015, focusing on competitive federalism. Its role in SDG localization, Aspirational Districts Programme, and innovation ecosystems makes it vital for GS2 governance questions.