The Union Budget for 2026-27 has earmarked Rs 1.4 lakh crore for states as Finance Commission Grants, based on a 41 per cent share of devolution. Finance Minister Nirmala Sitharaman, presenting the budget in Parliament, confirmed the government’s acceptance of the Commission’s recommendation to maintain the vertical share of devolution at 41 per cent. This allocation includes grants for rural and urban local bodies as well as disaster management.
Sitharaman mentioned that the Commission had submitted its report to the President on November 17, 2025, and the government is obligated to present the report in Parliament along with the action taken report as per Article 281 of the Constitution. Emphasizing fiscal prudence and monetary stability, she projected a decrease in the fiscal deficit to 4.3 per cent of GDP for 2026-27, continuing the path of fiscal consolidation.
The Finance Minister highlighted the government’s commitment to reducing the fiscal deficit, aiming to bring it down to 4.3 per cent from the current 4.4 per cent. This target, she explained, strikes a balance between supporting economic growth and maintaining stable public finances. Additionally, she announced a capital expenditure of Rs 12.2 lakh crore in the upcoming budget to drive major infrastructure projects for economic growth and job creation.
To expedite the development of significant projects, Sitharaman proposed the establishment of an Infrastructure Risk Development Fund. The budget also focuses on enhancing infrastructure, including investments in highways, ports, railways, and power projects to stimulate economic growth.
