States and the challenge before the Finance Commission

The Government of Tamil Nadu recently hosted the Sixteenth Finance Commission, which was chaired by Arvind Panagariya.

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With its distinguished experts from various fields, the Commission is uniquely positioned to address the critical fiscal challenges facing India and rectifying the skewness in the relationship between the States and the Union.The decisions taken by this Finance Commission will not only shape the fiscal fate of the nation for the next five years but will also influence India’s economic trajectory in the decades to come. The Sixteenth Finance Commission's work coincides with significant shifts in global economic trends. Concepts such as “friendshoring” and “reshoring” are reshaping international trade and investment patterns. These trends present a unique opportunity for India and Tamil Nadu. To seize these opportunities, the critical challenge for the Finance Commission lies in striking a balance between equitable redistribution and incentivising growth in high-performing States such as Tamil Nadu.