INDIAN ECONOMY

Sixteenth Finance Commission (2026–31)

• Context: The Sixteenth Finance Commission (16th FC), chaired by Arvind Panagariya, submitted its final report covering the award period 2026–31.
• The Finance Commission of India is constituted under Article 280 of the Constitution to regulate fiscal relations between the Union and the States.
• Its task includes determining: Vertical devolution (Centre–State tax share), and Horizontal distribution formula (division among states).

Vertical Tax Devolution – 41%

• The Commission retained the states’ share of the divisible central tax pool at 41%, continuing the arrangement recommended by the 15th FC.

Revised Horizontal Distribution Formula

• Introduced a 10% weight for Contribution to GDP, calculated using the square root of Gross State Domestic Product (GSDP).
• This replaces the earlier Tax Effort parameter used in previous formulas.

Grants to Local Governments – ₹7.9 Lakh Crore

• Significant allocations to rural and urban local bodies.
• 80% as unconditional basic grants.
• 20% tied to performance metrics.

Disaster Management Funding – ₹2.04 Lakh Crore

• • Recommended corpus for State Disaster Relief and Mitigation Funds.

• Cost-sharing pattern: 75:25 (Centre: State) for general states, 90:10 for Himalayan and North-Eastern states.

Urbanisation Incentive

• Proposed a ₹10,000 crore “Urbanisation Premium”.
• Objective: Encourage integration of peri-urban villages into larger municipal bodies to support planned urban growth.

Fiscal Consolidation Roadmap

• Centre to reduce fiscal deficit to 3.5% of GDP by 2030–31.
• States required to strictly maintain a 3% of GSDP deficit ceiling
  Current Facts
  • Tamil Nadu launched HPV Vaccination campaign on a pilot basis in four districts Ariyalur, Perambalur, Dharmapuri and Tiruvannamalai.
    SEBI to Strengthen Market Surveillance Using AI
    • Context: The Securities and Exchange Board of India (SEBI) has decided to intensify oversight of stock market manipulation and cyber-enabled financial frauds by leveraging advanced technology and Artificial Intelligence (AI). 
    • The move aims to detect irregular trading patterns, insider misconduct, and digital fraud more effectively.

    About SEBI

    • SEBI is the apex regulator of India’s securities and capital markets.
    • • Initially set up in 1988, it was granted statutory authority through the SEBI Act, 1992.
    • It functions under the administrative supervision of the Ministry of Finance, Government of India.

    Objectives

    • Safeguard the interests of investors in securities.
    • Foster orderly growth and development of the capital market.
    • Ensure proper regulation of stock exchanges and other securities market intermediaries.

    Composition of SEBI

    • A Chairperson appointed by the Central Government.
    • Two officials nominated from the Ministry of Finance.
    • One representative from the Reserve Bank of India (RBI).
    • Five additional members, with at least three serving as whole-time members.

    Powers of SEBI

    Quasi-Judicial Authority

    • SEBI can adjudicate cases involving fraudulent activities and unfair trade practices.
    • It has the authority to issue orders and penalties to ensure fairness and integrity in the securities market.

    Quasi-Executive Authority

    • Empowered to inspect account books, records, and documents of market participants.
    • Can conduct investigations, enforce compliance, and initiate action against entities violating regulations.

    Quasi-Legislative Authority

    • Authorized to frame regulations and guidelines to protect investors.
      Current Facts
      • In Tamil Nadu, where 58.27% of land is under agriculture and only 10.44% is classified as wasteland or dry land.
        18% increase in foreign direct investment
        • Context: Foreign direct investment (FDI) inflows into India increased by 18% to US$ 47.87 billion ($47.87 billion) in the first three quarters of the current financial year 2025-26.
        • Investment from the US has doubled to $7.80 billion compared to the same period in the financial year 2024-25.
        • Singapore is at the top of the total investment with $17.65 billion. It is followed by the US and Mauritius.
        • Maharashtra continues to be at the top with $15.38 billion in attracting foreign investment state-wise.
        • Karnataka ($11.20 billion), Gujarat ($5.00 billion), Tamil Nadu ($3.89 billion), and Haryana ($3.84 billion) are in the top five.