The Union Budget for 2026-27 provides an allocation of Rs 1.4 lakh crore to the states as Finance Commission Grants based on a 41 per cent share of the devolution.
Presenting the Union Budget 2026-27 in Parliament on Sunday, Finance Minister Nirmala Sitharaman said: “The government has accepted the recommendation of the Commission to retain the vertical share of devolution at 41 per cent. As recommended by the Commission, I have provided Rs 1.4 lakh crore to the States for the FY 2026-27 as Finance Commission Grants. These include rural and urban local body and disaster management grants.”
She further said that the Commission submitted its report to the President on November 17, 2025, and the government is to lay the report along with the explanatory memorandum on the action taken report on the recommendations of the Commission in Parliament as mandated under Article 281 of the Constitution.
Sitharaman further stated that the government has maintained fiscal prudence and monetary stability whilst maintaining a strong thrust on public investments.
She has projected a further reduction in the fiscal deficit to 4.3 per cent of GDP for 2026-27 as the government continues on the path of fiscal consolidation.
The Finance Minister said that the government had fulfilled its commitment to reduce the fiscal deficit to 4.4 per cent in the Budget for 2025-26 and would now reduce it further to 4.3 per cent as it continues on the fiscal prudence path.
She said that the target reflects a balance between supporting economic momentum and keeping public finances stable.
Sitharman also announced a capital expenditure of Rs 12.2 lakh crore in the Budget for 2026-27, to boost big-ticket infrastructure projects for growth and jobs in the economy.
The Finance Minister said that an Infrastructure Risk Development Fund would be set up to accelerate the development of big projects.
She said to push economic growth, the Budget proposes to deliver a powerful push to infrastructure, including highways, ports, railways, and power projects.
