FM: States Will Receive More Than Rs 25 Lakh Crore In FY27 Budget

Union Finance Minister Nirmala Sitharaman announced that states will receive over Rs 25 lakh crore in total resources during the financial year 2026-27 (FY27), with the figure estimated at Rs 25.44 lakh crore. This includes the states' share of central taxes and transfers under centrally sponsored schemes. The statement was made during her reply to the discussion on the Union Budget in the Lok Sabha on February 11, 2026. The allocation marks an increase of Rs 2.70 lakh crore compared to FY26, reflecting higher projected central revenues and continued adherence to fiscal transfer norms.

The minister emphasized that the Centre has fully complied with the 41% vertical devolution recommendation from the Finance Commission for the divisible pool of taxes. She addressed concerns raised by opposition members about potential reductions in states' shares, asserting that no state's entitlement has been curtailed and that cesses and surcharges are utilized separately for development works in sectors benefiting states. Sitharaman referenced analyses from earlier periods (2018-19 to 2022-23) by the Finance Commission, which confirmed that required transfers have been made without discrepancies, leaving no room for doubt on the Centre's commitment to fair devolution.

This significant transfer supports state-level spending on infrastructure, welfare, and other priorities amid the government's broader fiscal strategy for FY27. The Union Budget projects total expenditure at Rs 53.47 lakh crore, up 7.7% from the current year, with a record capital outlay of Rs 12.2 lakh crore (3.1% of GDP). Effective capital expenditure, including support to states and Union Territories, is estimated at Rs 17.1 lakh crore, or 4.4% of GDP. The fiscal deficit is targeted at 4.3% of GDP, continuing the path of consolidation while prioritizing growth-oriented investments.

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The announcement comes in the context of ongoing debates over Centre-state fiscal relations, including opposition claims of uneven allocations or under-transfers in some cases. Sitharaman countered such narratives by highlighting the statutory basis of devolution and the increase in absolute transfers. The higher allocation to states is expected to bolster their fiscal capacity for development projects, particularly in infrastructure, health, education, and disaster management, aligning with national goals for balanced regional growth.

Overall, the projected Rs 25.44 lakh crore transfer underscores the Centre's emphasis on cooperative federalism during the Budget Session. As tax collections are forecasted to rise—driven by projected 8% growth in gross tax receipts—the enhanced devolution aims to empower states to meet their expenditure needs while the Union maintains fiscal discipline and high capital spending to sustain economic momentum.

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