Renowned economist Arvind Panagariya assumes the pivotal role of chairman in India’s new Finance Commission, tasked with recommending the distribution of federal taxes among states for the next five years.
New Delhi, December 31, 2023 – In a strategic move, the Indian government has named Arvind Panagariya as the chairman of the freshly constituted Finance Commission, charged with the crucial task of advising on the allocation of federal taxes among states. Panagariya, a distinguished Indian-born economist with a U.S. education, had previously served as a key adviser to Prime Minister Narendra Modi.
Panagariya stepped into the limelight in 2017 when he resigned from his position in the government’s primary policy think-tank. At that time, he was specifically chosen by Prime Minister Modi to spearhead the newly established body, which replaced the erstwhile planning commission responsible for crafting Soviet-style five-year economic plans.
India, as part of its periodic governance routine, forms a Finance Commission every five years. This commission is tasked with proposing a formula for the distribution of taxes between the central and state governments, while also providing recommendations on matters pertaining to public finances.
As of now, India allocates 42% of federal taxes to states.
According to the official government order, the Finance Commission, under Panagariya’s leadership, is expected to present its comprehensive report by October 31, 2025. This report will cover a five-year period starting from April 1, 2026, outlining key strategies for optimizing the fiscal relationship between the central and state entities. Panagariya’s wealth of experience and expertise is anticipated to play a pivotal role in shaping India’s economic trajectory in the coming years.