Govt appoints Arvind Panagariya as chairman of 16th Finance Commission

A month after the Union Cabinet approved the terms of reference of the 16th Finance Commission, the government on Sunday appointed former NITI Aayog vice-chairman Arvind Panagariya as the panel’s chairman.

However, the government didn’t appoint the members of the Commission, which may further delay its functioning.
 

“Members of the Sixteenth Finance Commission would be notified separately,” the Gazette notification said. Joint secretary in the finance ministry, Ritvik Ranjanam Pandey, was in November appointed as commission’s secretary.  D K Srivastava, a member of the 12th Finance Commission, said Panagariya is well suited for the job as he has a very good understanding of the Indian economy and looked after the NITI Aayog for a number of years.

 

From January 2015 to August 2017, Panagariya served as the first vice chairman of the NITI Aayog in the rank of a Cabinet minister. During these years, he also served as India’s G20 Sherpa and led the Indian teams that negotiated the G20 Communiqués.
 

On the delay in the appointment of members, Srivastava said the Commission takes 2-2.5 years to complete its report and, therefore, it is important that appointments are made in a timely manner. 
 

In 2024, the global slowdown may become sharper and advanced countries may enter recession which could pose challenges to assessments by the 15th Finance Commission.
 

Panagariya, who is currently serving as the Jagdish Bhagwati Professor of Indian Political Economy at Columbia University, has been a regular commentator on Indian political economy, including affairs of the states that he has to deal with at length during his job at the Finance Commission.

He recently praised Odisha as an example of how voters reward a leader who delivers high and consistent economic growth and has criticised Rajasthan’s switch to the Old Pension Scheme and its Right to Health Bill as examples of “dangerously irresponsible ways to court voters”.
 

The Finance Commission is a constitutionally-mandated body established once every five years to devise a formula for distributing net tax proceeds between the Centre and the states as well as among states and local bodies. Currently, India shares 41 per cent of federal taxes with states as recommended by the 15th panel.
 

In a departure from convention, the Union Cabinet on November 29 approved the terms of reference for the 16th Commission without revealing the names of its chairman and members. The new panel has to submit its report by October 31, 2025, covering a period of five years that will come into effect on April 1, 2026. The recommendations of the Fifteenth Finance Commission, chaired by N K Singh, are valid till March 31, 2026.
 

The government has also limited the terms of reference of the 15th finance panel only to the constitutionally mandated provisions, such as distribution of net proceeds of taxes between the Centre and the states and among states, principles that should govern the grants-in-aid of the revenues of the states out of the Consolidated Fund of India, and measures needed to supplement the resources of panchayats and municipalities in the states.

A foremost trade economist, Panagariya has often criticised the government’s “protectionist” import substitution policies though he has been supportive of the broad economic policies of the Narendra Modi government. 

Panagariya has earlier served as the chief economist of the Asian Development Bank and has also worked with the World Bank, International Monetary Fund, and UNCTAD in various capacities. He holds a Ph.D. degree in Economics from Princeton University. In March 2012, the government of India honoured Panagariya with Padma Bhushan, the third highest civilian honours the country bestows in any field.

NEW INNINGS

• The 16th Finance Commission under Arvind Panagariya will submit its report for 2026-27 to 2030-31 period to the President by October 31, 2025. It will come into effect on April 1, 2026
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• Served as the first vice chairman of the NITI Aayog between January 2015 and August 2017
   
• Supportive of broad economic policies of the Narendra Modi government but criticised its “protectionist” import substitution policies