The 16th Finance Commission of India on Monday applauded Uttarakhand for its fiscal management and efforts to increase income. Commission Chairman Dr Arvind Panagariya and other members, on a visit to Uttarakhand to take stock of the state’s financial needs, interacted with the state government, municipal and panchayat bodies.

A day after his meeting with Chief minister Pushkar Singh Dhami and senior officials in the government, Dr Arvind Panagariya stated that the state’s path of raising income is appreciable. “Uttarakhand has kept its fiscal deficit in balanced mode. If there is a balanced fiscal deficit in any developing state, it’s not a bad situation. However, it’s important to take care that this deficit does not increase too much which might cause poor budgeting of the state, said Dr Panagariya.”

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The 16th Finance Commission Chairman added, “Uttarakhand is aware of its financial challenges and is working in the right direction to meet them. The state is also making persistent efforts to increase its income and there is every possibility to achieve the target as set out by the government.”

Praises for Uttarakhand and its government came from Dr Panagariya during an interaction with journalists at the state secretariat on the second day of his visit to the state. He said Uttarakhand’s per capita income is good because it’s higher than the national average. “It can be increased further,” he said.

Dr Panagariya informed that the Finance Commissions in the past made allocations for the distribution of taxes based on specific geographical and topographical conditions of the Himalayan states. He explained in detail the system of tax sharing between the Center and the states and shared that the Finance Commission determines the method and formula for dividing the income generated from tax between the center and the states in accordance with the constitutional system and requirements.

According to Dr Panagariya, the mode of tax sharing between the Center and the states includes demographic performance (based on low fertility rate) 12.5 per cent, income difference 45 per cent, 15 per cent each for population and area of the states, ten per cent for forest and ecology and 2.5 per cent tax and fiscal management accounts of the state.

Earlier on Sunday, during a meeting with the chief minister and the state finance secretary, the latter demanded 10 per cent share of the Central cess and surcharge to be devolved to Uttarakhand.