The 16th Finance Commission, chaired by Arvind Panagariya, kept the States' share of the divisible pool at 41% for 2026-27 to 2030-31. The Commission is a constitutional body under Article 280. Its main innovation is a new 'contribution to GDP' criterion with a 10% weight in horizontal devolution. It dropped the 2.5% tax-effort weight, raised the population weight by 2.5 percentage points and cut weights for area, demographic performance and income distance, so States such as Karnataka, Kerala, Gujarat and Maharashtra gained. For the first time it recommended no Revenue Deficit Grants, but earmarked ₹7.91 trillion for local bodies (60:40 rural-urban) and ₹2.04 trillion for State disaster funds.