‘Central grants in aid crucial for meeting Bihar budget targets’

the state government is pinning high hopes on the central grants and other grants under the 16th finance commission recommendations to get additional central funds for meeting its annual scheme outlay and committed expenditure

After laying the state budget for year 2026-27 amounting to ₹3.47 lakh crore, the state government is pinning high hopes on the central grants and other grants under the 16th finance commission recommendations to get additional central funds for meeting its annual scheme outlay and committed expenditure, which has shown an uptick in the upcoming budget standing at ₹2.25 lakh crore.

‘Central grants in aid crucial for meeting Bihar budget targets’

Though the state budget has made a projection of getting ₹51,895 crore as total central grants including ₹7,983 crore as per recommendation of 16th finance commission to be effective from 2026-27 till 2030-31, officials in the finance department said the total amount is still not clear as the state budget projections were made before the central budget was announced.

“The total central grants including the grants under 16th finance commission is crucial this time as the committed expenditure has increased. If we get ₹51,895 crore as projected in total grants in aid from the centre, it would be a relief. Otherwise, if there is any curtailment, the pressure would be on fund availability to service the budget outlay,” said a finance official, seeking anonymity.

There are already concerns in the state finance department over the 16th finance commission discontinuing the health grant and only giving grants for local urban , rural bodies as well as disaster management.

Moreover, the central devolutions projected for Bihar at ₹1.58 lakh crore in FY26-27 is also crucial as the state is dependent on the devolutions for funding its development works and also committed expenditure.

“ Though the 16 finance commission has retained the 41% share of states in central taxes, Bihar’s share is going to be around 10% slightly lower than the devolution formula in 15th finance commission. That is a worrying part as the state might see some variations in projected central devolutions,” said a finance expert, associated with the state government.

Significantly, the state budget placed on Tuesday did show a revenue surplus of ₹1,143 crore (if revenue receipt is more than revenue expenditure the surplus) with the fiscal deficit for FY 26-27 projected at 2.88% of the state gross domestic product which is within the permissible limit of 3% of GSDP as laid down in Fiscal responsibility budget management act (FRBM), experts said the outstanding debt hovering over 30 percent of the GSDP is a worrying part.

“The fiscal deficit within the FRBM limit shows good fiscal discipline with focus on creation of capital assets with additional funds. But ,yes, there are certain worrying points on outstanding debt which is over 30% of GSDP . This needs to be brought down to around 25% so that the pressure of repayments of interests comes down,” said Amit Bakshi, economist associated with the Bihar Institute of Public Finance and Policy.

More importantly, experts said that the state government is also going to face a challenge of generating more funds in next two fiscal years especially in 2027-28 as the salary bill is expected to rise heavily once the centre implements the eighth pay commission.

There are reports the commission already set up in November 2025 is going to finalise its recommendations in next 18 months , which means the state too would have to implement the recommendations of enhanced salary for state employees as like central government staff.

“Yes , the eighth pay commission would be a big load on the state exchequer and there is already a challenge to generate more funds through the state’s own internal resources because the central grants and devolutions would not be enough to meet the enhanced salary bills. New recruitments of state officials would only increase the load on state exchequer,” said another finance official.

He added the state government has the challenge of keeping its fiscal health robust by tightening its expenses mainly on salary ,pension, interest on loans as otherwise the government might fall in the category of revenue deficit states from being a revenue surplus state.

State officials said that the government already has increased its revenue target in 2026-27 from its own internal sources to ₹65,000 crore of which ₹50,000 crore is expected from commercial taxes, ₹10,000 crore from registration and stand duty, ₹5,000 crore from transport and ₹800 crore from land revenue, ₹9,402 crore is the targeted revenue from state’s own non tax revenue.

“Bihar’s own state revenue from internal resources is going up, which is a positive trend. In this fiscal year, the state;s own revenue is likely to be around ₹65,000 crore.Of course, there is dependency on central devolutions but the state is showing signs of generating funds to meet its expenses on implementing schemes and creation of assets,” said another state finance official.