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West Bengal’s Finance Minister Chandrima Bhattacharya presented the State Budget for 2026–27 on 12 February 2026. The total expenditure, or size of the Budget for FY 2026–27, has been pegged at ₹3.89 lakh crore. This is about 14% higher than the revised estimate for 2024–25.

Some important new allocations

Dearness Allowance (DA) dues for state government employees have been a major and contentious issue. In this Budget, a 4% increase in DA for employees and pensioners has been announced, effective from April 2025. Social welfare continues to be a priority sector for the state government. Under this head, the monthly cash transfer scheme of ₹1,500 per month for women, known as Lakshmir Bhandar, remains the single largest component of expenditure, accounting for nearly 46% of the total allocation in this category.

A new scheme has also been introduced for the youth. Under this programme, individuals aged between 21 and 40 years will receive a monthly cash transfer of ₹1,500. In addition, several one-time cash transfer schemes have been announced.

In the infrastructure sector, a new initiative called the Nodi Bandhan Scheme has been introduced to combat river erosion. An allocation of ₹1,500 crore has been made for rural roads, and ₹500 crore has been earmarked for constructing a bridge to improve connectivity with Sagar Island. ASHA and Anganwadi workers will also be provided smartphones to improve service delivery.

Highlights of the State Economy

The growth of the State Gross Domestic Product (SGDP) has been satisfactory. In 2023–24, SGDP grew by 7.7% over the previous year, compared to India’s GDP growth rate of 7.2% during the same period. According to Budget documents, the sectoral composition of SGDP comprises agriculture (20%), manufacturing (23%), and services (58%).

The state’s per capita SGDP at current prices is estimated at ₹1,71,184, reflecting an increase of about 11% over 2022–23. In comparison, India’s per capita GDP in 2023–24 is estimated to have grown by 8.6% to ₹2,11,725.

Fiscal Estimates

West Bengal’s SGDP for 2025–26 is projected at ₹20,31,805 crore, representing a 12% increase over 2024–25. The fiscal deficit for 2025–26 has been targeted at 3.6% of SGDP, amounting to ₹73,178 crore. In contrast, the revised estimate for 2024–25 places the fiscal deficit at 4% of SGDP, higher than the budgeted 3.6%.

Major sources of Tax Revenue

The state government has seven major sources of tax revenue. First, State GST, which is estimated to have yielded ₹45,873 crore in 2024–25 (revised estimate). Second, State Excise, which generated ₹ 20,444 crore. Third, Sales Tax/VAT collections amounted to ₹12,768 crore. Fourth, Stamp Duty and Registration Fees brought in ₹7,885 crore. Fifth, Taxes on Vehicles contributed ₹4,074 crore. Sixth, Land Revenue generated ₹4,140 crore. Finally, Electricity Duty collections stood at ₹3,195 crore during the same period.

A major weakness of the state’s finances continues to be the low level of own non-tax revenue. For instance, in 2023–24, the Budget Estimate projected ₹6,377 crore under this head, but the Revised Estimate fell sharply to ₹3,238 crore. Similarly, targets for own tax revenue are not always fully achieved. The government needs to undertake special initiatives to strengthen revenue mobilisation and meet its fiscal targets.

Sixteenth Finance Commission recommendations and West Bengal’s share

The recommendations of the Sixteenth Finance Commission were accepted by the Union Government and tabled in Parliament on 1 February 2025, the same day as the Union Budget for 2026–27. As per its Terms of Reference, the Commission retained the vertical devolution at 41% of the divisible pool of Union taxes to be shared with the states.

However, the method of horizontal distribution among states has undergone changes compared to the Fifteenth Finance Commission. The tax effort criterion has been replaced with a contribution-to-GDP criterion, thereby giving greater weight to states with higher SGDP contributions. The weight assigned to income distance (SGDP distance) has been reduced from 45% to 42.5%. The weight for population has increased from 15% to 17.5%, while demographic performance has been reduced from 12.5% to 10%. A new criterion—contribution to India’s GDP—has been introduced, and tax and fiscal effort has been assigned a weight of 10%.

Under the revised formula, Uttar Pradesh receives the highest share at 17.62%, followed by Bihar (9.95%), Madhya Pradesh (7.35%), West Bengal (7.22%), and Maharashtra (6.44%). In the Union Budget for 2026–27, ₹15.26 lakh crore has been earmarked for devolution to states. Accordingly, Uttar Pradesh is expected to receive ₹2.69 lakh crore, Bihar ₹1.52 lakh crore, Madhya Pradesh ₹1.12 lakh crore, West Bengal ₹1.10 lakh crore, and Maharashtra ₹0.98 lakh crore.

The three types of grants—revenue deficit grants, state-specific grants, and sector-specific grants—have been discontinued under the Sixteenth Finance Commission’s recommendations. However, grants to local bodies and disaster management grants will continue.