The Finance Commission, established under Article 280 of the Constitution, is tasked with recommending the distribution of the net proceeds of taxes between the Centre and the states. It also addresses the principles governing grants-in-aid to the states and any other financial matters referred to it by the President. The 15th Finance Commission, chaired by N.K. Singh, has made significant recommendations, including increasing the states' share of the divisible tax pool to 42%, although some adjustments were later made considering the economic impact of the COVID-19 pandemic. In addition to the Finance Commission, the Goods and Services Tax (GST) Council plays a pivotal role in the financial relationship between the Centre and the states. The GST, implemented in 2017, is a landmark reform aimed at creating a unified indirect tax system, enhancing ease of doing business, and boosting revenue collection. The GST Council, comprising representatives from both the Centre and the states, ensures that the interests of all stakeholders are balanced and that decisions are made collaboratively. The introduction of GST also led to the establishment of the GST Compensation Fund, which guarantees states a minimum revenue growth rate of 14% per annum for the first five years of GST implementation. This mechanism was designed to protect states from potential revenue losses during the transition to the new tax regime, ensuring financial stability and predictability. Moreover, the NITI Aayog, which replaced the Planning Commission in 2015, plays an advisory role in shaping economic policies and fostering cooperative federalism. Unlike its predecessor, NITI Aayog does not allocate funds but focuses on strategic planning and policy coordination. It facilitates a platform for the states to express their needs and preferences, thereby promoting inclusive and participatory governance. The rationale behind these policies and mechanisms is to ensure a balanced distribution of financial resources, promote fiscal discipline, and encourage states to adopt sound economic policies. By providing a predictable and transparent framework for financial transfers, these policies aim to reduce regional disparities and foster inclusive growth. Furthermore, the Centre and states also engage in borrowing from financial markets to meet their expenditure needs. The Fiscal Responsibility and Budget Management (FRBM) Act, 2003, establishes targets for fiscal deficit and public debt, thereby promoting fiscal prudence and sustainability. Both the Centre and the states are required to adhere to these targets, although flexibility is provided in extraordinary circumstances, such as economic downturns or natural disasters. The financial relations between the Centre and the states in India are governed by a complex web of constitutional provisions, statutory bodies, and policy frameworks. These relations are essential for maintaining fiscal balance, ensuring equitable development, and fostering cooperative federalism. The ongoing evolution of these mechanisms reflects the dynamic nature of India's economy and the continuous efforts to address emerging challenges and opportunities.