The cover of the Fifteenth Finance Commission’s report for the period 2021-22 to 2025-26, which shows a pair of balanced scales representing the Union of India and the States, apparently seeks to highlight the Commission’s endeavour to maintain an equitable approach at a time when the two are facing unprecedented revenue stress and fiscal demands. The Centre has accepted much of the Commission’s broad recommendations, including giving States a 41% share of the divisible pool of taxes and revenue deficit grants of nearly Rs2.95-lakh crore for 17 States over the next five years. It has also acceded to the Commission’s suggestion to make grants towards urban and rural local bodies conditional upon States setting up their own finance commissions and publishing online the accounts of local bodies. And 60% of these grants will be further linked to these bodies’ providing sanitation and water services. There is an ‘in-principle’ nod to the panel’s suggestion to set up a non-lapsable dedicated fund to support defence and internal security modernisation — a response to the Centre’s belated request to examine if such a fund can be considered for funding defence capex beyond normal Budget allocations. While the panel has suggested moving Rs1.53-lakh crore out of the Consolidated Fund of India over five years to partly finance this, the Centre has said the funding nitty-gritties will be examined later. States would monitor how the modalities evolve, even as they have reason to fret about the Centre’s non-committal response to the Commission’s recommendations of sector-specific and other grants for them adding up to about Rs1.8-lakh crore. It is up to the Centre now to ensure that States do not feel short-changed from the new fiscal framework. The relations between the two sides need to be cordial. This is the only way to prosper and grow for both.