Daily Current Affairs - 4th to 5th May 2025
The 16th Finance Commission: Balancing Equity and Efficiency
Introduction
The 16th Finance Commission is at a critical juncture, addressing demands from states for a greater share in the divisible tax pool while ensuring fiscal discipline and efficiency.
States’ Demands and Concerns
- States have argued for an increase in their share of the divisible tax pool from the current 41% to as high as 50%.
- They express dissatisfaction as the central government has offset the impact of increased state shares by reducing the size of the divisible tax pool, imposing cesses and surcharges, which are not shared with states.
- By 2021-22, the share of states in gross tax revenues declined to 32% from 38.6% in 2011-12, affecting their fiscal autonomy.
Key Challenges
Fiscal Autonomy vs. Central Control
- States demand greater fiscal autonomy by increasing their share of untied transfers. However, this would strain the Centre’s fiscal resources, already stretched by grants to states exceeding its own revenue.
Central Schemes and Priorities
- Centrally-sponsored schemes often encroach on items in the State and Concurrent Lists, forcing the Centre to borrow for funding such schemes.
- Political considerations can override economic priorities, reducing fiscal space for critical expenditures.
Equality in Spending
- The demand for untied transfers raises concerns about equity in spending, as some states use funds inefficiently, leading to higher borrowings and fiscal stress.
- Regional inequalities persist, as states like Bihar spend significantly less per capita on public services compared to southern states.

Recommendations for the 16th Finance Commission
Rework Centrally-Sponsored Schemes
- Rationalize and re-examine schemes to align with fiscal priorities and reduce inefficiencies.
Improve Equity in Transfers
- Address regional disparities by adjusting transfers to ensure equitable development and convergence in public service delivery.
Enhance Fiscal Discipline
- Encourage states to improve fiscal responsibility and ensure funds are utilized effectively for intended purposes.
Conclusion
The 16th Finance Commission must strike a delicate balance between states’ fiscal autonomy, regional equity, and central priorities. A well-structured approach will be key to fostering cooperative federalism while ensuring fiscal sustainability.
Arctic Geopolitics: From Scientific Cooperation to Strategic Contestation
Introduction
The Arctic, once a bastion of scientific collaboration and environmental stewardship, has rapidly emerged as a focal point of geopolitical rivalry and military posturing. Accelerated climate change, new navigational routes, and the lure of untapped resources are transforming the region from a peripheral concern into a central theatre of Great Power competition.
Drivers of Rising Tensions in the Arctic
- Climate Change and New Routes:The Arctic is warming at nearly four times the global average, leading to significant ice melt. This has opened up the Northern Sea Route (NSR) and other passages, potentially redrawing global trade flows by offering shorter and more cost-effective links between Asia and Europe.
- Resource Competition:The region is estimated to hold about 13% of the world’s undiscovered oil and 30% of its natural gas, making it a magnet for energy-hungry states.
- Militarisation:Russia has revitalised its Arctic military infrastructure, reopened Soviet-era bases, and conducted regular military drills. In response, the US and NATO have increased their presence, with Finland and Sweden joining NATO to counter Russian assertiveness.
- China’s Arctic Ambitions:China, branding itself a “near-Arctic state,” is investing in infrastructure and scientific projects, notably through the ‘Polar Silk Road’ initiative, and has deepened cooperation with Russia, raising concerns among Western powers.
- Legal and Territorial Disputes:Overlapping claims under the UN Convention on the Law of the Sea (UNCLOS) and sovereignty disputes, such as over the Northwest Passage and Svalbard archipelago, further complicate the strategic landscape.
Implications for India
- Strategic and Economic Stakes:India’s interests in the Arctic are multifaceted-ranging from energy security and trade route diversification to climate research. Increased militarisation and instability could disrupt India’s access to Arctic resources and diminish the relevance of Indian Ocean trade routes as the NSR becomes more viable.
- Climate Linkages:Changes in the Arctic directly impact South Asian monsoon patterns and glacial stability, making Arctic developments critical for India’s water and food security.
- Diplomatic Challenges:India must balance its traditional ties with Russia, growing partnerships with Western nations, and the evolving security dynamics in the region. The deepening Russia-China alignment in the Arctic, coupled with China’s expanding footprint in the Indian Ocean, complicates India’s strategic calculus.
- Current Posture:India’s Arctic engagement has largely focused on scientific research and environmental cooperation, as reflected in its 2022 Arctic Policy. However, this approach risks marginalising India in the emerging order, which is increasingly shaped by power politics rather than consensus.
Challenges in Managing Arctic Tensions
- Geopolitical Rivalries:The Arctic is now a battleground for influence among Russia, the US, China, and other stakeholders, with military build-ups and joint exercises signalling a shift from cooperation to competition.
- Governance Gaps:The Arctic Council, while fostering dialogue, lacks enforcement authority on security matters, limiting its ability to mediate escalating disputes.
- Environmental and Indigenous Concerns:The rush for resources threatens fragile ecosystems and the livelihoods of indigenous communities, raising the risk of unregulated exploitation.
Way Forward for India
- Strategic Recalibration:India must institutionalise its Arctic engagement, moving beyond scientific diplomacy to include dedicated policy mechanisms within its foreign and defence ministries, regular inter-agency consultations, and collaboration with strategic think tanks.
- Partnerships and Presence:Proactive collaboration with like-minded Arctic states on dual-use initiatives-such as polar logistics, maritime domain awareness, and satellite monitoring-can enhance India’s credibility without provoking regional anxieties.
- Multilateral Engagement:India should seek a seat at emerging Arctic governance forums, particularly those shaping infrastructure, shipping regulations, and the blue economy, while maintaining a climate-sensitive and community-oriented approach.
- Balanced Diplomacy:India must reassure Arctic partners that its approach, guided by strategic autonomy, can contribute constructively to regional stability and sustainable development.
Conclusion
The Arctic’s transformation from a zone of scientific cooperation to a contested geopolitical frontier has profound implications for global security, trade, and environmental governance. For India, adapting to this new reality requires a nuanced blend of climate-conscious engagement and strategic foresight. Only through purposeful, multidimensional involvement can India safeguard its interests and contribute meaningfully to the evolving Arctic order.