18th October 2025 – Current Affairs

1. Restoring Fiscal Space for the States in India – Economy 

Why in News?

The increasing fiscal imbalance between the Centre and the States has renewed discussions around fiscal federalism in India, particularly in light of the abolition of GST compensation and the centralisation of taxation powers post-GST implementation.

Key Takeaways:

1. Centralisation of Fiscal Powers Post-GST:

• With the implementation of GST in 2017, States lost independent control over several taxes (like VAT, entertainment tax, etc.).

• GST has centralised tax collection, and States are now heavily reliant on GST revenue sharing and central transfers.

2. Abolition of GST Compensation Cess:

• The GST Compensation Cess (valid for 5 years till June 2022) helped States cover revenue losses due to GST implementation.

• Its removal has worsened the fiscal stress for States, reducing their predictable revenue source.

3. Constitutional Basis for Fiscal Federalism:

• Articles 268 to 293 of the Constitution define fiscal relations between the Centre and States.

  • E.g., Article 280 establishes the Finance Commission, which recommends tax devolution.

  • Article 270 provides for sharing of taxes collected by the Union.

4. Declining Fiscal Independence:

• States now receive a major portion of their revenue via central transfers, making them fiscally dependent.

• Wealthier States (with higher income bases) argue that the current formula of devolution penalises their better performance.

5. Need for Rethinking Devolution:

• Suggestions include:

  • Sharing a portion of personal income tax with States.

  • Enhancing grants-in-aid based on performance and needs.

  • Revisiting GST structure and giving States more flexibility.

Additional Context:

Impact of GST on States’ Fiscal Health:

• Before GST: States could design and implement their own taxes, allowing greater financial autonomy.

• After GST: All major indirect taxes subsumed; States lost flexibility, especially during economic downturns or emergencies.

Future Concerns – GST Slab Restructuring (2025):

• Expected to increase revenues but also raises concerns about:

  • Regressivity of tax structure.

  • Whether poorer States will benefit proportionately.

Exam Connect – Possible Questions

Prelims

1. Which of the following Articles of the Indian Constitution deals with the distribution of tax revenues between the Centre and the States?
A. Article 368
B. Article 280
C. Article 270
D. Article 360
Answer: C. Article 270

2. What was the primary purpose of the GST Compensation Cess?
A. To fund infrastructure development projects
B. To compensate States for losses due to demonetisation
C. To cover the revenue loss incurred by States after the implementation of GST
D. To provide subsidies to States for welfare schemes
Answer: C. To cover the revenue loss incurred by States after the implementation of GST

Mains

1.Discuss the challenges posed by the centralisation of fiscal powers in India after the implementation of GST. What measures can be taken to restore fiscal space and autonomy for the States? (Word limit: 200)

2.Examine the constitutional provisions that govern fiscal relations between the Centre and the States. In light of recent developments, critically analyse whether the current fiscal arrangement supports the principle of cooperative federalism. (Word limit: 250)

2. Ensuring Safeguards for India’s Carbon Market – Environment

Why in News?

India is working to strike a balance between economic development and environmental sustainability. In this context, the use of carbon credit systems has emerged as a key strategy. However, for India’s carbon market to be both effective and just, it must incorporate safeguards that protect community rights and ensure equitable participation.

Key Takeaways:

1. The Growth-Environment Dilemma:

• Historically, economic growth has been linked with environmental degradation (e.g., fossil fuel use, deforestation).

• Developing nations like India must now decouple economic growth from environmental harm using sustainable technologies and market-based instruments like carbon credits.

2. What are Carbon Credits?

• A carbon credit is a certified reduction of greenhouse gas (GHG) emissions.

• These credits can be traded in carbon markets—allowing companies or countries to offset emissions by funding or purchasing reductions elsewhere (e.g., renewable energy, afforestation).

3. Benefits of Carbon Credit Markets:

• Mobilizes finance for low-carbon technologies in developing regions.

• Encourages private sector involvement in sustainability.

• Supports global climate goals (e.g., under the Paris Agreement).

Additional Details:

Challenges in India’s Carbon Market:

 Northern Kenya Rangelands Carbon Project

• A cautionary example where carbon finance flowed to conservation efforts without clear local consent, leading to community rights violations.

• Demonstrates the need for context-sensitive project design and robust safeguards.

Path Forward for India:

1.Adaptive Regulation – Dynamic laws that evolve with on-ground challenges.

2.Community-Centric Design – Carbon projects should include local voices from planning to implementation.

3.Transparent Monitoring – Independent verification, grievance redressal, and benefit-sharing mechanisms.

4.Social and Environmental Safeguards – Protecting land tenure, ensuring Free, Prior and Informed Consent (FPIC) of communities.

Exam Connect – Possible Questions

Prelims 

1. What is a carbon credit?
A. A tax levied on fossil fuel use
B. A permit allowing a country or organization to produce a certain amount of emissions
C. A tradable certificate representing a reduction in greenhouse gas emissions
D. A government subsidy for renewable energy
Answer: C. A tradable certificate representing a reduction in greenhouse gas emissions

2. Which of the following is a major concern associated with carbon markets in India?
A. High cost of carbon credits
B. Low participation of industrial sectors
C. Lack of social safeguards and community participation
D. Absence of international buyers
Answer: C. Lack of social safeguards and community participation

Mains

1.Discuss the role of carbon credit systems in achieving India’s climate goals. How can India ensure that its carbon market is both effective and equitable? (Word limit: 200)

2.Carbon markets are being promoted as tools for sustainable development. Critically evaluate the challenges faced in implementing such markets in developing countries, with special reference to India. (Word limit: 250)

3. Sustainable Aquaculture in Mangrove Ecosystems (SAIME) Initiative – Environment 

Why in News?

The SAIME Initiative, launched by the Nature Environment and Wildlife Society (NEWS) in the Sundarbans, West Bengal, has received Global Technical Recognition from the Food and Agriculture Organization (FAO) of the United Nations for its innovative and sustainable model of integrating shrimp farming with mangrove conservation.

Key Takeaways:

1. What is SAIME?

• SAIME stands for Sustainable Aquaculture in Mangrove Ecosystems.

• It is a climate-adaptive and conservation-linked livelihood program that combines eco-friendly aquaculture with mangrove restoration.

2. Core Features of SAIME:

Global Alignment:

SAIME supports multiple UN Sustainable Development Goals (SDGs):

Additional Insights:

• Nature-Based Solution (NbS): SAIME is an example of an NbS that combines environmental restoration with livelihood security.

• Model for Replication: The success of SAIME in the Sundarbans positions it as a replicable model for other coastal and climate-vulnerable regions of India.

• Low-Input, High-Yield: Makes aquaculture more sustainable and economically viable, especially for marginalized coastal communities.

Exam Connect – Possible Questions

Prelims

1. The SAIME initiative recently recognized by the FAO is associated with:
A. High-altitude agriculture in the Himalayas
B. Sustainable shrimp aquaculture in mangrove areas
C. Organic cotton farming in arid regions
D. Forest-based tribal livelihood in central India
Answer: B. Sustainable shrimp aquaculture in mangrove areas

2. Which of the following Sustainable Development Goals (SDGs) are directly advanced by the SAIME initiative?
1.SDG-13 (Climate Action)
2.SDG-14 (Life Below Water)
3.SDG-9 (Industry, Innovation, and Infrastructure)
4.SDG-15 (Life on Land)
Select the correct answer:
A. 1, 2 and 3 only
B. 1 and 2 only
C. 1, 2 and 4 only
D. 1, 3 and 4 only
Answer: C. 1, 2 and 4 only

Mains 

1.What is the SAIME initiative? Discuss how it integrates climate resilience and sustainable livelihoods in ecologically fragile regions like the Sundarbans. (Word limit: 200)

2.Community-based aquaculture can promote both environmental restoration and economic growth. Critically evaluate this statement in the context of India’s coastal ecosystems. (Word limit: 250)

4. Akash Missile System – Defence & Security 

Why in News?

India is promoting the Akash missile system for export to Brazil, marking a strategic move in strengthening international defense collaborations and showcasing India’s indigenous military capabilities on the global stage.

Key Takeaways:

1. What is the Akash Missile System?

• A Short-Range Surface-to-Air Missile (SAM) system.

• Developed by the Defence Research and Development Organisation (DRDO).

• Manufactured by Bharat Dynamics Limited (BDL).

• A key component of India’s integrated air defence system.

2. Deployment and Use:

• Inducted by both the Indian Army and the Indian Air Force.

• Mounted on mobile launchers for high mobility and rapid deployment.

3. Technical Specifications:

Strategic Significance:

• Indigenous Defence Capability: Reflects India’s self-reliance in critical defense technologies.

• Export Potential: Part of India’s “Make in India, Make for the World” initiative in the defense sector.

• Geopolitical Leverage: Arms exports like Akash enhance India’s strategic partnerships with nations like Brazil, part of the BRICS grouping.

• Air Defence Readiness: Provides protection against fighter jets, cruise missiles, UAVs, and helicopters, crucial for India’s evolving threat landscape.

Exam Connect – Possible Questions

Prelims

1. The Akash missile system is primarily designed to target:
A. Submarines
B. Armoured tanks
C. Aerial threats like fighter jets and drones
D. Ballistic missiles
Answer: C. Aerial threats like fighter jets and drones

2. Which of the following organisations developed the Akash missile system?
A. ISRO
B. Hindustan Aeronautics Limited
C. Bharat Electronics Limited
D. Defence Research and Development Organisation (DRDO)
Answer: D. Defence Research and Development Organisation (DRDO)

Mains

1.Discuss the significance of the Akash missile system in enhancing India’s air defence capabilities. How does it reflect the indigenisation of India’s defence sector? (Word limit: 200)

2. India is increasingly promoting indigenous defence systems for export. Evaluate the strategic and economic implications of exporting systems like the Akash missile to countries such as Brazil. (Word limit: 250)

5. Global Trade Wars and India’s Strategic Response in a VUCA World – International Relations 

Why in News?

The global trade system is undergoing significant disruption, with traditional champions of free trade such as the US, EU, and China now using trade, technology, and energy as tools of geopolitical competition. This has compelled India to rethink its economic and strategic policies to remain competitive and resilient in an increasingly VUCA world (Volatile, Uncertain, Complex, Ambiguous).

Key Takeaways:

1. Decline of the Globalization Consensus

• US and EU are leveraging market access and trade rules for geopolitical purposes.

• Protectionist policies such as tariff hikes, export controls, and carbon taxes are becoming common.

2. India’s Strategic Dilemmas and Opportunities

• India faces:

  • Rising trade barriers in key export markets.

  • Green protectionism, such as EU’s Carbon Border Adjustment Mechanism (CBAM).

• But India also has opportunities:

  • Supply chain diversification due to “China + 1” strategies.

  • Potential to emerge as a trusted global manufacturing hub.

Additional Details:

Changing Nature of Global Trade:

Economic Cold War:

• A new techno-economic rivalry between the US and China is reshaping global trade alliances.

• India must tread carefully to:

  • Avoid entanglement.

  • Build strategic partnerships.

  • Maintain economic sovereignty.

India’s Strategic Roadmap:

Significance of the VUCA World for India

• Volatile: Trade and tariff changes are abrupt.

• Uncertain: Rules are unpredictable; WTO’s authority is weakening.

• Complex: Trade is now intertwined with security, tech, and energy.

• Ambiguous: Intentions of global powers are unclear and often contradictory.

India needs agile, adaptive, and resilient trade and foreign policies to navigate this landscape.

Exam Connect – Possible Questions

Prelims 

1. The Carbon Border Adjustment Mechanism (CBAM), set to be implemented by the EU in 2026, is likely to affect which of the following Indian exports the most?
A. Textiles
B. Steel and Aluminium
C. Pharmaceuticals
D. Handicrafts
Answer: B. Steel and Aluminium

2. The term VUCA, often used in global policy discourse, stands for:
A. Variable, Unilateral, Conflicting, Ambiguous
B. Volatile, Uncertain, Complex, Ambiguous
C. Virtual, Unpredictable, Chaotic, Arbitrary
D. Vulnerable, Unseen, Coordinated, Advanced
Answer: B. Volatile, Uncertain, Complex, Ambiguous

Mains

1.The global trade environment is shifting from a rules-based to a power-based system. Examine how India can safeguard its strategic autonomy and economic interests in this changing global order. (Word limit: 250)

2. In the face of increasing trade wars and green protectionism, what should be India’s strategic roadmap to build a resilient, competitive, and self-reliant economy? (Word limit: 200)

6. Engaging the Taliban, Cautiously: India’s Afghanistan Strategy – International Relations

Why in News?

The visit of Afghanistan’s Foreign Minister Amir Khan Muttaqi to New Delhi marks the highest-level interaction between India and the Taliban regime since its return to power in August 2021. In a significant move, India announced plans to re-establish its embassy in Kabul, currently operating as a technical mission since June 2022.

Key Takeaways:

1. India’s Cautious Engagement Strategy:

• India is engaging with the Taliban regime based on pragmatic security and humanitarian interests.

• There is no formal diplomatic recognition extended to the Taliban.

• The engagement is primarily through a technical and humanitarian mission.

2. Why This Engagement Matters:

• India has over $3 billion in development investments in Afghanistan.

• A stable Afghanistan aligns with India’s goals of:

  • Countering extremism and terrorist threats.

  • Reducing Pakistan’s strategic depth.

  • Ensuring regional connectivity through Central Asia.

3. The Role of the Afghan Embassy in New Delhi:

• It has been central in managing relations during the legitimacy tussle between the former Republic-appointed diplomats and Taliban representatives.

Additional Insights:

Engagement Without Recognition – A Diplomatic Nuance:

India’s Historical Engagement in Afghanistan:

• India had previously recognized the Soviet-backed regime in Afghanistan during the 1980s.

• Historically seen as a trusted development partner, India has built:

  • Roads

  • Hospitals

  • Parliament building

  • Power infrastructure

Global & Regional Context:

Taliban’s Search for Legitimacy:

• Seeks UN recognition but faces hurdles:

  • Lack of an inclusive government

  • Poor record on women’s rights and human rights

India’s Current Interests:

Exam Connect – Possible Questions

Prelims

1. India’s current diplomatic stance towards the Taliban regime in Afghanistan is best described as:
A. Full diplomatic recognition with formal embassy presence
B. Strategic isolation to pressure the regime
C. Technical engagement without formal diplomatic recognition
D. Military intervention under UN mandate
Answer: C. Technical engagement without formal diplomatic recognition

2. Which of the following statements regarding international law and recognition of governments is correct?
A. Diplomatic recognition is mandatory for communication with any government
B. Recognition and diplomatic relations are the same under international law
C. A country can engage with a regime without officially recognizing it
D. The UN automatically recognizes all governments in power
Answer: C. A country can engage with a regime without officially recognizing it

Mains

1.India has adopted a cautious engagement policy towards the Taliban regime in Afghanistan. Analyse the rationale behind this strategy and its implications for India’s security and regional interests. (Word limit: 250)

2.Discuss how India’s approach to the Taliban reflects the balance between realism and principles in foreign policy. What challenges and opportunities does this engagement present for India? (Word limit: 200)