1. 16TH FINANCE COMMISSION EXPLORES GSDP-BASED TAX DEVOLUTION
SUBJECT: POLITY
- Fiscal Federalism Debate: The 16th Finance Commission has initiated discussions on using Gross State Domestic Product (GSDP) as a primary criterion for central-to-state tax transfers. This aims to reward states with high economic performance.
- State Concerns: High-performing states like Tamil Nadu, Maharashtra, and Karnataka have argued that the current formula penalizes efficiency. They are advocating for a shift from 41% to 50% vertical devolution to compensate for revenue losses post-GST.
- Cess and Surcharges: A major point of contention remains the rising share of cesses and surcharges collected by the Centre, which stay outside the divisible pool. States are demanding these be included to ensure a fair share of total tax revenue.
- Data Accuracy Issues: Experts have highlighted that direct tax data often misrepresents state contributions as taxes are recorded at corporate headquarters rather than production sites. GSDP is being proposed as a more reliable proxy for actual economic contribution.
- Cooperative Federalism: The Supreme Court recently emphasized “Green Governance,” noting that states must have a greater say in environmental and fiscal policies that impact their specific regional ecologies.
- Concepts: Article 280 (Finance Commission mandate); Vertical vs. Horizontal Devolution; Finance Commission (FC) formula components (Population vs. Performance).
2. TAMIL NADU UNVEILS INDIA’S FIRST STATE-LEVEL DEEP-TECH STARTUP POLICY
SUBJECT: NATIONAL ISSUES / STATE NEWS
- Policy Launch: Tamil Nadu Chief Minister M.K. Stalin unveiled the country’s first dedicated “Deep-Tech Startup Policy,” aiming to provide a robust ecosystem for high-end technology sectors like AI, Robotics, and Semiconductor design.
- Corpus Fund: The government has allocated an initial ₹100 crore to provide equity-based funding to 100 deep-tech startups, with a goal of making Tamil Nadu a global R&D hub by 2030.
- Infrastructure Shift: The policy incentivizes the creation of specialized labs and “Sandbox” environments for testing disruptive technologies in sectors like aerospace and biotechnology.
- Monument Conservation: In a significant policy shift, the Ministry of Culture has opened the conservation of 250 monuments to the private sector under a Public-Private Partnership (PPP) model, moving beyond the previous “Adopt a Heritage” scheme.
- Hydrogen Rail Trials: India’s first hydrogen-powered train entered its crucial trial phase today, marking a massive leap toward the Indian Railways’ goal of becoming a “Net Zero Carbon Emitter” by 2030.
- Concepts: Deep-Tech vs. General Tech; PPP Model in Heritage; Green Hydrogen Mission goals for transport.
3. US TRADE POLICY VOLATILITY AND INDO-GERMAN STRATEGIC ALIGNMENT
SUBJECT: INTERNATIONAL
- Sanctioning Russia Act of 2025: The US President has signaled approval for a bill proposing a 500% tariff on nations trading in Russian oil. This move threatens to impact India’s energy security and fiscal stability in 2026.
- Indo-German Submarine Pact: India and Germany are on the verge of finalizing a landmark $8 billion deal for six conventional submarines (Project-75I). This includes unprecedented technology transfer to bolster India’s naval presence in the Indian Ocean.
- BRICS Presidency: Brazil has formally handed over the BRICS presidency to India for 2026. India’s chairmanship will focus on four pillars: Digital Economy, Multilateralism, Energy Security, and Counter-terrorism.
- US Exit from Global Bodies: President Trump has issued a memo to exit the UNFCCC (Climate Framework) and UN Women, signaling a shift toward bilateralism and “America First” policies that could reshape global climate diplomacy.
- International Year of Rangelands: The UNGA has officially declared 2026 as the International Year of Rangelands and Pastoralists (IYRP), a resolution heavily supported by India to protect its nomadic communities.
- Concepts: Strategic Autonomy (India’s balancing act); CAATSA and Sanctions; BRICS Plus Expansion dynamics.
4. NSO PROJECTS 7.4% REAL GDP GROWTH FOR FY26
SUBJECT: ECONOMY
- First Advance Estimates: The National Statistical Office (NSO) has released the First Advance Estimates of GDP for 2025-26, projecting a robust Real GDP growth of 7.4%, surpassing the previous year’s 6.5%.
- Sectoral Performance: Manufacturing is expected to grow at 7.5% due to the PLI 2.0 schemes, while the services sector remains the strongest driver with an estimated 9% expansion.
- Bio-Bitumen Breakthrough: India has become the first country to commercially produce “Bio-Bitumen” from agricultural residue (paddy straw), aimed at reducing crude oil imports and carbon footprints in highway construction.
- Tex-RAMPS Scheme: The Ministry of Textiles unveiled the “District-Led Textiles Transformation (DLTT)” to catalyze sustainable growth across 100 textile clusters, focusing on handlooms and technical textiles.
- Digital Judiciary: Chief Justice of India Surya Kant inaugurated India’s first “Fully Paperless District Court,” utilizing blockchain and AI for end-to-end digital case management.
- Concepts: Real vs. Nominal GDP; Bio-economy; GVA (Gross Value Added) as a measure of productivity.
5. MISSION SUDARSHAN CHAKRA AND NEW NAVAL BASES
SUBJECT: DEFENCE
- Drone Defence: India officially launched “Mission Sudarshan Chakra,” a national program to build a comprehensive, multi-layered air defense system specifically designed to counter swarm drone attacks on critical infrastructure.
- Naval Expansion in East: The Indian Navy has established a new naval detachment at Haldia, West Bengal, to enhance maritime surveillance and rapid response capabilities in the Bay of Bengal.
- Indigenization Milestones: Defence Minister Rajnath Singh announced that investments in the Uttar Pradesh Defence Corridor have crossed ₹34,000 crore, focusing on electric military vehicles and drones.
- Space-Tech Launch: Dhruva Space, a Hyderabad-based startup, is set to launch 10 space missions aboard ISRO’s PSLV-C62 on January 12, marking a major milestone in private sector participation in strategic space assets.
- Indo-US Defence Interoperability: The US has approved a new $92.8 million arms sale to India, focusing on advanced communication systems to enhance interoperability in the Indo-Pacific region.
- Concepts: Indigenization Lists (Positive Indigenisation); Asymmetric Warfare (Swarm Drones); Project-75I (Submarine capabilities).
