The Hindu Editorial Analysis- 19th June 2025 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

A Fair Share

Why is it News?

The Sixteenth Finance Commission (SFC) is being discussed because it has to decide on how to divide tax revenue between the Centre and the States in India starting from April 1, 2026. 

•  There is a significant demand from 22 out of 28 States, including those governed by the BJP, to increase their share of the divisible tax pool from 41% to 50%. 
•  This demand is seen as necessary because the Centre has been relying more on non-shareable cesses and surcharges, which reduces the States' actual share of tax revenue. 

Introduction

 The Sixteenth Finance Commission (SFC), set to begin its work on April 1, 2026, faces the challenging task of redefining fiscal federalism in India. This task has become urgent due to the demands of 22 out of 28 States, including many ruled by the BJP, who are asking for an increase in their share of the divisible tax pool from 41% to 50%. 

 These demands highlight the growing concern over the Centre's increasing reliance on non-shareable cesses and surcharges, which has effectively diminished the States' real share in national tax revenue. The SFC will need to navigate these complex issues to ensure a fair and balanced distribution of resources between the Centre and the States. 

Sixteenth Finance Commission (SFC)

• Effective Period: The recommendations of the 16th Finance Commission will apply from April 1, 2026. 
• Chairperson: Arvind Panagariya, who recently flagged the fiscal concerns raised by States. 
• Central Issue: Balancing vertical devolution (between Centre and States) and horizontal devolution (among States) amid rising fiscal centralisation. 

Key Demand by States

• Increase in States' Share: 22 out of 28 States, including many ruled by the BJP, are demanding an increase in their share of the divisible tax pool from 41% to 50%. 
• Rationale: This demand is considered legitimate due to the erosion of fiscal autonomy following the implementation of the Goods and Services Tax (GST). 

Shrinking of the Divisible Pool

Share of Cesses & Surcharges in Centre’s Gross Tax Revenue

Implication:

•  The increase in non-shareable cesses and surcharges has significantly reduced the effective share of States in central tax revenues. 

States’ Effective Share in Gross Tax Revenue

GST and States’ Fiscal Autonomy

Post-GST Challenges:

• Limited Revenue Avenues: States have fewer options to generate their own revenue since the implementation of the Goods and Services Tax (GST). 
• GST Revenue Issues: Although GST revenues are increasing, they do not make up for the loss of fiscal independence that States experienced. 
• Dependence on Centre: States are now heavily reliant on financial transfers from the Centre to meet their fiscal needs. 

Horizontal Devolution: Formula Concerns

• Population Criterion: This criterion benefits high-population states but penalizes those with progressive governance and development. 
• Income Distance Criterion: This criterion helps poorer states but is perceived as punishing states that are efficient and have lower income disparities. 
• Southern and Progressive States' Perspective: These states argue that the current formula penalizes them for their good governance and development efforts, creating an imbalance in the horizontal devolution process. 

Challenges Ahead for the Finance Commission

• Maintaining 41% Vertical Devolution: Keeping the current vertical devolution rate of 41% could undermine cooperative federalism and miss the opportunity to revise the federal compact. 
• Centre’s Constraints: The Centre is facing rising defence and capital expenditures, making it reluctant to reduce its fiscal share. Arvind Panagariya has pointed out that a significant increase in devolution could disrupt existing balances and create conflicts. 

Way Forward

• Modest Increase in States’ Share: The Commission should consider raising the States’ share of the divisible pool to around 44–45% to address fiscal imbalances while respecting the Centre’s spending requirements. 
• Regulation of Cesses and Surcharges: There should be recommendations to cap cesses and surcharges, ensuring any surplus is included in the divisible pool for transparency and fairness. 
• Revision of Horizontal Devolution Formula: The formula should be revised to balance equity and performance, rewarding efficient governance while supporting less-developed States. This would create a fairer fiscal framework and strengthen cooperative federalism. 

Conclusion

 The Sixteenth Finance Commission has an opportunity to reshape fiscal federalism in India by increasing vertical devolution, regulating non-transparent revenue tools, and reforming horizontal distribution. By doing so, it can strengthen the fiscal foundation of States, which are crucial for Indian democracy, and create a more equitable and cooperative fiscal framework. 

The legality of Israeli actions under international law 

Why is it News?

The international community is grappling with the question of whether Israel's military strikes on Iran are legal under international law.

• The UN Charter, particularly Article 2(4), prohibits the use of force in international relations, except in specific cases like self-defence as per Article 51.
• Article 51 allows self-defence only in response to an armed attack, and the response must be necessary and proportional.
• Legal experts argue that if self-defence is interpreted strictly, Israel's actions could be seen as unlawful aggression, which is a war crime under international law.

Introduction

The international community is divided on the legality of Israel's military strikes against Iran, with the core issue being compliance with international law. The UN Charter, particularly Article 2(4), prohibits the use of force in international relations, allowing exceptions only in cases like self-defence under Article 51. Article 51 permits self-defence only in response to an armed attack, and the response must meet the criteria of necessity and proportionality. Legal experts suggest that if self-defence is interpreted narrowly, Israel's actions could be deemed unlawful aggression, which constitutes a war crime under international law.

Pre-emptive Self-Defence

Israel argues that its military actions against Iran are based on pre-emptive self-defence, aiming to thwart Iran's nuclear weapons program. The rationale is that Iran is on the brink of developing nuclear weapons and has issued threats against Israel, warranting a pre-emptive strike. This raises a critical legal question: Is it permissible for a country to use force before an actual armed attack occurs?

Article 51 of the UN Charter typically allows for self-defence only after an armed attack has taken place, making pre-emptive action appear contradictory. However, some legal scholars, such as Rosalyn Higgins, contend that waiting for an actual attack may be unrealistic in contemporary warfare. If pre-emptive self-defence is accepted, its parameters must be narrowly defined to prevent misuse. A more widely accepted concept is anticipatory self-defence, which finds support in historical precedents like the Caroline Incident of 1837.

The Caroline Doctrine Explained

The Caroline doctrine outlines the conditions under which force may be used in anticipatory self-defence. These conditions include:

• Immediacy: The threat must be immediate and overwhelming.
• Necessity: There must be no alternative course of action available, and there should be no time for deliberation.
• Proportionality: The response must be proportionate to the threat.

Legal Concepts Related to Self-Defence

The concept of pre-emptive self-defence remains a subject of legal and moral debate. If it is to be permitted, its application must adhere to strict criteria, including immediacy, necessity, and proportionality. An overly broad interpretation could undermine the UN Charter and risk legitimizing aggressive actions by states.

Interpretations of 'Imminent' in Self-Defence

Key Legal Objections to Expansive Meaning

• Violates UN Charter principles on the prohibition of use of force.
• Undermines international peace and security by allowing conjecture-based action.
• Contradicts the Caroline doctrine, which sets stringent conditions for self-defence:
  • Must be instant
  • Overwhelming
  • Leave no room for deliberation
• Widespread support for a narrower, restrictive interpretation of 'imminent'.
• Ensures restraint, and upholds sovereignty and legal safeguards.

Application to Israel-Iran Context

Israel’s Claim

• Pre-emptive self-defence against Iran’s nuclear threat

Legal Evaluation

• Fails to meet the restrictive test of imminence.
• Based on potential future threat, not an imminent one.

Assertion of existential threat due to nuclear progress

• Relies on expansive meaning, which is unsupported in international law.

Conclusion

The ongoing debate about Israel's military actions against Iran highlights the complexities of international law and the principles governing the use of force. While some may argue that discussing these legal frameworks is futile in a world where they are often ignored, it is essential to remember that international law provides the foundation for assessing state behavior and holding them accountable. Upholding and applying these legal norms, even in cases of severe violations by powerful states, is crucial for maintaining a rule-based global order.