What to Read in The Hindu Editorial ( Topic and Syllabus wise)

 

Article: Is India prepared for the end of globalisation?

Why in news: U.S. President Donald Trump’s remarks on India’s Russian oil imports and tariff threats highlight the erosion of multilateral trade norms and signal a broader U.S. shift towards mercantilist, power-centric bilateral negotiations.

Key Details

U.S. President Donald Trump’s remarks on India’s Russian oil imports and tariff threats reflect a transactional and coercive approach to bilateral trade.

The real crisis is not only in global trade, but in the political system governing it.

The world is shifting back to mercantilism, where trade surpluses equal power and deficits signal weakness.

Globalisation, once tied to liberalism, democracy, and cooperation, has effectively collapsed as a political system.

Globalisation as a Political System

Globalisation was never just about the free flow of goods and services; it was a political framework governing markets, societies, and international relations.

It shaped how states interacted with multilateral institutions, resolved disputes, and coordinated global governance.

Over time, it became closely associated with liberal values, democratic norms, and international cooperation.

This political consensus has now fractured, leaving global markets without a shared moral or institutional anchor.

Historical Roots of the Global Order

The world economy was global long before it was liberal; early globalisation relied on force, colonial extraction, and unequal trade.

Wealth in the industrialised North was built through domestic exploitation and overseas resource extraction, not free markets.

After World War II, widespread destruction and decolonisation created space for a new multilateral order.

Global institutions emerged to provide rules, legitimacy, and restraint, even when powerful states acted unilaterally.

Assumptions of the Post-War Multilateral System

The system rested on open markets, free movement of capital, but restricted movement of people.

It assumed cross-border enforcement of contracts and negotiated solutions for shared global resources.

For a period, these assumptions appeared successful, as many countries experienced economic growth and poverty reduction.

However, the system depended heavily on self-restraint by powerful states, which is now openly abandoned.

Unintended Economic and Social Consequences

The first major consequence was rising inequality, as returns to capital grew much faster than wages.

Deep integration of global supply chains led to deindustrialisation in some regions and industrial concentration in others.

Increased migration and job losses created fertile ground for populist and nationalist politics.

These pressures gradually undermined public support for globalisation in advanced economies.

China’s Disruptive Rise

The second major shock came from China’s integration into the global economy without full compliance with multilateral norms.

China benefited from open global markets and technology, while retaining strong state control over capital, labour, and information.

Its persistent trade surpluses and excess capacity weakened industrial prospects in poorer countries, including India.

Over time, China emerged as an alternative model combining economic growth with tight political control.

Shift Towards Sovereignty and Mercantilism

Major economies now view global cooperation as a constraint rather than a benefit.

Policies increasingly emphasise self-sufficiency, industrial protection, and politicisation of migration.

International aid is becoming conditional on donor interests, eroding the principle of shared responsibility.

Multilateral institutions are weakening, reducing the bargaining power of developing countries on global issues.

Way Forward

Political elites must recognise the breakdown of the old order and act decisively, even if driven initially by self-interest.

India must strengthen state capacity, especially in health, education, and social investment.

Focus on select strategic domains where India can compete, such as digital public infrastructure, renewable energy, services, and democratic decentralisation.

Build a new social contract that shares growth more equitably and improves social cohesion.

Conclusion

In the emerging mercantilist global order, India faces the risk of long-term marginalisation unless it strengthens its institutional and economic foundations. Despite its size and strategic importance, persistent weaknesses in state capacity, human capital investment, and social cohesion limit its ability to convert potential into power. The failure to broaden the gains of growth and build an inclusive social contract undermines India’s global aspirations. In a world where economic strength is increasingly tied to national capability, rhetoric alone cannot substitute for reform, and only sustained investment in institutions and people can enable India to play a meaningful global role.

 

 

Article 2 : Devolution, not debt

Why in news: State governments are increasingly scrutinising the Union Budget as Central tax devolution is failing to stabilise their finances, pushing them toward higher market borrowing through State Development Loans (SDLs).

Key Details:

Union Budget relevance: States closely track the Budget to assess actual resource flows, not just headline devolution figures.

Shift in financing pattern: SDLs have moved from being an exceptional tool to a routine source of revenue.

Post-COVID stress: The pandemic shock exposed weaknesses in Central support mechanisms.

Hidden erosion of devolution: Rising cesses and surcharges reduce the effective share of States.

GST impact: Centralised tax collection has weakened the tax effort–reward link for States.

Rising debt burden: Increasing debt-to-GSDP ratios threaten long-term fiscal sustainability.

Crowding out effect: Borrowing for welfare limits funds for capital expenditure and private investment.

Diminishing Role of Central Tax Devolution

The Union Budget is closely watched by States to gauge their share of Central tax devolution, but this source is no longer providing the stability it once did to State finances.

Despite a constitutionally fixed share, effective resource flow to States has weakened over time.

Rising Dependence on State Development Loans (SDLs)

SDLs have become a major financing tool for States’ routine expenditure, rather than just capital needs.

In 2024–25 (RE), SDLs formed about 35% of Tamil Nadu’s and nearly 26% of Maharashtra’s total revenue receipts—levels earlier seen as fiscally exceptional.

This shift intensified after 2020–21, when the COVID-19 shock exposed the inadequacy of Central devolution.

The dependence on borrowing has persisted, with even profit-making State PSUs and SPVs being used to finance revenue expenditure.

Erosion of Effective Devolution Mechanism

Although the 15th Finance Commission set States’ share at 41% of the divisible pool, rising cesses and surcharges—kept outside the pool—have reduced actual transfers.

Industrialised States with strong indirect tax bases are especially affected.

Impact of GST on State Finances

Since the introduction of GST in 2017, a large portion of indirect taxes is collected by the Centre and redistributed through formulas that weaken the link between tax effort and reward.

This has constrained States’ fiscal capacity despite higher overall collections.

Borrowing-Led Welfare Financing

Key welfare commitments—such as old-age pensions, employee pensions, and mass health insurance schemes—are increasingly funded through domestic borrowing.

This crowds out resources for public capital expenditure and private investment, both crucial for sustaining growth.

Evidence from State Borrowing Patterns

A five-year comparison across Punjab, Uttar Pradesh, Tamil Nadu, Maharashtra, and West Bengal highlights growing reliance on SDLs.

West Bengal, despite receiving about 47.7% of its revenues from Central devolution, continued heavy borrowing, with SDLs averaging 35% of revenues.

This occurred even as nominal tax devolution increased, indicating deeper structural stress.

Implications for Fiscal Federalism

The trend signals a steady erosion of States’ fiscal autonomy.

Rising debt-to-GSDP ratios alongside weakening assured revenues pose serious macroeconomic risks.

If debt replaces devolution as the primary shock absorber, fiscal sustainability will be undermined.

Way Forward

Increase effective tax devolution, not just nominal shares.

Bring cesses and surcharges into the divisible pool.

Redesign horizontal devolution criteria to reward tax effort, efficiency, and fiscal discipline.

Strengthen States’ capacity for own-tax revenue mobilisation.

Conclusion

The growing reliance of States on borrowing instead of assured tax devolution signals a weakening of India’s fiscal federalism. As debt increasingly replaces devolution as the primary shock absorber, State finances face rising sustainability risks. Restoring effective tax transfers, reducing dependence on cesses, and strengthening fiscal autonomy are essential to protect long-term growth and macroeconomic stability.

Descriptive question:

1. Critically examine how declining tax devolution and rising State borrowings affect India’s fiscal federalism. (10 marks, 150 words)

 

 

Article 3 : Quick pill

Why in News: The government amended the New Drugs and Clinical Trials Rules, 2019, replacing mandatory test licences with a prior-intimation system to ease pharma research, speed up drug development, reduce approval timelines, and support India’s goal of becoming a global pharmaceutical hub.

Key Details:

Mandatory test licences scrapped for non-commercial drug manufacture.

Prior intimation to CDSCO through the SUGAM Portal made sufficient.

Drug synthesis allowed after online acknowledgement of notice.

Expected three-month reduction in drug development timelines.

Low-risk bioavailability and bioequivalence studies allowed post-intimation.

Approval time for psychotropic and narcotic drugs cut from 90 to 45 days.

Emphasis on documentation and GMP compliance despite relaxed licensing.

Reform aimed at improving ease of doing business and innovation speed.

Policy Rationale and Objective

The government has scrapped mandatory test licences for manufacturing small quantities of drugs meant solely for research and testing.

The reform aims to reduce regulatory bottlenecks that often delay pharmaceutical innovation.

This move aligns with the broader objective of improving ease of doing business in the pharma sector.

Key Changes in Drug Regulation Framework

Amendments to the New Drugs and Clinical Trials Rules, 2019 replace licence requirements with a prior-intimation mechanism.

Drug developers can begin non-commercial manufacture after informing the CDSCO through the SUGAM Portal.

Once the notice of intent is acknowledged online, research-only drug synthesis can commence.

Expected Benefits of the Reform

The government expects drug development timelines to reduce by at least three months, especially in a post-COVID environment where speed is critical.

Certain low-risk bioavailability and bioequivalence studies can now begin with online intimation alone.

For drugs still requiring licences, such as psychotropic and narcotic substances, approval timelines are cut from 90 to 45 days.

A paperless system reduces delays, costs, and administrative inefficiencies.

Safeguards and Compliance Requirements

Manufacturers must document and file all processes in strict adherence to regulatory rules.

The reform does not dilute responsibility for Good Manufacturing Practices (GMP) compliance.

Concerns and Risks

Faster approvals may risk quality control lapses if regulatory oversight weakens.

Past incidents, such as cough syrup-related deaths, highlight the dangers of poor pharmaceutical supervision.

Speed should not come at the cost of drug safety and efficacy.

Way Forward

Establish post-intimation inspections to ensure strict adherence to GMP norms.

Strengthen digital surveillance and audit mechanisms on the SUGAM Portal.

Enhance accountability and penalties for quality violations.

Invest in regulatory capacity building for CDSCO officials.

Balance innovation facilitation with robust patient safety safeguards.

Conclusion
The removal of the licence-raj-style regulatory barrier marks a progressive step toward accelerating pharmaceutical research and positioning India as a global drug innovation hub. While the reform promises faster development, reduced costs, and potential life-saving outcomes, its success ultimately depends on maintaining uncompromising quality standards. Speed in drug development is valuable, but without vigilant oversight and enforcement, it risks undermining public trust and patient safety making balanced regulation the real test of this reform.

Prelims Question:

Which of the following is/are features of the new prior-intimation mechanism for drug research?

Intimation must be submitted through the SUGAM Portal.

It applies only to commercial-scale drug manufacturing.

Drug synthesis can begin after online acknowledgement.

Select the correct answer using the code below:

1 and 3 only

1 only

2 and 3 only

1, 2 and 3

Answer: a