Table of Contents
The Hindu Editorial Analysis
We understand the significance of reading The Hindu newspaper for enhancing reading skills, improving comprehension of passages, staying informed about current events, enhancing essay writing, and more, especially for banking aspirants who need to focus on editorials for vocabulary building. This article will explore today’s editorial points, along with practice questions and key vocabulary.
States to Receive 41% Tax Devolution; Southern States See Increased Share
- The 16th Finance Commission (16th FC) has suggested that the Central government should continue giving 41% of its tax revenue to the States, a system that has been followed since 2021.
- Finance Minister Nirmala Sitharaman, while presenting the Union Budget, said that the Union government has accepted this recommendation of the 16th Finance Commission.
- She clearly mentioned that the government has agreed to keep the same 41% share of tax devolution between the Centre and the States.
- According to the 16th Finance Commission’s recommendations, the Finance Minister has provided ₹1.4 lakh crore as Finance Commission Grants to the States for the financial year 2026–27.
- These grants will be used for Rural Local Bodies, Urban Local Bodies, and Disaster Management
- Even though the total share of tax devolution between the Centre and the States has not been changed, the formula used to divide this amount among the States has been modified.
- Because of these changes in the formula, the five Southern States — Tamil Nadu, Kerala, Andhra Pradesh, Telangana, and Karnataka — will now receive a higher share than before.
- The 16th Finance Commission submitted its report to the President of India on November 17, 2025.
- The report was presented in Parliament on Sunday.
- The Commission pointed out that the only way it could support the Centre’s finances was through the Centre’s share in the divisible pool of taxes.
- It also said that there was no scope to further reduce the States’ share, because the Centre collects a large amount of money through cesses and surcharges, which are not shared with the States.
- Due to this, the divisible pool of taxes has reduced from 1% of gross tax revenue in 2014–15 to between 74% and 80% during 2020–24, based on actual available data.
- Under the new formula, population has been given a weightage of 17.5%, which is higher than the earlier 15%.
- The weightage for demographic performance (which checks how well States have controlled population growth) has been reduced to 10% from 12.5%.
- The area of a State has now been given a 10% weightage, compared to 15% earlier.
- The weightage for forest cover remains unchanged at 10%.
- The difference in per capita GSDP (which means the income gap between a State and the richest State) has the highest weightage of 42.5%, though this has been reduced from 45% earlier.
- As per the 16th Finance Commission’s recommendations, Andhra Pradesh’s share has increased to 4.217% from 4.047%.
- Karnataka’s share has gone up to 4.131% from 3.647%.
- Kerala’s share has risen to 2.382% from 1.925%.
- Tamil Nadu’s share has slightly increased to 4.097% from 4.079%.
- Telangana’s share has improved to 2.174% from 2.102%.
Rare Earth Corridors to Reduce Dependence on Chinese Imports
- Finance Minister Nirmala Sitharaman, in her Union Budget 2026 speech, announced that the government will help mineral-rich States like Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to set up rare earth corridors.
- These corridors will focus on mining, processing, research, and manufacturing of important minerals.
- This move comes at a time when China, which controls a major share of the global rare earth market, is using its mineral supply as a strategic tool during its ongoing trade and tariff tensions with the United States.
- While the United States is the second-largest buyer of Chinese rare earths after Japan, India also depends heavily on China for these materials.
- Data shows that India’s rare earth imports increased from $14.1 million in 2014 to $17.5 million in 2024.
- More than 45% of India’s rare earth imports come from China.
- China’s strong position in rare earths is not only because of natural resources, but also due to its well-developed mining systems and strong research facilities.
- Rare earth elements (REEs) are not actually rare, despite their name.
- According to the International Energy Agency (IEA), rare earths include 17 different metals.
- These metals are usually divided into light rare earths, such as lanthanum, cerium, praseodymium, neodymium, samarium, and europium.
- Heavy rare earths include gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium, and yttrium.
- Promethium is not included because it is radioactive and does not exist in usable quantities.
- Rare earth elements are very important for clean energy technologies, including electric vehicles and wind turbines.
- They are also essential for defence equipment and systems.
- Rare earths are widely used in modern electronic devices like smartphones and hard drives.
- Although countries such as Brazil, Australia, and India also have rare earth deposits, China holds nearly half of the world’s known reserves.
- China is the largest producer of rare earths, contributing over 60% of global production in the last five years.
- China also dominates the processing stage, controlling about 92% of the world’s rare earth refining capacity, according to the IEA.
- In addition, China has been the largest exporter of rare earths, supplying nearly 30% of global demand over the last five years.
Seven Rail Corridors Receive Approval
- Finance Minister Nirmala Sitharaman, during her Budget speech, announced seven high-speed rail corridors that will connect five South Indian States along with other regions.
- These corridors will be built at a total cost of ₹16 lakh crore.
- She described these rail lines as “growth connectors”, saying they will connect Mumbai–Pune, Pune–Hyderabad, Hyderabad–Bengaluru, Hyderabad–Chennai, Chennai–Bengaluru, Delhi–Varanasi, and Varanasi–Siliguri.
- The new corridors are expected to greatly reduce travel time.
- Travel from Chennai to Bengaluru will take 1 hour 30 minutes, Bengaluru to Hyderabad 2 hours, Hyderabad to Chennai 2 hours 55 minutes, Pune to Hyderabad 1 hour 55 minutes, and Pune to Mumbai just 45 minutes.
- At a press conference, Railway Minister Ashwini Vaishnaw said that connecting five South Indian States through these corridors will boost economic growth in the region.
- The Delhi–Varanasi corridor will reduce travel time to 3 hours 50 minutes.
- The journey from Varanasi to Siliguri via Patna will take 2 hours 55 minutes.
- The total length of all seven corridors will be around 4,000 km, with a total project cost of ₹16 lakh crore.
- In the Union Budget 2026–27, the Ministry of Railways has been allotted ₹2,78,030 crore, compared to ₹2,55,466 crore in 2025–26, showing an increase of 8%.
- The total capital expenditure for Railways has been fixed at ₹2,93,030 crore.
- For safety-related work, the Railway Minister said that ₹1,20,000 crore has been set aside for track maintenance, new locomotives and coaches, fast installation of Kavach (India’s automatic train protection system), and electrical systems.
- The Ministry of Road Transport and Highways has been given a capital expenditure of ₹3.09 lakh crore for 2026–27, up from ₹2.87 lakh crore, marking a rise of 7%.
- The allocation to the National Highways Authority of India (NHAI) has been increased to ₹1.87 lakh crore, compared to ₹1.70 lakh crore last year.
Important Questions
- Why did the 16th Finance Commission recommend retaining the 41% tax devolution between the Centre and the States despite the decline in the divisible pool?
- How did the revised formula of the 16th Finance Commission lead to an increased share for Southern States like Tamil Nadu, Kerala, and Karnataka?
- Why did Finance Minister Nirmala Sitharaman, in the Union Budget 2026, announce rare earth corridors for States like Odisha and Tamil Nadu?
- How does China’s dominance in mining and refining capacity, as noted by the International Energy Agency, affect India’s rare earth imports?
- How will the seven high-speed rail corridors, described as growth connectors in the Union Budget 2026, benefit South Indian States?
- Why has the Ministry of Railways increased capital expenditure for safety-related measures like Kavach in 2026–27?
Important Vocabulary
- Devolution – Transfer of funds or powers from the Centre to the States.
- Divisible pool – Portion of tax revenue that is shared between Centre and States.
- Weightage – Importance given to a factor in calculation.
- Demographic performance – Measure of how well population growth is controlled.
- Rare earth elements – Group of 17 metals used in modern technology.
- Strategic bargaining tool – Resource used to gain advantage in global relations.
- Refining capacity – Ability to process raw minerals into usable form.
- Deposits – Natural underground sources of minerals.
- High-speed rail corridors – Fast railway routes connecting major cities.
- Capital expenditure – Money spent on long-term infrastructure projects.
- Outlay – Total amount of money allocated.
- Kavach – Indigenous automatic train protection system.
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