17 October 2025

• Federalism: A detailed analysis examined the fiscal imbalance between Centre and States. The GST compensation cess abolished in July 2025 transferred Rs 2 lakh crore in tax benefits to consumers. States still handle more than 50 per cent of expenditure but collect only 33 per cent of tax revenue.
• Economy: India-Nepal economic ties deepened. RBI measures from 1 October 2025 expanded Rupee internationalisation through Special Rupee Vostro Accounts.
• Governance: The National Blockchain Framework achieved 34 crore verified documents since its launch in September 2024.
• Defence: India withdrew from the Ayni Airbase in Tajikistan after approximately four years of operations.
• RBI MPC: The October 2025 MPC meeting held repo rate at 5.50 per cent, unchanged, neutral stance retained.

GS area: Economy (Monetary Policy)

The Reserve Bank of India's Monetary Policy Committee (MPC) announced its decision from the 4th bi-monthly meeting of FY2025-26.

• Repo rate: 5.50 per cent, unchanged. Cumulative cuts in 2025 before this meeting: 100 basis points (three cuts of 25 bps each, starting February 2025).
• Policy stance: Neutral (retained; 4-2 vote on stance. Dr Nagesh Kumar and Prof Ram Singh voted for Accommodative; 6-0 unanimous vote on the rate hold).
• Governor: Sanjay Malhotra.
• Rate corridor:
  • Standing Deposit Facility (SDF): 5.25 per cent.
  • Marginal Standing Facility (MSF): 5.75 per cent.
  • Bank Rate: 5.75 per cent.
  • Cash Reserve Ratio (CRR): 3.00 per cent.
• Revised projections:
  • GDP FY2025-26: 6.8 per cent (raised from 6.5 per cent).
  • CPI inflation FY2025-26: 2.6 per cent (lowered from 3.1 per cent).
• Additional measures: risk-based deposit insurance premiums proposed; loan-against-shares limit raised from Rs 20 lakh to Rs 1 crore; IPO financing cap raised from Rs 10 lakh to Rs 25 lakh.
• Next meeting: December 3-5, 2025.

The October 2025 MPC hold is notable. Three earlier 25 bps cuts brought the repo rate down 100 bps from its 6.50 per cent peak. The record-low September CPI of 1.54 per cent would normally signal space for a cut. But core inflation at 4.6 per cent and the MPC's concern about US tariffs and H-1B visa cost pressures led to a hold.

Static linkage: Monetary policy, RBI, interest rates.

GS area: Polity (Fiscal Federalism, Centre-State Relations)

The GST compensation cess was abolished in July 2025. Detailed analysis of Centre-State fiscal architecture followed.

• Revenue asymmetry: the Centre collects approximately 67 per cent of total taxes. States handle more than 50 per cent of total public expenditure. This structural mismatch requires large transfers.
• State dependence on Centre: Bihar depends on central transfers for 72 per cent of its revenue receipts. Tamil Nadu: 31 per cent. Haryana: 20 per cent.
• Finance Commission devolution history:
  • 11th FC: 29.5 per cent of divisible pool.
  • 14th FC: 42 per cent.
  • 15th FC: 41 per cent (reduced by 1 per cent after J&K reorganisation created new Union Territories).
• Non-shareable cesses: Rs 4.23 lakh crore in Budget 2025-26. These are not included in the divisible pool and do not reach states. The proliferation of cesses is a key grievance.
• Constitutional provisions: Article 270 (divisible pool); Article 269A (GST and Centre-State sharing); Article 275 (grants to states); Article 280 (Finance Commission); Article 263 (Inter-State Council).
• Proposed reforms: share 50 per cent of personal income tax base between Centre and States; merge cesses and surcharges into the divisible pool; bring petroleum, real estate and alcohol under GST.

Static linkage: Polity (fiscal federalism, Finance Commission, Articles 270-280).

GS area: International Relations, Economy

RBI measures announced on 1 October 2025 expanded Rupee internationalisation with specific impact on India-Nepal trade.

• Measures: authorised dealer banks may lend rupees to non-resident entities in Nepal, Bhutan and Sri Lanka; Special Rupee Vostro Accounts (SRVAs) may now invest in corporate instruments; transparent reference rates for major currencies established.
• India's share in Nepal's international trade: 65 per cent. India's exports to Nepal: over USD 8 billion. Nepalese exports to India: approximately USD 1 billion.
• Indian FDI in Nepal: 33 per cent of Nepal's total FDI; approximately USD 670 million.
• Exchange rate arrangement: 1.6 Nepalese rupees = 1 Indian rupee. This is a fixed peg.
• Governor: Sanjay Malhotra (RBI); Nepal Rastra Bank (NRB) implements on the Nepal side.
• Strategic goal: reduce dependence on US dollar in bilateral trade; lower transaction costs for small and medium businesses in Nepal.

Static linkage: India-Nepal relations, Rupee internationalisation.

GS area: Science and Technology (Governance, Digital India)

The National Blockchain Framework (NBF) announced that 34 crore documents had been verified since the framework's launch in September 2024.

• Core components:
  • Vishvasya Blockchain Stack: a modular platform with Blockchain-as-a-Service (BaaS) hosted at NIC data centres in Bhubaneswar, Pune and Hyderabad.
  • NBFLite: a sandbox environment for startups and academic institutions to experiment.
  • Praamaanik: a tool verifying the authenticity of mobile applications.
• Applications: document verification (34 crore verified); Karnataka's Aushada system for drug authenticity tracking; Integrated Criminal Justice System (ICJS); property ownership records.
• Workforce development: 214 training programmes trained 21,000-plus government officials. The BLEND programme (C-DAC) and FutureSkills PRIME (MeitY) support blockchain capacity building.
• Related: RBI's Digital Rupee (e₹) pilot uses distributed ledger technology; TRAI's DLT platform combats SMS fraud.

Static linkage: Digital governance, blockchain technology, Digital India.

GS area: International Relations, Defence (Central Asia)

India withdrew from the Ayni Airbase in Tajikistan after approximately four years of operational presence post-2021.

• Location: Ayni Airbase is 10 kilometres west of Dushanbe, the capital of Tajikistan. It is approximately 20 kilometres from the Afghanistan Wakhan Corridor.
• History: India used the Farkhor base (1998-2008) to support anti-Taliban Northern Alliance operations. Ayni was later used as a forward presence after the Taliban's 2021 return to power in Afghanistan.
• Reason for withdrawal: the Taliban's consolidation of control over Afghanistan reduced the strategic rationale for a forward base in Tajikistan.
• Aircraft stationed: Mi-17 helicopters.
• Significance: the withdrawal closes a chapter of forward deployment in Central Asia. India's Afghanistan engagement is now conducted through diplomatic and trade channels.

Static linkage: India's Central Asia policy, Afghanistan, base agreements.

• Geothermal Energy Policy: the Ministry of New and Renewable Energy notified the National Policy on Geothermal Energy 2025. India has 381 hot springs in 10 geothermal provinces. Estimated geothermal potential: 10,600 MW. Key regions: Ladakh (Puga Valley), Himachal Pradesh, Gujarat, Odisha and Chhattisgarh. Global geothermal capacity: 15.4 GW (2019), led by the US, Indonesia and the Philippines.
• Rani Chennamma 200-year commemoration: Rani Chennamma of Kittur in Karnataka revolted against the British East India Company in 1824, 33 years before the 1857 uprising. The trigger was British refusal to recognise her adopted heir (an early instance of the Doctrine of Lapse). She was defeated by Colonel Deacon and died in Bailhongal Fort in 1829.
• Cloud seeding in Delhi: Delhi partnered with IIT-Kanpur for cloud-seeding experiments. Silver iodide is the primary seeding agent. The CAAPEEX studies (2009-2019) showed rainfall can increase by up to 46 per cent under favourable conditions. Delhi's post-monsoon pollution season limits its effectiveness.