02 March 2026

• The killing of Ali Khamenei in coordinated U.S.– Israeli strikes has led to a major escalation in West Asia.
• Iran retaliated with missile and drone attacks on Israel and Gulf states hosting U.S. forces.
• Explosions were reported in Tel Aviv; casualties occurred in Israel and Gulf regions.
• Iran initiated constitutional procedures to appoint a new Supreme Leader through the Assembly of Experts.
• The conflict threatens regional stability, energy security, and global maritime trade routes, especially the Strait of Hormuz.

Key Points

• Iran’s Political Structure
  • Supreme Leader is the highest political and religious authority.
  • The Assembly of Experts elects and can remove the Supreme Leader.
  • The President functions under the authority of the Supreme Leader.
• Strategic Importance of Strait of Hormuz
  • Connects the Persian Gulf to the Gulf of Oman.
  • Handles nearly 20% of global petroleum trade (as per global energy assessments).
  • Critical for India’s crude oil imports.
• Gulf Cooperation Council (GCC)
  • Members: Saudi Arabia, UAE, Qatar, Kuwait, Oman, Bahrain.
  • Region hosts major U.S. military bases.
• International Law
  • Article 2(4), UN Charter – Prohibition of use of force.
  • Article 51 – Right to self-defense.
  • Applicability of Geneva Conventions in armed conflicts.
• India’s Stakes
  • Large Indian diaspora in West Asia.
  • High dependence on Gulf region for crude oil.
  • Precedents of evacuation operations such as Operation Rahat (Yemen).

Static Linkages

• Strategic chokepoints in global trade: Strait of Hormuz, Bab-el- Mandeb.
• Theocratic constitutional framework and fusion of religion with state authority.
• India’s energy import dependence and Current Account Deficit implications.
• Non-Alignment and Strategic Autonomy in India’s foreign policy.
• Role and limitations of the UN Security Council in conflict resolution.

Critical Analysis

• Strategic Concerns
  • Risk of full-scale regional war.
  • Disruption of oil supply chains leading to inflationary pressures.
  • Possibility of involvement of major powers.
• Legal and Ethical Dimensions
  • Debate over legality of pre-emptive strikes under international law.
  • Civilian casualties and humanitarian concerns.
• Impact on India
  • Potential rise in crude oil prices affecting fiscal stability.
  • Safety concerns for Indian diaspora.
  • Diplomatic balancing between Israel, Iran, and Gulf countries.
• Regional Stability
  • Leadership vacuum may create internal instability in Iran.
  • Increased role of proxy warfare and non-state actors.

Way Forward

• Promote diplomatic de-escalation through multilateral forums.
• Strengthen India’s Strategic Petroleum Reserves.
• Diversify crude oil import sources.
• Enhance maritime security cooperation.
• Maintain strategic autonomy in foreign policy

SEBI TO USE TECH VS MANIPULATORS

• The Chairman of the Securities and Exchange Board of India (SEBI) announced enhanced technology-driven surveillance to curb market manipulation and cyber fraud.
• Introduction of “SEBI Check” within the UPI ecosystem to verify registered intermediaries before investors make payments.
• AI-based multilingual investor awareness campaigns in collaboration with private technology firms.
• Regulatory steps taken to cool excessive speculation in equity derivatives, particularly short-duration options.
• Focus on strengthening corporate bond markets and reviving agri-commodity derivatives.

Key Points

• SEBI is a statutory body established under the SEBI Act, 1992.
• Mandate:
  • Protect investors.
  • Regulate securities market.
  • Promote development of capital markets.
• SEBI has:
  • Civil court powers.
  • Authority to impose monetary penalties.
  • Search and seizure powers (post-2014 amendment).
• “SEBI Check” aims to:
  • Prevent payments to unregistered brokers.
  • Reduce cyber fraud and fake advisory services.
• SEBI regulates:
  • Stock exchanges.
  • Mutual funds.
  • Portfolio managers.  
  • Investment advisers.
  • Commodity derivatives (since FMC merger in 2015).
• Measures introduced to:
  • Reduce speculative activity in derivatives.  
  • Improve investor awareness.
  • Enhance regulatory impact assessment.

Static Linkages

• Capital Market Structure:
  • Primary market – IPO, FPO.
  • Secondary market – Stock exchanges.
  • Derivatives market – Futures and Options.
• Role of derivatives:
  • Hedging instrument.
  • Risk management tool.
  • Can lead to excessive speculation if misused.
• Corporate bond market:
  • Reduces dependence on bank credit.
  • Important for infrastructure financing (Economic Survey).
• Financial literacy:
  • Essential for inclusive growth.
  • Promoted through RBI and SEBI initiatives.
• Regulatory architecture:
  • RBI – Banking & monetary regulation.  
  • SEBI – Securities market.
  • IRDAI – Insurance.  
  • PFRDA – Pension.

Critical Analysis

• Positives
  • AI improves real-time detection of manipulation.  
  • Strengthens investor confidence.
  • Reduces cyber fraud and unregistered advisory scams.
  • Encourages disciplined long-term investing.
  • Moves towards evidence-based policymaking.
• Concerns
  • Over-regulation may affect market efficiency.
  • Retail participation in derivatives remains risky.
  • Enforcement challenges in digital fraud.
  • Need for coordination with RBI and law enforcement agencies.

Way Forward

• Strengthen financial literacy at school and college levels.
• Enhance coordination between SEBI, RBI and cybercrime units.
• Develop corporate bond market for long-term capital formation.
• Continuous regulatory impact assessment.
• Promote technology-driven grievance redressal systems.

INSTUTIONS MUST ADMIT ERROR

• Senior Advocate Abhishek Manu Singhvi addressed the “Justice Unplugged: Shaping the Future of Law” conclave.
• Event organised by Vellore Institute of Technology School of Law in association with The Hindu.
• Key themes:
  • Institutional fallibility and judicial self- correction.
  • Protection of constitutional rights against executive excess.
  • Responsible use of Artificial Intelligence (AI) in the legal profession.
  • Law as foundation of economic and democratic nation-building.

Key Issues Highlighted

• Courts must acknowledge errors to preserve constitutional credibility.
• Judiciary’s role as guardian of Fundamental Rights.
• Concerns over expansion of Executive authority during national crises.
• Preventive detention and arbitrary state action.
• Legal system judged by its protection of vulnerable citizens.
• AI should assist legal reasoning, not replace judicial discretion.
• Law mediates economic justice and growth.

Static Linkages

• Article 13 – Judicial review of unconstitutional laws.
• Article 32 & 226 – Right to Constitutional Remedies.
• Article 21 – Protection of life and personal liberty.
• Article 22 – Safeguards against preventive detention.
• Doctrine of Basic Structure – Kesavananda Bharati (1973).
• ADM Jabalpur (1976) – Judicial failure during Emergency (later corrected in Puttaswamy, 2017).
• Justice K.S. Puttaswamy (2017) – Right to Privacy; recognition of past judicial error.
• Separation of Powers – Checks and balances model
• Rule of Law – A.V. Dicey.
• NITI Aayog – Responsible AI for All (2021).

Critical Analysis

• Institutional Fallibility Significance
  • Strengthens democratic resilience through self- correction.
  • Upholds constitutional morality over institutional ego.
  • Reinforces judicial legitimacy. Concerns
  • Delay in correcting errors may harm civil liberties. 
  • Overreach or judicial activism vs restraint debate.
  • Executive-judiciary tensions during national emergencies.
  • Judiciary & Protection of Vulnerable Positive Role
  • Expands rights jurisprudence (Article 21 expansion). 
  • PIL mechanism enhances access to justice.
• Challenges
  • Pendency of cases.
  • Preventive detention laws often misused.  
  • Unequal access to legal representation.
  • AI in Legal System Opportunities
  • Faster case summarisation and research.
  • Reduces workload in overburdened courts.
  • Supports data-driven judicial administration.
• Risks
  • Algorithmic bias.  
  • Privacy concerns.
  • Over-reliance affecting judicial reasoning

Way Forward

• Strengthen judicial accountability with transparency mechanisms.
• Strict scrutiny of preventive detention laws.
• Institutionalise constitutional morality in legal education.
• Develop AI regulatory framework aligned with fundamental rights.
• Improve access to justice via technology-enabled courts (e-Courts Mission Mode Project).
• Encourage continuous democratic dialogue among institutions.

SIXTEENTH FINANCE PANEL GAPS

• The Sixteenth Finance Commission (FC-XVI) submitted recommendations on tax devolution and fiscal transfers between Union and States under Article 280.
• It retained the 41% share of States in the divisible pool of central taxes.
• Introduced a new “contribution” criterion in horizontal devolution.
• Discontinued revenue deficit grants and did not recommend State/sector-specific grants.
• Raised concerns over rising cesses and surcharges (non-shareable).

Key Constitutional Provisions

• Article 280 – Constitution of Finance Commission.
• Article 270 – Distribution of taxes between Union and States.
• Article 275 – Grants-in-aid to States.
• Cesses & Surcharges – Not part of divisible pool.
• GST – Articles 246A & 279A (GST Council). Vertical Devolution (Centre vs States)
• 14th FC: Increased States’ share from 32% to 42%.
• Later reduced to 41% (post J&K reorganisation).
• 16th FC retained 41% → quasi-permanent structure.
• Recommended a “grand bargain”:
  • Centre merges cesses into shareable taxes.
  • States accept slightly lower share in a larger pool.
• No explicit restriction on cesses & surcharges.
• Discontinued revenue deficit grants.
• Criteria Changes
  • Retained Income Distance (equity principle).
  • Introduced Contribution Criterion:
    • Based on share in all-State GSDP.
    • Used square root of GSDP to reduce skew.  
  • Dropped Tax Effort/Fiscal Discipline criterion. Implication
  • Some poorer States (UP, Bihar, MP, Odisha, etc.) see relative decline.
  • Several North-Eastern States also lose share.  
  • Richer States benefit unevenly.

Core Concepts

• Vertical Fiscal Imbalance – Mismatch between revenue powers and expenditure responsibilities.
• Horizontal Fiscal Imbalance – Inter-State disparity in fiscal capacity.
• Equalisation Principle – Ensuring comparable levels of public services across States.
• Cooperative vs Competitive Federalism.
• Normative assessment of revenue gap (used in earlier FCs).

Issues for Mains

1. Cesses and Surcharges

• Increasing share in Union revenue.
• Not shareable → reduces effective devolution.  
• Raises concerns of spirit of fiscal federalism.

2. Equity vs Efficiency Debate

• Income distance → promotes equalisation.
• Contribution criterion → rewards economic performance.
• Tension between redistribution and incentive.

3. Discontinuation of Revenue Deficit Grants

• May hurt fiscally weaker
• Article 275 allows grants for State-specific needs.

4. GST Uncertainty

• Revenue volatility post reforms.
• Limited fiscal autonomy of States.

Critical Evaluation

• Positives
  • Stability by retaining 41%.
  • Acknowledges Centre’s fiscal stress.
  • Attempts balance between equity and efficiency.
• Concerns
  • Weak stance on cesses and surcharges.
  • Dropping fiscal discipline reduces reform incentives.  
  • Reduced equalisation orientation.
  • Potential overestimation of GDP growth in projections.

• India’s demographic dividend is expected to last till 2040 (Economic Survey; UN Population Prospects).
• Only 1.3% of secondary students are enrolled in vocational streams (UNESCO), compared to~40–60% in many EU countries and China.
• The National Education Policy 2020 aims for 50% exposure to vocational education by 2025.
• The Comptroller and Auditor General of India (CAG) in 2025 flagged financial and performance issues in Pradhan Mantri Kaushal Vikas Yojana (PMKVY).
• Concerns raised about underutilisation of funds, weak placement outcomes (~41%), and governance gaps.
• Debate on reforming skill financing through skill loans, vouchers, and industry skill levies.

Key Points

• Demographic dividend: Higher working-age population share boosts economic growth if productively employed.
• PMKVY launched in 2015 under Skill India Mission.
• NEP 2020: Vocational exposure from Grade 6; integration with mainstream education.
• CAG is a Constitutional authority under Article 148.
• Apprentices Act, 1961 (amended 2014) aims to promote industry-linked training.
• Over 90 countries use skill levies (ILO data).

Static Linkages

• Article 41 (DPSP): Right to work and public assistance.
• Human Capital Formation (NCERT Class 12 – Indian Economic Development).
• Structural transformation: Movement from agriculture to manufacturing/services.
• Labour Market Information Systems (LMIS).
• Fiscal accountability and public expenditure management.
• PPP model (National Skill Development Corporation).

Mains Analysis

• Issues in India’s Skill Ecosystem
  • Low vocational participation at secondary level.
  • Supply-driven model dominated by short- term courses.
  • Fragmented governance across ministries.  
  • Weak monitoring and outcome tracking.
  • Limited employer ownership.
  • Budget-dependent and politically cyclical funding.

Reform Proposals Discussed

1. Skill Loans

• Shift from grant-based to demand-driven financing.
• Similar to education loan model.
• Encourages competition among institutions.
• Risk: NPAs and exclusion of vulnerable groups if poorly designed.

2. Skill Vouchers

• Public funds follow the trainee, not institution.
• Enhances accountability and choice.
• Useful for AI, digital, green skills and women’s workforce participation.
• Requires strong accreditation and regulatory oversight.

3. Skill Levy (Reimbursable Industry Contribution)

• Payroll-linked contribution from organised sector.
• Reimbursed when firms invest in employee training.
• Ensures employer ownership.
• Insulates funding from annual budget fluctuations.

Critical Evaluation

• Positives
  • Creates sustainable financing.
  • Aligns training with market demand.  Improves accountability.
  • Supports lifelong learning vision of NEP 2020.  
  • Reduces fiscal uncertainty.
• Concerns
  • Administrative complexity.
  • Risk of elite capture by large firms.
  • Inclusion challenges for informal sector.
  • Need for strong Labour Market Information System (LMIS).

Way Forward

•  Gradual transition from supply-driven to demand-driven model.
• Integrate skill loans within PMKVY.
• Pilot voucher systems in high-demand sectors (AI, green jobs).
• Introduce industry levy with safeguards for MSMEs.
• Mandate anonymised job market data sharing for real-time LMIS.
• Strengthen outcome-based monitoring.
• Increase vocational spending share in education budget.
• Align skilling with Industrial Policy and Make in India goals.