Editorial Snapshot: 19-June-2025

Failed summit: on the G-7 summit in Canada 

At its 50th anniversary, the G-7 summit held in Kananaskis, Canada, reflected disunity and ineffectiveness amid major global conflicts including the Russia-Ukraine war, Israel-Iran tensions, and Gaza bombardment. The U.S. under President Trump disrupted cohesion with policy shifts, refusal to support de-escalation, and a push to include Russia and China in the G-7, alarming other members. The summit failed to produce a joint statement, issuing only a Chair’s Summary focused on non-divisive topics.Indian Prime Minister Narendra Modi’s participation yielded limited gains, with his key outcome being a bilateral reset with Canadian PM Mark Carney, including restoring High Commissioners after tensions over the Nijjar case. However, Canada maintained its stance on Khalistani extremism, and the G-7’s statement on Transnational Repression indirectly referenced India’s alleged involvement.Given the limited outcomes, fractured summit, and vague G-7 stance on key Indian concerns, India may need to reassess the value of continued participation in the G-7 process. 

A fair share: on divisible pool of tax collections 

The Sixteenth Finance Commission (SFC), set to make recommendations effective from April 1, 2026, faces a complex situation. A majority of States, including BJP-ruled ones, have demanded an increase in their share of the divisible tax pool from 41% to 50%. This stems from the Union government increasing its revenue via non-shareable cesses and surcharges, reducing the effective share of States from 35% to 31% between the pre-pandemic and recent years.States are now heavily reliant on central transfers due to limited revenue-raising powers post-GST. The current horizontal devolution formula, which emphasizes population and income distance, is viewed by economically advanced southern States as punitive. Maintaining the status quo would contradict the principle of cooperative federalism.Chairman Arvind Panagariya has indicated resistance to a sharp increase in States’ share, citing central spending pressures. However, a modest rise in devolution and curbing arbitrary cess usage—possibly by capping them and sharing surpluses—would signal reform. The SFC must also revise horizontal devolution criteria to better reflect State performance, needs, and area, ensuring a fair and fiscally sound federal framework. 

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