9 PM Current Affairs Brief – February 1st, 2018

Download the compilation of all summaries of all the news articles here

GS: 1

Graduates from IIT, NIT to teach in rural areas

Graduates from IIT, NIT to teach in rural areas


More than 1,200 youngsters with Ph.D and M. Tech degrees from institutions like Indian Institutes of Technology, Indian Institute of Science, Bengaluru, and National Institutes of Technology will spend the next three years teaching at 53 government engineering colleges in rural areas of districts lagging behind in technical education

The teachers will be there on a three-year contract and get paid ₹70,000 a month.

  • Human Resource Development Minister told reporters on Wednesday that these teachers had already joined the colleges
  • The teachers will be there on a three-year contract and get paid ₹70,000 a month.
  • Later, they can either choose to stay in academics or join the corporate world.
  • This initiative, entailing an expenditure of ₹370 crore, is a result of the Centre helping state governments fill up vacancies in backward districts in 11 states where engineering students were suffering because of dearth of teachers.

Focus States

The focus is on states like Uttar Pradesh, Uttarakhand, Tripura, Assam, Bihar, Jharkhand, Odisha and the Andaman and the Nicobar Islands.

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Stone tools offer insights into history of human evolution

Stone tools offer insights into history of human evolution


Based on the study of over 7,200 stone artefacts collected from the archaeological site at Attirampakkam in the Kortallayar river basin about 60 km from Chennai, researchers suggest that hominins in India may have developed a Middle Palaeolithic culture phase around 3,85,000 years ago and continuing up to around 1,72,000 years ago.

Researchers suggest that hominins in India may have developed a Middle Palaeolithic culture phase around 3,85,000 years ago.

According to earlier evidence, the Middle Palaeolithic culture in India was dated to around 1,25,000 years ago.

Middle Palaeolithic

  • The Middle Palaeolithic is an important cultural phase, associated as it is globally with both modern humans and Neanderthals or other archaic hominins, with complex histories of interaction, cultural transitions and change and dispersals.
  • Based on stone tool and fossil studies, the Middle Palaeolithic culture (called the Middle Stone Age in Africa) is associated with modern humans in Africa, while it is associated with both modern humans and Neanderthals in Israel.
  • But in Europe, the Middle Palaeolithic culture is associated only with Neanderthals.

In India

  • In case of India, we cannot say who made the tools as no hominin fossil remains have been found till now.
  • The Middle Palaeolithic culture is thought to have originated in Africa.
  • When we look at the Indian site at Attirampakkam, which is far away from Africa, we see a similar cultural change occurring.
  • The number and nature of dispersals of populations bearing a Middle Palaeolithic culture from Africa is not a simple, linear model but is far more complex

Going deep

  • In 2011, Prof. Pappu and her team reported the discovery of 1.5-million-year-old stone artefacts belonging to the Lower Palaeolithic (Acheulian) culture from Attirampakkam.
  • The objects were buried in sediments at the lowest levels in the excavation.
  • In the top three metres of the soil, the same site has yielded artefacts that reflect a distinct Middle Palaeolithic culture.

What this shows

  • This research presents a paradigm shift in thinking about the origin and spread of Middle Palaeolithic cultures in South Asia, suggesting a far greater antiquity and more complex story than we thought
  • At Attirampakkam, we have a wonderful sequence contained in a single stratigraphic continuum and showing a long process of evolution
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‘Indus script was written from right to left’

‘Indus script was written from right to left’


Two scientists working at The Institute of Mathematical Sciences, Chennai, (IMSc) have figured out a way to computationally estimate whether a language is written from left to right or otherwise. Most interestingly, they have studied the Indus script and calculated that it must flow from right to left

Researchers use statistical indices to measure variations in letters

“Professor Iravatham Mahadevan [the well-known Indus scholar] was one of the experts who had figured out that the Indus script ran from right to left by observing how the writing got a little cramped as it ran towards the left — suggesting that the writer started writing at the right end and ended up running out of space as he or she reached the left end,” says Sitabhra Sinha of IMSc, one of the scientist who carried out the study.


  • “In a workshop at Roja Muthiah Research library, he asked the audience whether it was possible to come up with a mathematically rigorous technique to infer the ‘handedness’ of a script — that is, to deduce whether the script was written from left to right or right to left,” adds Mr. Sinha
  • This question set Mohammed Ashraf, a research scholar with B.S. Abdur Rahman University, Chennai, thinking and led him to this collaboration and discovery

Letters and alphabets

We know intuitively that in a language, some words are used more often than others

Similarly, some letters of the alphabet occur more at the start of words and others are more common at the end of words

Gini Index and Shannon’s entropy

  • The variation faced by different letters may be measured using two independent statistical indices — the Gini index and Shannon’s entropy.
  • Mr. Sinha and Mr. Ashraf have established that there is a difference between these measures when calculated for the first letter and the last letter
  • This difference between start and end of a word makes it possible for them to identify whether the word is written from left to right or the other way around.
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GS: 2

Testing waters

Testing waters


We need to evolve credible and institutionalized practices to resolve inter-State river disputes

We need to evolve credible and institutionalized practices to resolve inter-State river disputes

  • Last week, the Supreme Court directed the Centre to constitute a tribunal within a month to adjudicate the Mahanadi river water dispute between Odisha and Chhattisgarh.
  • The Centre had resisted constituting a tribunal, instead advocating a political resolution through talks.
  • During the recent winter session of Parliament, the Union Road Transport Minister Nitin Gadkari had even asked Odisha to engage with Chhattisgarh through his or the Prime Minister’s office.
  • Odisha, however, insisted on a legal route.

The question rises

Why was the Centre unsuccessful in getting Odisha to the table? It is time we invest in right, credible and institutionalised practices for enabling inter-State mediation, coordination and cooperation.

Political rationalities

The States’ escalation of the dispute for pursuing their respective interests is legitimate. However, the underlying political rationalities of actors present a typical paradox of multi-party federal democracies that produce the stalemate. This is for two reasons.

Political opportunism in federal democracies

Mahanadi dispute is an enticing opportunity for both the BJP and BJD for political mobilization  as they both are facing ant-incumbency in the states

Political subjectivity of the contemporary Indian state

The mechanism of the Centre’s mediation before constituting a tribunal for adjudication — prescribed by the current Inter-State River Water Disputes Act, 1956 — is outdated.

Worked when single party dominated: This was conceived when a single party dominated Indian politics, and the Centre could exercise power and influence over States

Polarized regional powers:

  • The Centre-States engagement has turned politically subjective with polarised and assertive regional powers. The BJD is unlikely to trust a BJP-led Central government’s initiatives – irrespective of how sincere those efforts might be – with the BJP’s own government in Chhattisgarh.
  • The challenge thus is securing credibility of mediation practices — of institutionalising neutrality and objectivity.

Inter-State cooperation

  • Odisha’s unwillingness to engage in talks might not necessarily be for political reasons. It can be for the uncertainties associated with the apparent ad hoc framing of the practice of mediation by the Centre.
  • State river waters governance is a classic case of collision between Central and State powers. This conundrum of federal governance is not new.

Policy reforms needed like:

  • The Act of 1956 for resolving disputes has been amended at least a dozen times since its inception.
  • But the River Boards Act, 1956, drafted simultaneously for inter-State collaboration, has not been amended even once since then.

Mediation under Inter state council

  • The drive for political resolution suggests a welcome realisation to push the envelope beyond legal routes
  • But the practices need to be structured within the constitutional realm.
  • For example, the mediation practices may be structured under the Inter-State Council, provided by the Constitution for the exclusive purpose of inter-State coordination.


The ecosystem has to enable not just inter-State dialogue for collaboration, but also other goals of executing agreements and projects for river development, conservation and restoration.

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Italian anti-corruption officials to meet Indian counterparts

Italian anti-corruption officials to meet Indian counterparts


An Italian delegation of senior anti-corruption officials is expected to visit India soon for a meeting with the representatives of various enforcement agencies to discuss issues of mutual cooperation in investigations.


The meeting follows the visit of Italian Prime Minister Paolo Gentiloni in October-November last year.

CVC at the helm

  • It is learnt that the Indian delegation will be headed by a senior Central Vigilance Commission (CVC) functionary.
  • The CVC is empowered to supervise and direct a probe into corruption allegations. It also conducts inquiries into cases referred by the Central government.

Strengthening ties

Through the meeting, the Indian agencies hope to further strengthen their ties with their Italian counterparts in the areas of mutual information sharing on financial crimes, as part of their efforts to open up more efficient channels for communication with countries.

Bilateral treaties

  • In the past few years, India has also signed revised bilateral treaties with many countries for effective action against black money.

VVIP chopper deal case

  • The crucial meeting comes in the backdrop of acquittals of Giuseppe Orsi and Bruno Spagnolini, two former top functionaries of Italy-based Finmeccanica and its subsidiary Agusta Westland, in the VVIP chopper deal case by an Italian appeals court in January.
  • The Italian court acquitted the two accused citing insufficient evidence.
  • However, the Central Bureau of Investigation, which is probing the bribery allegations, has maintained that it does not have any bearing on its probe.
  • The agency has already filed the first charge sheet in the case.
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Westinghouse teams visit revives hopes for Kovvada plant

Westinghouse teams visit revives hopes for Kovvada plant


Officials of Westinghouse Electric, that went through bankruptcy proceedings last year, and was bought from Toshiba by a Canadian consortium last month, will visit India next week to discuss a reworked deal for nuclear reactors for the proposed nuclear plant in Andhra Pradesh’s Kovvada.

Relook at deal to build reactors for Andhra plant likely

It is understood that the team of executives and engineers will travel to Mumbai to meet with officials of the Nuclear Power Corporation of India Ltd (NPCIL), which is the Indian operator, and with government officials including those from the Ministry of External Affairs (MEA) in Delhi.

A bit of history

  • The agreement that was expected to be signed by “July 2017” according to a deadline set in the Indo-U.S. joint statement of June 2016, had been further delayed after both Westinghouse Electric as well as Toshiba ran into major financial trouble.
  • This led to Westinghouse filing for “Chapter 11” bankruptcy in the U.S. On January 4 this year, the company was bought for $4.6 billion — considerably lower than the $5.6 billion paid by Toshiba for Westinghouse in 2006, and indicates the extent of the company’s financial losses that could pose more hurdles for the India deal down the road.

Assurance in LS

  • Discussions are in progress between NPCIL and WEC to arrive at a viable project proposal.
  • In December 2017, the Andhra Pradesh government said it had completed the land acquisition for the Kovvada “nuclear park” where the reactors are expected to be built.

Only reactors

Westinghouse has announced it will no longer carry out the construction of the power project, but will only provide reactors and components.

A boon for Make in India

While this could be a boon for the government’s Make in India push, this may also delay the project as NPCIL looks for Indian partners who will carry out the construction.

Flexible yet complicated

  • The reworked deal would also have more flexibility when it comes to sourcing cheaper components from Japan and South Korea, both of which India has civil nuclear agreements with, but the multiple contracts now required will complicate the NPCIL’s task, the sources added.

Financing woes

  • Another complication could come from the financing of the Westinghouse agreement, which India expects America’s Exim bank (Export-Import Bank of the United States) to undertake.
  • The Trump administrations nominee for Chairman of Exim bank was rejected last month by the U.S. Senate’s Banking committee, adding to the timeline woes of NPCIL.

History of problems with Westinghouse deal

  • The Westinghouse deal, which first saw a Memorandum of Understanding signed in 2009, had originally run into trouble over the issue of supplier liability and of tracking nuclear parts.
  • It was expected to go through after U.S. President Obama and Prime Minister Narendra Modi declared a “breakthrough” agreement in January 2015, where the governments claimed to have ironed out the issues to their satisfaction.
  • However, the proof of the agreement would only come after the first “techno-commercial” agreement is signed between American and Indian companies.

Another agreement delayed

Another agreement with American company GE-Hitachi ran aground in 2016 after GE officials said they weren’t satisfied on the issue of liability in case of a nuclear accident.

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Reality check in Sri Lanka

Reality check in Sri Lanka


Sri Lanka’s local government elections, scheduled to be held on February 10, have elicited the interest of a national election, and with good reason.

Local government elections this month will have a bearing on the coalition government in Colombo

This is the first time the country will go to the polls in about three years since the President Maithripala Sirisena–Prime Minister Ranil Wickremesinghe combine rose to power promising “good governance”, giving voters a chance to say what they think of the performance of the government they elected to office.

Deep fissures in the coalition government

Further, the two coalition partners in government — Mr. Sirisena-led Sri Lanka Freedom Party (SLFP) and Mr. Wickremesinghe’s United National Party (UNP) — are contesting the island-wide local polls separately, with their campaigns laying bare the deep fissures and insecurities within the coalition government.

Focus on corruption

Mr. Sirisena has pegged his campaign to an anti-corruption crusade, chiefly targeting the SLFP’s senior coalition partner in Parliament, the UNP.

The President’s attacks have grown shriller after a presidential commission of inquiry (CoI) held a former Central Bank Governor and a former Finance and Foreign Minister Ravi Karunanayake, close aides of the Prime Minister, of corruption

Three-cornered fight

  • The challenge for the two parties does not end there.
  • Mr. Rajapaksa and his supporters, basically a faction of the SLFP and others who call themselves the ‘Joint Opposition’, are campaigning for the Sri Lanka Podujana Peramuna (SLPP), or Sri Lanka People’s Front
  • In effect, the local government polls present a three-cornered contest, with the President and Prime Minister fighting each other, despite being coalition partners in the national government, and the Rajapaksa-backed SLPP threatening to eat into the SLFP’s vote share.

Forgotten issues

  • Though the leaders are contesting local government polls, they are in fact gearing up for a bigger fight, so much so that key local issues such as illegal sand mining, deforestation, irrigation and drinking water hardly figure in the ongoing campaign.
  • Unemployment is a chief concern not only in the war-affected north and east but also across other provinces, despite the Prime Minister’s grand promise of a million jobs.

Mixed bag

  • This is not to say that the story of the forthcoming local polls, in which about 16 million citizens are eligible to vote, is entirely about a brewing political crisis
  • It does offer some promise, especially after the government enacted a law mandating 25% representation of women in local government bodies, prompting many women community leaders to contest.
  • This is also the first time that Sri Lanka will follow a mixed electoral model whereby 60% of members will be elected by the first-past-the-post system and the remainder through closed list proportional representation.


Undoubtedly, the political stakes are high for all parties and the actors in this election. But the leaders would do well to remember that the stakes are higher for the people.

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Don’t want India to become the refugee capital of the world, govt. tells SC

Don’t want India to become the refugee capital of the world, govt. tells SC


The Union government told the Supreme Court on Wednesday that it does not want the country to become the refugee capital of the world.

The Centre was responding to a submission by Rohingya refugees that the BSF was “pushing back” their compatriots at the borders with chilli spray and stun grenades

“We do not want India to become the refugee capital of the world. People from every other country will flood our country,” Additional Solicitor General Tushar Mehta told a Bench led by Chief Justice of India Dipak Misra.

Refugee determination

  • Justice D.Y. Chandrachud observed that the court did acknowledge the humanitarian aspects of the situation, but asked if judicial standards of India, which applied to refugees already living on Indian soil, also apply to those attempting to enter the country
  • “Somebody comes to your border and says ‘I am a refugee’. It has to be determined whether he is a refugee. He cannot be blindly pushed back… then what is the commitment of India to refugee determination?

‘We cannot push them back to the jaws of death’

  • Senior advocate Ashwini Kumar, also for the refugees, said “minimum humanitarian morality” should be shown to the refugees at the border.
  • “We cannot push them back to the jaws of death. You cannot deny a man his right to life. The Supreme Court has to intervene as the ultimate protector of life,” he submitted.
  • Senior advocate Gopal Subramanium, for National Human Rights Commission (NHRC), submitted that the issue of how to deal with refugees trying to enter at the border should be diplomatically resolved.

Balancing human rights with national interests

  • The court has said it would want to balance national interests with humanitarian concern about the refugees.
  • The court is hearing a bunch of petitions, one filed by persons within the Rohingya community, against a proposed move to deport over 40,000 Rohingyas.
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GS: 3

Rs. 370 cr. allotted for building border infra

Rs. 370 cr. allotted for building border infra


Laying emphasis on building infrastructure along the Indo-Pak and Sino-India borders, the government has sanctioned nearly Rs. 370 crore to the BSF and the ITBP for construction of bunkers and special climate-controlled huts in forward areas, an official said on Wednesday.

BSF, ITBP will build bunkers, fortify border outposts and construct special climate-controlled huts

  • A total of Rs. 369.84 crore has been sanctioned by the Home Ministry for construction of infrastructure for Border Security Force (BSF) and Indo Tibetan Border Police (ITBP)
  • The amount will be spent for construction of bunkers, fortifying border outposts of the BSF along the Indo-Pak border, construction of climate-controlled huts, procurement of snow scooter for the ITBP besides other necessary works of the two forces.


  • The BSF guards the 2,526.86-km-long Indo-Pak border, including 237.2 km of the Line of Control, and 4096.7 km of the Indo-Bangladesh border.
  • The Indo-Pakistan border has been witnessing massive ceasefire violation from across the border since the beginning of 2017.


  • ITBP guards the 3,488-km-long Sino-India border that runs through Jammu and Kashmir, Himachal Pradesh, Uttarakhand, Sikkim and Arunachal Pradesh.
  • The force is specially trained to operate in high altitude mountainous terrain along the border.
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INS Karanj boosts Navy’s firepower

INS Karanj boosts Navy’s firepower


The Navy’s third state-of-the-art Scorpene class submarine, INS Karanj, was launched by Reena Lanba, wife of Chief of Naval Staff Admiral Sunil Lanba. The new submarine is named after the earlier Kalvari class INS Karanj, which was decommissioned in 2003.

Third Scorpene class submarine joins Naval fleet

Six Scorpene class submarines are being built under Project 75 by the Mazagon Dock Shipbuilders Limited (MDSL), Mumbai, under a $3.75 billion technology transfer signed in October 2005 with the Naval Group of France.

Scorpene class

  • The Scorpene class is the Navy’s first modern conventional submarine series in almost two decades, since INS Sindhushastra was procured from Russia in July 2000
  • INS Kalvari, the first to be launched, was commissioned in December 2017 by Prime Minister Narendra Modi. INS Khanderi, which was launched in January 2017, is currently undergoing deep dive trails and is expected to be commissioned later this year, according to Navy officials

‘Speedy delivery’

  • Timely construction and speedy delivery of the remaining three submarines — VelaVagir and Vagsheer is expected
  • “The three submarines are in various stages of outfitting. The entire project is expected to be completed by 2020,” a defence official said.
  • INS Kalvari, manned by a team of eight officers and 35 sailors, carries sea-skimming SM39 Exocet missiles and the heavyweight wire-guided Surface and Underwater Target (SUT) torpedoes. For self-defence, it has mobile anti-torpedo decoys.
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Power of a single identity

Power of a single identity


Indian activists echo American conservatives of the 1930s, but Aadhaar is the best tool to administer the subsidy regime

Social Security Act of US

The United States enacted the landmark Social Security Act in 1935, giving birth to the Social Security Number (SSN). The debate leading up to the Act was highly contentious, as conservative Republicans/Congressmen declared, “Never in the history of the world has any measure been brought in here so insidiously designed as to prevent business recovery, to enslave workers, and … opens the door and invites the entrance into a political field of a power so vast, so powerful, as to threaten the integrity of our institutions….”

Safety nets

  • The fearmongering ultimately failed to impress the American public, and over the years Social Security and its counterpart, Medicare, have become the only safety nets for a majority of America’s elderly
  • It continues to be the backbone of citizen interactions with the state — for the simple reason that no one has come up with a better alternative.

Aadhaar raising the same type of debate

Eighty-three years later, the apocalyptic rhetoric of those opposing Aadhaar in India’s Supreme Court harkens back to the arguments made against the SSN: “[Aadhaar] tends to terrorise citizens with the country becoming a totalitarian regime; ” and “it is a ‘giant electronic mesh’ and will turn the country ‘into a surveillance state.’”

There is a difference though

The opposition to Social Security was informed by right-wing ideology, which saw it as the harbinger of socialism and an existential threat to America’s capitalist enterprise. In stark contrast, the movement against Aadhaar is led by a small group of Left-leaning activists, who are well known for advocating more and more government in people’s lives (the public distribution system, rural employment guarantee, food security, and so on), but who are now arguing in the same breath for the citizens’ right to be left alone.

The biometric difference

Petitioners will, of course, argue that there is another crucial difference between the SSN and Aadhaar: biometrics.

One can’t change his fingerprints: Unlike other personal information that one can change at will to protect one’s privacy, they say, one can’t change one’s fingerprints.

Arguments against this difference

More damaging data with social media etc. : But as one of the learned Supreme Court justices observed recently, Google and other social media, mobile operators, and our own voter lists have a lot more immediately damaging personal information that one has no real control over. (Have you ever tried to delete highly personal and sometimes libellous information that show up when you Google your own name?)

None of the breaches involve fingerprint or iris scan data

  • Besides, none of the examples of Aadhaar data breaches that have been reported — which we should all be rightly concerned about — involves fingerprints or iris scans.
  • So, the argument that biometrics somehow make a more compelling case against Aadhaar simply does not hold water.

Biometrics bring much needed credibility instead

In fact, in a nation with the world’s largest safety net programmes, historically largest levels of leakages, and systemic fraud in every past ID programme, it is indeed the biometrics that bring credibility to Aadhaar as a national ID.

So, where does all this leave us?

Anti Aadhaar activists not offering any alternatives: On the one side, we have a well-organised group of anti-Aadhaar activists who can take full credit for catapulting the privacy debate on to the national stage, but who have not offered a single viable alternative tool to better administer the nation’s massive subsidy regime.

Pushing questionable stories forward: Unfortunately, in their eagerness to quash Aadhaar, they seem even willing to embrace questionable storylines deliberately designed to bait and malign the Unique Identification Authority of India (UIDAI) prior to the Supreme Court hearings. Example: For example, when the UIDAI filed a FIR in a case of alleged misuse of its grievance redress system to illegally obtain some people’s Aadhaar demographic data, it was quickly accused of muzzling the free press, when it was merely fulfilling its legal obligation to act on any reported misuse of data.

Best use of a scheme

The Unified and determined Government: On the other side, we have a government at the Centre whose party opposed Aadhaar prior to the elections, but upon taking over the reins quickly realised the power of a single national ID in effectively administering welfare schemes; and which has been much more internally unified than the previous government in its determination to make the best use of Aadhaar.

UIDAI serious in addressing data security and other concerns: And we have the UIDAI, which has consistently shown its seriousness in addressing data security and privacy issues; is poised to add more layers of security, such as virtual Aadhaar ids; is taking an active part in crafting a national data privacy law; but which, unfortunately, has been unable to match the nimbleness of the opposition in its public messaging.

The Supreme Court: In the middle is the Supreme Court, now hearing detailed arguments from both sides.

Not an either or game

When they are through, one would hope that the court will roundly reject the zero sum choice (Aadhaar or privacy) posited by some of the petitioners which would pose a huge setback for administrative reform.

Drawing lines between privacy and national interest

Instead, the Justices will hopefully focus their deliberations on where the nation should draw the line between personal privacy and the national interest.

Author’s view

  • In my view, mandating Aadhaar for all government schemes and subsidies, and allowing it as a tool to prevent money laundering and terrorism are the most logical places to draw that line.
  • And, lighting the fire under the government to quickly enact a comprehensive national data privacy law, which enshrines internationally accepted principles of privacy, must be the citizens’ insurance policy to prevent mass surveillance and other excessive use of Aadhaar, like in the case of the SSN
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‘Data safety: few firms ready

‘Data safety: few firms ready


With less than four months to go for the EU’s General Data Protection Regulation to kick in, “too many companies are still not prepared” for the regime that would also cover Indian IT firms, according to a global survey.

Only 33% have plans to comply with the EU rule: EY survey

“Asked to describe their company’s current status with respect to complying with the GDPR, only 33% of respondents said that they have a plan, while 39% said they are not familiar with GDPR,” according to EY’s Global Forensic Data Analytics Survey 2018.


  • An initiative to unify data protection laws across the EU, GDPR would apply to all firms, regardless of their location, that process personal data of people living in the EU
  • Once in force, the GDPR would require companies to notify a data breach within 72 hours of the event.

‘Minimum €20 mn fine’

Violators could be fined up to 4% of annual global turnover or €20 million, whichever is greater, according to the report

New risks

  • According to the survey titled ‘How can you disrupt risk in an era of digital transformation?’, corporate India’s journey toward digital transformation has introduced new risks, especially around managing data, over the last two years
  • As many as 70% of Indian respondents see data protection and data privacy compliance as increasing areas of concern; while 46% are worried about cyber breach and insider threats.


The role of advanced Forensic Data Analytics and emerging technologies would continue to be pivotal to mitigate escalating digital threats.

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Making financial savings less taxing

Making financial savings less taxing


Bumping up the household savings rate and nudging savers to park their surpluses in financial assets have always been high on the agenda of Indian Finance Ministers. Fully aware of this, different arms of the financial services industry — insurers, banks, intermediaries, mutual funds — usually present a long laundry list of Budget demands. This year has been no exception.

Savers in India need a far simpler tax regime for financial products that doesn’t distort their freedom to choose

It is accommodating such piecemeal demands over the years that has led to such a complicated and inconsistent smorgasbord of tax rules for investors. This does them more harm than good.

Here are some ideas that may uncomplicate life for savers, if they figure in the Budget.

Omnibus 80C

  • India is an aspirational economy and this makes deferring one’s consumption a particularly difficult decision for the income-earner.
  • Offering tax incentives to increase the savings rate, therefore, makes sense.
  • The Income Tax Act, under Section 80C, does create such incentives by allowing savers to deduct up to ₹1.5 lakh upfront from their taxable income each year towards investments
  • Ideally, Section 80C should have stopped with an omnibus deduction and allowed investors to choose their own instruments.

Restrictive list of approved 80C investments

But in practice, there’s a restrictive list of ‘approved’ 80C investments that has grown over the years to accommodate the whims of different Finance Ministers.

Distorting the choices for savers

The problem with the ‘approved’ 80C list is that it distorts choices for savers.

Some savers lock into risky ULIPs or ELSS (equity linked savings scheme) products for 80C tax breaks, when bank fixed deposits would better suit their risk profile

Removing the approved list

  • Instead of micromanaging savings under 80C, it would be good if the Finance Minister did away with the approved list and offered just one catch-all deduction of, say, ₹2 lakh a year, for financial investments
  • That would allow savers freedom of choice based on individual goals.

Favour financial assets

That Indian savers prefer to bet their surpluses on physical assets such as gold or property, instead of in productive financial assets such as deposits, bonds and shares, has for long been a sore point with policymakers

It is only recently, in fiscal year 2016 and FY 2017, that there has been a mild shift in this behaviour.

Income tax rules need to favor financial investments

Income tax rules, however, continue to offer handsome tax breaks on property investments, which are denied to many financial investments

  • For instance, tax laws encourage leveraged investments in property by allowing tax deductions on both the principal (Section 80C) and interest repayments (Section 24B) on home loans.
  • But when it comes to financial investments, forget leverage, many popular avenues (bank and post office deposits less than five years, recurring deposits, bonds) receive no tax breaks even on the actual investment.

More capital gains exemptions on property investments

  • Property investments also enjoy more generous capital gains exemptions than financial products
  • Capital gains earned on selling residential property after three years is not taxed if you reinvest the proceeds in another house
  • But this reinvestment benefit is unavailable to financial products.

Complex rules

  • What’s more, capital gains tax rules for financial products are complex — shares and equity mutual funds get full exemption after one year, bonds and debt mutual funds suffer tax after three years and returns from cumulative deposits are taxed at stiff rates as income, and not as capital gains.

Reinvestment without capital gains tax

  • To establish a level playing field between physical and financial assets, sale proceeds from financial assets, if held long term, should be allowed to be reinvested without capital gains tax. A uniform definition of ‘long-term’ and cost inflation benefits for all financial products, whether they are bonds or bank deposits, would render them more attractive.

Freedom on allocation

  • Prudent financial planning requires a saver to decide on her relative allocation between safe and risky assets based on her life stage, income, financial goals and risk appetite.
  • Reserve Bank of India data tell us that in FY17, Indian households made a ₹18.2 lakh crore incremental allocation to financial assets

Allocation of funds

About 60% of this went into bank deposits, 24% into insurance premium, 16% into pension and provident funds, 10% into shares/mutual funds and about 5% into small savings, with other minor allocations.

Overwhelming preference for fixed income plans

This tells us that Indian investors have an overwhelming preference for fixed income avenues that safeguard their capital, even if they earn lower returns. This is logical given that the population is dominated by low to mid-income earners. 

Ignoring individual risk taking ability

But present tax laws ignore individual risk-taking ability, and try too hard to push investors towards equities

  • So, dividends on equity shares are exempt in the investors’ hands (distribution tax is a flat 20% at source)
  • But interest on deposits are added to one’s income and suffer tax at 10-31%. Equity gains are treated as ‘long term’ after just one year and completely exempt from tax thereafter. But for most debt investments, ‘long term’ is three years with gains taxed at 20%.
  • It would be desirable to tax both dividend and interest income at similar rates in the hands of investors.
  • There is also a case for treating equity gains as ‘long term’ only after three years.


These measures above will not just nudge savings behaviour closer to the policy objectives. They will also make financial products vastly more appealing to savers, by uncomplicating the tax rules that presently hamper their freedom of choice.

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Budget expected to focus on direct taxes

Budget expected to focus on direct taxes


While there are unlikely to be any major changes in indirect tax as most of them are now under the purview of the Goods and Services Tax Council, Budget 2018 could have several positive changes on the direct tax side, according to analysts.

Effort will be to ensure any cut in rate doesn’t hit revenue

The key consideration while reducing direct taxes, either for individuals or corporates, would be to ensure that the changes don’t reduce government revenue too much, as there is already the possibility of overshooting the fiscal deficit target.

‘Archaic limit’

  • “The other thing that could change is the medical reimbursement limit of ₹15,000, which is an archaic limit. So that could go up.
  • The last thing is that the income tax slabs could be tweaked.”

Long term capital gains tax

There is a chance the government may introduce a long term capital gains tax on equity shares, or may remove the dividend distribution tax.

Changes in corporate tax

There could be some changes on the corporate tax front as well, according to analysts, but they added that the government will be careful with these in order to minimise the impact on the exchequer.

No cut in the excise duty on fuel

Against the backdrop of consistently rising oil prices, there has been an increasing demand for a cut in the excise duty on fuel. However, indications from both the government and the private sector suggest that this will not happen in this Budget.

Farmers a priority

“I believe that our first priority is to find out a solution for our farmers who are in distress,” Mr. Modi had said, perhaps indicating that the Budget could have measures to ease the plight of farmers, and boost agriculture.

Not in favor of a populist budget

Overall, however, the Prime Minister said he was not in favour of a populist Budget, something both Mr. Subramanian and Niti Aayog Vice Chairman Rajiv Kumar have reiterated.

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