Investor Protection Framework: Multifaceted Implications of the Digital Revolution in India

With the advent of digitalisation and expansion of the retail market in recent years, India has experienced a significant shift in its financial landscape, necessitating an increased emphasis on investor education and protection. This paper delves into the intricate relationship between investor education and investor protection, emphasising the pivotal role of the Government, regulators and financial institutions in framing protective measures for investors. With the rise of digitalisation, particularly fintech, the financial services sector has witnessed transformative changes, influencing access to investment opportunities. This exploratory article reviews the existing architecture for investor protection and stresses the need for a dynamic and well-coordinated approach, robust complaint resolution mechanism, and comprehensive research to enhance investor protection in this evolving financial ecosystem. It discusses notable initiatives, including the National Strategy on Financial Education (NSFE) and its 5C strategy, suggesting an additional “6th C” i.e. a class-oriented approach to serve as a key driver in creating a financially aware and empowered India. The strengthening of the regulatory framework with adequate cybersecurity measures, launch of an online portal for claim settlement, and the establishment of a Centralised Grievance Redressal system are highlighted as crucial steps in building a comprehensive investor protection framework. The authors also highlight that investor protection is a two-way approach involving the Government and regulatory bodies on the one hand and investors on the other, with both sides being equally accountable, alert, and watchful in the digital era.

Children Break the Mould of Parental Education

At the end of the first quarter of the 21st century, the vast majority of India’s population aged 5 and above, is literate through formal schooling. About 84 percent of men and 72 percent of women are literate, as per the Periodic Labour Force Survey (PLFS), 2021–22, Government of India. That being said, slightly more than one-fifth of the total population aged 5 and above is still not literate. It’s intriguing to explore the educational achievements of the children whose parents are among this group of non-literate adults!

There is a lot of literature that confirms that parents’ educational level has a very significant positive impact on a child’s educational outcomes. And much more prominent is the role of the mother’s education in the same. A well-known quote by Mahatma Gandhi reads, “If you educate a man, you educate an individual, and if you educate a woman, you educate an entire family.” But important insights can be drawn from the socio-economic profiles of the parents who are not literate through any formal education and whose children entered the education system for the first time in their families. These children may be termed “first-generation students.”

The PLFS data reveals that around 38 percent of the total population falls into the age group of 5–25 years. Among these young people, around 14 percent have parents who are not literate through formal education. The parents of approximately 14 percent of children are not literate. Out of this 14 percent, about 88 percent have gone to school, becoming the first in their families to step into the formal education system. And another 12 percent of the of the children have not received any formal education.

It was found that the majority of first-generation schoolchildren are from rural areas; about three-fourths belong to the bottom two expenditure quintiles; over 40 percent are from SC/ST communities; and about 60 percent are boys.
Further, approximately two-thirds of these first-generation students have completed their education up to the middle level; 18 percent have completed secondary or higher secondary education, and another 3 percent have reached higher education (graduation or post-graduation).

The data also reveals that the children of non-literate parents (12 percent) have not received any formal education either. They are mostly from rural areas and low-income groups. Around 85 percent of them are from the bottom two expenditure quintiles; more than 80 percent belong to rural areas; around 56 percent are boys; and 43 percent are from SC/ST communities.

Further probing on the whereabouts of the 12 percent non-literate children of the non-literate parents reveals that approximately 22 percent of these children are engaged in direct income-generating activities, and another 10 percent are involved in indirect economic activities for their families. Around one-fourth of them are involved in domestic duties, like household chores, caregiving, and other responsibilities.

A little more than 5 percent of the non-literate children are disabled, and the largest proportion, approximately 41 percent, is neither participating in formal education nor engaged in any economic or domestic activities.
Such a situation may require targeted interventions aimed at improving access to education, economic opportunities, and support services for individuals in this demographic group. While there are already many scholarship programs and initiatives to ensure that financial barriers should not be a reason for any child to remain uneducated, many children are still out of the education system.

As goes the Tibetan proverb, “A child without education is like a bird without wings,”  it is crucial that every child be enrolled in school. This will require necessary support for first-generation students, both academic and financial, and mentorship as well as career counselling programs. Also, policymakers can prioritise focused initiatives aimed at uplifting non-literate individuals, especially parents, to break the cycle of intergenerational illiteracy. Given the significant influence of parental education on children’s educational achievements, policies can focus on empowering parents, particularly mothers who are under 50 years old, through literacy programs and adult education initiatives.
In summary, many children who have already broken the barriers in their families and have set foot into the classroom have paved the way for future generations. But for the other less fortunate children, the constraints are many, due to which they remain stuck in the cycle of illiteracy, struggling to break free. Overall, a concerted effort from policymakers, educators, and community stakeholders is imperative to create an inclusive and equitable education system that enables every child to reach their full potential.

The authors are Prabir Kumar Ghosh (Sr. Fellow) and Chanchal Negi (Research Analyst), at the National Council of Applied Economic Research.

Ensuring successful transition to renewable power

Focus on grid balancing, optimal storage capacity and spatial distribution of power demand is needed.

The success of India’s net zero pledge by 2070 rests heavily on India’s successful energy transition in the power sector, as it is responsible for more than 50 per cent of emission.

So, India has gone all out to expand installed capacity of renewable electricity, with a bias towards solar. The report card indicates that there has been a sharp rise in the installed capacity of renewable electricity even though the energy mix of generated renewable electricity does not indicate any sharp spike. In fact, the divergence between generation and installed capacity of renewable electricity is becoming wider.

This trend needs to be reversed. A primary reason for this trend is the way our distribution companies enter into purchasing agreements with the producer of renewable electricity.

A distribution company usually does not insist on supply of power for 24 hours from the producer of renewable electricity but on purchasing their entire production even if it is limited to eight hours in a day — the general production hour of a typical solar-based power plant.

As a result, the risk of purchasing power for the rest of the time of the day lies with the distribution company, which is dependent mostly on fossil power for same. Barring the new Adani mega renewable power project, almost none of the renewable power companies has attempted to build in solar/wind hybrid/battery storage model for providing uninterrupted power for 24 hours.

If the purchasing agreement insist on buying power for 24 hours from a supplier, we would have seen more such hybrid power projects.

Grid balancing, transmission

Currently our fossil-based power projects are more or less evenly spread across India as coal/piped gas are by and large available all over India. Consequently, the transmission line of India along with substation has been developed accordingly.

On the contrary, the renewable power like solar is by and large being produced in a few States due to land constraint. The potential for wind energy is also observed to be concentrated in a few States. Thus, the existing transmission line and substations may not be able to transmit power over much longer distances.

Furthermore, unlike power from conventional sources, power from renewable sources always exhibits large variation in a day due to vagaries of nature (wind speed, sunlight, etc).

Thus, in other countries where the emphasis is on producing higher electricity from renewable sources, solar/wind capacity augmentation goes hand in hand with other sources like hydro power or particularly pumped hydroelectric energy storage (PHES) for load balancing.

PHES has emerged as one of the most important sources of hydroelectric energy storage used by electric power systems for load balancing. However, this does not seem to be in much favour in India. Only recently has India woken up to the grid balancing aspect and tenders are being floated for storage of electricity in batteries along with construction of renewable solar plant.

Integrated assessment model linked to power system model is a potential solution to further enhance energy accessibility and optimise the power generation cost by minimising the curtailment of renewable power through optimal introduction ofstorage capacity and location specific planning.

Mapping plan

Spatial mapping of available RE resources along with transmission and distribution network and mapping of demand can further help policymakers prepare an implementation plan for low carbon transition.

It plays a crucial role by ensuring energy through resource planning, optimising energy mix, infrastructure planning, policy formulation and economic analysis. In many EU countries, energy planning considers power infrastructure, network topology, and spatial distribution of power demand while planning for electricity transition.

Till now, probably all the bottom up energy models developed in the context of India do not take these into account. As a result, investment numbers generated out of these modelling exercises for energy transition may be off-target or infeasible. It is time a power system model for renewable electricity integration and energy transition analysis is developed in India.

Sanjib Pohit is Professor at NCAER. Views are personal.

Data sharing policies can’t be one size fits all. Crucial to address privacy, ownership

The Indian data market remains in its infancy due to regulatory ambiguity, despite the global trend of enterprises monetising various types of data.

The potency of data becoming a critical asset is now a reality. Familiar phrases such as “data is the new gold” or “data is the new oil” underscore its value. In the growing pile of information, we need a new shovel to dig up gold.

The Internet of Things (IoT), Artificial Intelligence (AI), cloud computing (CC) and machine learning (ML) would leverage the utilisation of data. With data being generated at an unprecedented rate and quantity, its monetisation has also been in focus. It is the process of generating revenue or economic value from data assets. This can include selling or trading data to third parties or using it internally.

Data sharing and monetisation in India
Despite the global trend of enterprises monetising various types of data, the Indian data market remains in its infancy due to regulatory ambiguity. Just like elsewhere in the world, India is in the middle of a data revolution with the government being the largest repository of data. There have been several attempts to frame policies and frameworks.

In March 2012, the National Data Sharing and Accessibility Policy (NDSAP) was published with the objective of increasing the accessibility and facilitating easier sharing of non-sensitive data generated using public funds by various agencies of the government of India, for scientific, economic, and social developmental purposes. It excluded, among others, personal information, and data related to intellectual property rights such as patents, trademarks, official marks, and identity documents. In pursuance of this policy, the government, through the National Informatics Centre (NIC), set up the Open Government Data (OGD) platform to provide open access through the proactive release of data available with various ministries and departments.

Next was the Kris Gopalakrishnan Committee on Non-Personal Data Governance Framework (2020). The Committee suggested that non-personal data should be regulated to (i) enable a data-sharing framework to tap the economic, social, and public value of such data, and (ii) address concerns of harm arising from its use.

The Committee identified three purposes for Non-Personal Data Sharing—Sovereign Purpose (national security, legal purposes), Public Good Purpose (public good and benefits of society at large), and Business Purpose (sharing of non-personal data between two or more for-profit private entities). But the Committee also cautioned that current methods for anonymising data still leave individuals at risk of re-identification, as research has shown.

India’s first formal foray into monetising data was the formulation of the Draft India Data Accessibility and Use Policy (IDAUP) of February 2022. It laid down that every government ministry and department will identify non-personal datasets and classify them as open, restricted or non-shareable. It also lays down protocols for the sharing of non-personal datasets. The policy further specified the “pricing & licensing” process for high-value datasets (HVD) of the government, which have undergone value addition through defined pricing guidelines. To address privacy concerns, it suggested anonymisation tools be put in place and to include a “negative list” of datasets that will not be accessible to the public. However, this policy got scraped after facing criticism that monetisation of data would go against the principle of open government data.

In May 2022, the government released the revised National Data Governance Framework Policy, which did away with the idea of monetising data. It, inter alia, proposes to launch “non-personal data based India Datasets program and addresses the methods and rules to ensure that non-personal data and anonymised data from both government and private entities are safely accessible by research and innovation eco-system.”

Then, in Union Budget 2023-2024, the government announced that it will launch the National Data Governance Policy (NDGP) to enable access to anonymised dataset, and unleash innovation by startups and academia. It will aim to enhance citizen awareness, participation, and engagement with open data, increase the availability of datasets of national importance, identify suitable datasets for sharing, and improve overall compliance with secure data sharing and privacy policies and standards.

Meanwhile, the Digital Personal Data Protection (DPDP) Act 2023 was enacted with the objective to “provide for the processing of digital personal data in a manner that recognises both the right of individuals to protect their personal data and the need to process such personal data for lawful purposes…”. In case of any personal data breach, the Data Protection Board of India (DPBI) will be responsible for looking into the matter. The body is supposed to inquire into the breach and impose penalties. However, “data monetisation” as a concept and dealing with the associated privacy concerns has not been specifically spelled out or defined under the DPDP Act.

Need for threadbare approach
Data is one of the most valuable intangible assets. By leveraging it, India can drive innovation, enhance productivity, and address societal challenges across various sectors. Data has grown to be an important resource and services driven by it would be the next thing. It can also provide useful inputs for policy formulations and assist government agencies in identifying issues at the granular level.

The sovereign authority commanded by the government enables its agencies to collect vast amounts of data, with little hesitation or reluctance from the public in sharing information. Hence, data collection cannot be solely driven by profit motives. Security and privacy concerns require serious and adequate attention.

The overall legal framework should include adequate, stringent and well-balanced provisions. The lesson learned from the scrapping of the government’s policy, which allowed private entities to access the vehicle registration databases Vahan and Sarathi, and the Indian Railway Catering and Tourism Corporation’s (IRCTC) roll-back of a tender for hiring a consultant to monetise its passenger and freight customer data should be kept in mind. With the advancement in AI models, the possibility of “de-annonymisation” or “triangulation” or matching the data with other available databases with the ultimate aim to misuse is now becoming a greater possibility and threat. Another issue that needs equal attention is the possibility of data storage systems and networks being hacked.

India’s cautious approach to data sharing and monetisation reflects the need for nuanced strategies amid rapidly evolving technological landscapes. It is becoming more apparent that a ‘one size fits all’ approach will not work. It is crucial for the government to address key challenges related to data privacy, ownership, quality, and standardisation in a threadbare manner.

Dr Palash Baruah is Associate Fellow at National Council of Applied Economic Research (NCAER), New Delhi and DL Wankhar is a retired officer of the Government of India. Views are personal.

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