How IIMs are using CAT 2018 to take in more non-engineers

IIMs want students to come from diverse academic backgrounds and therefore IIM professors are trying to redesign questions for its MBA entrance exam CAT.  Photo: HT

IIMs want students to come from diverse academic backgrounds and therefore IIM professors are trying to redesign questions for its MBA entrance exam CAT. Photo: HT

New Delhi: As their classrooms continue to be dominated by men and engineers, the Indian Institutes of Management (IIMs) are trying to add diversity, which will ultimately show up in corporate boardrooms over the next few years. At the centre of this strategy is IIM’s Common Admission Test (CAT 2018), which will see a change in the type of questions being asked.

Although the IIMs have decided not to change the broad pattern in this year’s CAT examination, yet questions will be framed in a manner to create a level field for students from all streams, including arts and commerce.

IIM officials say they do not want the CAT pattern to be biased towards engineering students as there is a need for academic diversity in India’s top B-schools.

What kind of questions should you expect in the CAT

CAT 2018 convener and IIM Calcutta professor Sumanta Basu told Livemint that there was no significant change in the broad pattern of the CAT exam. The IIMs are continuing with the same set of three sections:

Section I: Verbal ability and reading comprehension

Section II: Data interpretation and logical reasoning

Section III: Quantitative ability

But within these sections, there is a change. “We may focus on questions that test candidates on fundamentals,” Basu said. “Our effort will primarily involve framing the correct types of questions instead of changing the pattern altogether,” he added.

The CAT exam does not have a syllabus. Only mocks tests, to be posted soon on the CAT website, can help you understand the pattern of questions. In the three-hour-long computer-based exam, candidates get 60 minutes each for the three sections.

According to analysis of previous CAT exams by coaching centres, the focus has been more on testing reasoning and analytical ability than grammar and vocabulary. This could be a reason why engineers have the upper hand in the CAT.

How are engineers filling up IIMs in large numbers

If you walk into a typical classroom in any of the 20 IIMs in India, chances are high you will encounter students who have already completed their engineering courses. Even popular author Chetan Bhagat first studied in IIT Delhi and then joined IIM Ahmedabad before working as an investment banker at Goldman Sachs.

IIM Calcutta, ranked consistently among the top management colleges in India, has an overwhelming number of 88% students coming in from an engineering background. The figures may be better in some other IIMs, like the one in Ahmedabad (68%), but the IIMs remain a bastion of engineering graduates.

Engineers dominate list of top scorers in the CAT exams. In 2017, there were only three non-engineers who scored 100 percentile.

What are the other changes in IIM selection process

Over the last few years, the IIMs have been making concentrated efforts to have more academic diversity, not just through the CAT but via other aspects of the selection process.

IIM Calcutta, for example, allots only 15 points out of 50 to the CAT score the while personal interview (PI) and a written ability test (WAT) together receive almost double the weight (24+5). Therefore, a candidate who can write well on a given topic has a higher chance of getting through IIM Calcutta than someone who is good in analysis but has poor writing and communication skills.

IIM Bangalore, on the other hand, wants you to be at your best in PI. The weightage is 30 for PI and 25 for CAT.

If you are applying to IIM Ahmedabad then a science student has to score at least 55% in class XII exams to get 1 point in the preliminary screening process while a commerce student needs only 50% and arts 45%.

How are IIMs giving importance to gender diversity

Besides skewed towards engineers, classrooms at IIMs are also skewed against the fairer sex. IIMs, both old and new ones, are walking the extra mile to ensure that women representation.

The admission of girls in IIMs during the last three years has shown an increasing trend with the total women admitted going up from 881 in 2015-17 to 1211 in 2017-19, according to the union ministry of human resource development. IIM Ahmedabad’s flagship PGP course saw 28% women students in 2017, as compared to 14% women in 2015.

IIM Rohtak has been the most successful so far in gender diversity with a ratio of over 50% going in favour of women.

[“Source-livemint”]

Mint Money tells you when it makes sense to take an education loan, how it can benefit you and how much it can cost

Keeping your accumulated savings invested and taking an education loan instead can benefit you. Photo: Alamy

Keeping your accumulated savings invested and taking an education loan instead can benefit you. Photo: Alamy

Any big-ticket spending requires you to either have the required funds in place or a financing option. When dealing with long-term financial goals, such as higher education of children, you have the advantage of planning much in advance. Here’s how you can go about the planning.

Start early

A lot of parents have an inclination to send their children abroad for higher education, at least at the post-graduate level, said Suresh Sadagopan, a certified financial planner and founder of Ladder 7 Financial Advisories. “In that case, the planning needs to start really early. They would need a horizon of at least 10-15 years. When we talk of international education at post-graduate level today, most likely it is not going to happen below ₹40 lakh,” he said.

Click here for enlarge

How do you work towards saving that amount? Prakash Praharaj, founder, Max Secure Financial Planners, said that the future cost of a particular course needs to be calculated taking into account at least 10% annual inflation. “Then calculate the current assets and investments accumulated for these goals. Then the remaining gap for the aimed amount is to be filled through monthly SIPs over the years,” he said.

Starting an SIP of ₹5,000-7,000 in an equity fund for 15 years and increasing it by 10-20% each year could help. However, Sadagopan said, given the fact that there are so many ongoing expenses these days, including other loans, it becomes difficult for parents to put aside a huge amount for the child’s post-graduation alone.

Consider taking loan

Even if you have been working on creating a higher education corpus, you need to consider taking an education loan. At present, the total expenses for higher education abroad could be in the range of ₹1 crore per child, Sadagopan said.

“A realistic thing that parents need to realise is that the child’s higher education is not their only goal. Retirement is also an important goal and they need to be aware of the fact that you can get a loan for all other requirements but not for retirement,” he said.

Own funds versus loan

But if someone has already accumulated the required amount, why should another repayment burden be taken on? The answer lies in two things, Praharaj said. “A cost benefit analysis suggests that taking an education loan and keeping the accumulated amount invested works in your favour. Moreover, it also helps in developing a sense of responsibility in the student. The realisation that a repayment has to be done by them keeps them focussed,” he said.

The math of keeping your accumulated savings invested and taking an education loan instead suggests that taking a loan results in significant benefits. For instance, if ₹1 crore is kept invested and an education loan for the same amount is taken, at the end of nine years, including the repayment holiday on the education loan, the net benefit could be around ₹87 lakh (see graph).

This includes the tax saved on repayment of loan. Borrowers of education loans can claim deduction on the interest paid, though not on the principal amount. Also, unlike in home loans, there is no limit to the amount that can be claimed as deduction.

Sadagopan said it is better that the parents keep the money with themselves and let the child take the loan. “In future if the child is struggling to find a job and pay back, you can step in to help at that point,” he said.

[“Source-livemint”]

How to fund child’s education: Take a loan or use own funds?

Keeping your accumulated savings invested and taking an education loan instead can benefit you. Photo: Alamy

Keeping your accumulated savings invested and taking an education loan instead can benefit you. Photo: Alamy

Any big-ticket spending requires you to either have the required funds in place or a financing option. When dealing with long-term financial goals, such as higher education of children, you have the advantage of planning much in advance. Here’s how you can go about the planning.

Start early

A lot of parents have an inclination to send their children abroad for higher education, at least at the post-graduate level, said Suresh Sadagopan, a certified financial planner and founder of Ladder 7 Financial Advisories. “In that case, the planning needs to start really early. They would need a horizon of at least 10-15 years. When we talk of international education at post-graduate level today, most likely it is not going to happen below ₹40 lakh,” he said.

Click here for enlarge

How do you work towards saving that amount? Prakash Praharaj, founder, Max Secure Financial Planners, said that the future cost of a particular course needs to be calculated taking into account at least 10% annual inflation. “Then calculate the current assets and investments accumulated for these goals. Then the remaining gap for the aimed amount is to be filled through monthly SIPs over the years,” he said.

Starting an SIP of ₹5,000-7,000 in an equity fund for 15 years and increasing it by 10-20% each year could help. However, Sadagopan said, given the fact that there are so many ongoing expenses these days, including other loans, it becomes difficult for parents to put aside a huge amount for the child’s post-graduation alone.

Consider taking loan

Even if you have been working on creating a higher education corpus, you need to consider taking an education loan. At present, the total expenses for higher education abroad could be in the range of ₹1 crore per child, Sadagopan said.

“A realistic thing that parents need to realise is that the child’s higher education is not their only goal. Retirement is also an important goal and they need to be aware of the fact that you can get a loan for all other requirements but not for retirement,” he said.

Own funds versus loan

But if someone has already accumulated the required amount, why should another repayment burden be taken on? The answer lies in two things, Praharaj said. “A cost benefit analysis suggests that taking an education loan and keeping the accumulated amount invested works in your favour. Moreover, it also helps in developing a sense of responsibility in the student. The realisation that a repayment has to be done by them keeps them focussed,” he said.

The math of keeping your accumulated savings invested and taking an education loan instead suggests that taking a loan results in significant benefits. For instance, if ₹1 crore is kept invested and an education loan for the same amount is taken, at the end of nine years, including the repayment holiday on the education loan, the net benefit could be around ₹87 lakh (see graph).

This includes the tax saved on repayment of loan. Borrowers of education loans can claim deduction on the interest paid, though not on the principal amount. Also, unlike in home loans, there is no limit to the amount that can be claimed as deduction.

Sadagopan said it is better that the parents keep the money with themselves and let the child take the loan. “In future if the child is struggling to find a job and pay back, you can step in to help at that point,” he said.

[“Source-livemint”]

Paradise Papers: Seven Steps Modi Must Take Against Black Money

Workers wait for a cargo ship to beach at Mundra Port in Gujarat April 2, 2014. Credit: Reuters/Amit Dave

The ‘Paradise Papers’ expose carried out by the Indian Express in collaboration with a German newspaper and the International Consortium of Journalists (ICIJ) once again reveals the extent of the black money menace and the lack of political will to take it on. By now it is clear that the Narendra Modi government that rode to power on widespread popular anger against corruption and black money has let the people down and is actively collaborating in covering up rather than uncovering black money. In this context, celebrating ‘Anti-Black Money Day’ on the anniversary of demonetisation is nothing but a cruel joke on the people of this country.

There is a set pattern by now. Instead of taking proactive and concrete action, the government reacts only to leaks that come out from time to time. Whether it is the leaks about accounts in Liechtenstein’s banks or in HSBC bank or the Panama Papers or Paradise Papers, every time the government defends its own people and says that it has set up some task force or the other. Thereafter, we don’t know what happens. We have not seen any details of any accounts of Indians abroad obtained by the government on its own proactively or any amount recovered or any culprits jailed. For all big claims of black money caught through demonetisation, we are yet to see any names or lists. Even very specific information on black money given to the government has not led to any prosecution. Since all such exposés name politicians of the ruling party as well as the opposition, there is no concerted public campaign to bring the guilty to the book.

This is a global menace and arguably the biggest challenge to democracy today. The Paradise Papers, and Panama Papers earlier, present another example of how big corporates and the ultra-rich of various countries move their money to tax havens and out of their countries through shell companies and trusts created for this purpose. Siphoning off funds of corporations to tax havens in this manner is today arguably the biggest business in the world, involving amounts in excess of $100 billion a year. It is a malaise which lies at the root of corruption, black money, income inequalities and the continuing hold of corrupt politicians and their parties over the levers of power through this illicit money.

These two exposés reveal a standard modus operandi. In most cases, the money is the product of siphoned off funds from domestic companies by over-invoicing and under-invoicing through intermediary shell companies. Siphoning out of huge funds leads to non-performing assets (NPAs) since most of these companies take loans from public sector banks on the basis of over-invoiced costs, as the Adani, Essar as well as Sterling cases show. This also leads to the defrauding or cheating of electricity consumers by higher tariffs imposed upon them, as well as cheating of these public companies by their promoters. This is why we see this phenomenon of companies like those of Vijay Mallya going into bankruptcy, while the promoters manage to have huge assets, mostly abroad. Some of these funds could also be cases of tax evasion and not necessarily siphoning out by over-invoicing and under-invoicing. However, hardly any part of it is likely to be legitimate or above-board, because there was no reason to park it in tax havens. And it should have been declared upfront to the authorities.

This phenomenon is widely used by large corporates, and known and understood by the politicians and bureaucrats, and by this government. This device has been transparently visible in a number of big cases investigated recently by the Directorate of Revenue Intelligence, Income Tax Department, the CBI and the Enforcement Directorate. Unfortunately, as the following cases show, the government has not taken any effective action.

The Modi government’s failure to tackle black money is quire evident from some of these cases:

1. Sterling Biotech: More than Rs. 5,000 crore allegedly siphoned through over-invoicing and under-invoicing

On June 28, 2011, the Income Tax Department conducted a search and seizure under Section 132 of the Income Tax Act covering 25 premises of the Gujarat-based Sterling Biotech and Sandesara Group of Companies.

During the raid, certain incriminating documentary evidence was found and seized from the premises of the group at Mumbai and Vadodara. As per the FIR, a “Diary 2011” was found from the company premises during a raid, which detailed the monthly payouts to the accused income tax officials and several police officials and politicians in Gujarat. The FIR states that:

“The Documents seized revealed that the Sandesara group has been acting as a depository for receiving funds on behalf of persons including public servants and for further delivery to them at the place of convenience. The evidence collected by the Income Tax Department showed corruption of various public servants including three senior IRS officers”. More than 5000 crores were found to have been loaded by this company through over invoicing and under invoicing and more than 74 accounts were opened in foreign jurisdictions particularly tax havens. (FIR dated 25.10.2017 registered by CBI)

The Modi government, however, promoted Rakesh Asthana and appointed him as special director in the CBI despite the fact that his name figures in the list of persons who have received the payment and also despite the fact that the CBI director had strongly opposed his promotion citing the ‘integrity clause’ requirement.

A second, more incriminating FIR was lodged by the CBI on October 25, 2017 against the Sandesara Group company Sterling Biotech Limited, its directors, chartered accountant and the then director of Andhra Bank for allegedly cheating public sector banks of Rs 5,383 crore. The FIR alleges that the Sterling Biotech group companies availed of more than Rs 5,000 crore in loans from State Bank, Andhra Bank and other public sector banks, which turned into non-performing assets. The CBI has alleged that the group was laundering money through a circuitous route and indulged in insider trading. The FIR states that the directors falsified the records of the company related to production, turnover and investment in capital assets using various India-based entities and entities situated abroad. On the basis of these false and fabricated documents, manipulated balance sheets were prepared to induce the banks to sanction higher amounts of loans, which were later diverted for personal purposes.

The CBI has alleged that the company even falsely represented its market capitalisation. For this, the CBI says, “the shares in India and abroad in the names of non-promoters were in fact held by the directors themselves which were concealed from the banks with the dishonest intent to cheat them.” According to the CBI, manipulations were done in reporting turnover, investment in capital goods and taxes to be paid on the turnover. The bogus turnover was in turn arrived at through bogus sales to benami companies in Dubai and India and inflated export bills. (FIR dated 25.10.2017 registered by CBI)

2. DRI investigations of Adani Power and Essar

Indian power companies directly import the coal/equipment from the OEMs (Original Equipment Manufacturers), based mostly in China. The foreign intermediary company is a wholly controlled/owned subsidiary of these Indian companies, set up solely for the purpose of generating two sets of invoices for such imports. The invoices generated by the OEMs on the intermediary company reflect the actual price of the imports. The invoices generated by the intermediary company on the Indian companies can be inflated almost to the extent of 400%. The amount of over-valuation is the illegal profit generated by the promoters of the Indian companies, in the garb of costs, which is siphoned out by their subsidiary intermediary foreign companies, into accounts owned by the promoters situated mostly in tax havens.

Artificial over-invoicing of coal and power equipment by such companies is a practice adversely impacting millions of consumers in the form of higher tariffs since the increase in the inflated costs of coal/equipment is realised from the consumers in the form of higher electricity tariffs. Further, the share holders of such power generating companies have been cheated of their rightful dividends since these companies artificially reduce profits by showing higher costs. Moreover, the loans issued by banks for the purpose of imports, are used to disburse the loan amount to foreign intermediaries, in the garb of inflated invoices, for generation of unaccounted profit. This is a major reason for the alarming growth of non-performing assets in the banking sector. The Income Tax Department is also unable to tax huge profits since the amount is absorbed by the foreign intermediary company, incorporated in tax havens such as UAE and Mauritius, leading to the evasion of tax of thousands of crores of rupees.

For more than three years since May 2014, the DRI sat over this matter, after its initial show cause notices to various companies which detailed the entire modus operandi of over invoicing through shell companies and money laundering to tax haven accounts owned by the relatives of the promoters. However, after The Guardianpublisheda detailed and very embarrassing story on Adani, the adjudicating officer of the DRI passed an order saying that this does not amount to over-invoicing, citing some untenable reasons.

In March 2016, the DRI issued an alert that about 30 power generating companies have been indulging in artificial over-invoicing of coal which is being imported from Indonesia. The DRI alert said that this is being done for two objectives: “(i) siphoning-off money abroad and (ii) to avail higher power tariff compensation based on artificially inflated cost of the imported coal.” (DRI alert circular dated 30.03.2016). However, no action has been taken despite the passage of more than one and a half years. No show-cause notice has also been issued so far to major companies like Adani etc mentioned in that note.

3. Complaint against Mukesh Ambani

The Indian high commission in Singapore made a starting disclosure to the government of India in a letter dated August 31, 2011. The high commission stated that Rs 6,530 crores have come into India from Bio Matrix Marketing Ltd., a one room company in Singapore that does not do any business. It was pointed out that this is a company with no assets, no equity and does not file an income tax returns in Singapore claiming to be a small company. Yet, the huge investment by this company of Rs 6530 crores is the single biggest FDI into India from Singapore. The high commission had stated that all this money has gone into the Reliance group of companies in India with the major chunk going to Reliance Gas Transportation Infrastructure Ltd, which is a company 100% owned by Mukesh Ambani personally.

We had, therefore, made a detailed complaint on July 8, 2014 to the SIT on Black Money but still not action has been taken.

4. Complaint against Anil Ambani

The CBI in its chargesheet in the 2G scam had confirmed that Swan Telecom was set-up by Reliance Telecom owned by Anil Ambani. We all know that as consideration of the transfer of Swan Telecom to Balwa and Goenka, they could not have directly transferred the money to Anil Ambani companies since that would have exposed the fact that Swan Telecom was owned by Reliance. Hence a circuitous route had to be followed. We had therefore found and complained to the SIT on Black Money on July 18, 2014 that M/s AAA & Sons Enterprises (an Anil Ambani company) received a huge sum of $750 million from a company, EMITS Singapore in December 2007, which was later transferred to other Anil Ambani-owned Reliance group companies. The entire amount transferred by EMITS Singapore was not used for any project by AAA & Sons but only transferred to other group companies. Though this was also an apparent case of taking funds abroad and then bringing them back to India circuitously, no action was taken even on this complaint, which was backed by all documentary evidence.

5. Finance Act amendments

Instead of taking action on such clear cases of siphoning of funds through over invoicing and instead of using that money and bringing the culprits to book, the Modi government has made many retrograde amendments to the laws dealing with political funding in order to allow foreign companies and Indian corporates to donate unlimited anonymous funds to political parties.

Retrograde amendments have been made by the government through the Finance Act, 2016 and Finance Act, 2017, both passed illegally as money bills. These amendments have opened the floodgates to unlimited corporate donations to political parties and anonymous financing by Indian as well as foreign companies which can have serious repercussions on the Indian democracy. These amendments have removed the caps on campaign donations by companies and have legalised anonymous donations.

The Finance Act of 2017 has introduced the use of electoral bonds which is exempt from disclosure, opening the door to unchecked, unknown funding to political parties. The Finance Act, 2016 has also amended the Foreign Contribution Regulation Act (FCRA), 2010, to allow foreign companies with subsidiaries in India to fund political parties in India, effectively, exposing Indian politics and democracy to international lobbyists who may want to further their agenda. These Amendments pose a serious danger to the autonomy of the country and are bound to adversely affect electoral transparency, encourage corrupt practices in politics and have made the unholy nexus between politics and corporate houses more opaque and treacherous and is bound to be misused by special interest groups and corporate lobbyists.

Seven demands

If this government is at all serious about the menace of black money, it should take some immediate steps and carry out some long-term changes in the legal framework instead of sham exercises like ‘Anti Black Money Day’.

One of us (Prashant Bhushan) had, in fact, written a letter to Prime Minister Modi as far back on June 23, 2014 pointing out the steps that need to be taken to tackle black money.  The letter had suggested the following changes in the legal frameworkFirst, a new law, or an amendment to an existing law (such as the Prevention of Money Laundering Act), requiring all Indian citizens to disclose all their assets and liabilities, including their stakes in companies or trusts registered abroad, needs to be introduced. Second, any income or assets not disclosed in the required form would be deemed to be “proceeds of crime”, and included as ‘predicate offences’ defined under the UNCAC. Third, instruments such as participatory notes and anonymous investments by funds or shell companies need to be disallowed with immediate effect.  In the case of investments made in the name of a company or a trust, the major stakeholders of the company, or the trustees of the trust, must be determined and duly recorded, before the investment is allowed.

We therefore demand that:

  1. Specific and immediate action must be taken in all the cases detailed above.
  2. The government must disclose full details of the action it has taken on black money by way of recovering any money from named individuals as well as prosecutions of named individuals.
  3. Instead of making vague claims about the unearthing of black money through demonetisation, the government should disclose the details and make public all the cash deposits made by all MPs, MLAs or political parties and their office bearers between November 8 and December 31, 2016.
  4. We understand that the SIT on Black Money has also made several recommendations to the government but in most cases these recommendations have not been implemented. The government must therefore place the reports and recommendations of The SIT before the people as well as the action taken by it on those.
  5. The government must rollback the retrograde amendments made in the finance act of 2016 and 2017 relating to the FCRA as well as the funding of political parties, including electoral bonds.
  6. A law must be passed on the lines suggested above requiring all citizens to declare their foreign assets and providing for confiscation of all undisclosed assets.
  7. Rakesh Asthana must be removed from the CBI forthwith as suggested by the CBI director.

Source:-thewire.