Why in news?

Seven Rajya Sabha MPs from the Aam Aadmi Party—including Raghav Chadha and Harbhajan Singh—have joined the Bharatiya Janata Party, sharply reducing AAP’s strength in the Upper House to just three members.

This shift has significant legal implication: the defecting MPs may face action under the anti-defection law.

What’s in Today’s Article?

• Anti-Defection Law in India: Key Provisions and Evolution
• Disqualification Debate After AAP MPs’ Defection
• Anti-Defection Law: Consequences if Two-Thirds Threshold Is Not Met

Anti-Defection Law in India: Key Provisions and Criticism

• The anti-defection law is contained in the Tenth Schedule, added by the 52nd Constitutional Amendment Act 1985 to curb political defections and ensure stability in legislatures.
• Changes Introduced by the 91st Amendment (2003)
  • The 91st Constitutional Amendment Act 2003 strengthened the law in two major ways:
    • Stricter Merger Rule - At least two-thirds of a party’s members in a House must defect together to qualify as a valid merger. If fewer members switch, they face disqualification proceeding. This replaced the earlier rule that allowed a one-third split, which had been widely misused.
    • Cap on Council of Ministers - Total number of ministers capped at 15% of the strength of Lok Sabha or State Assembly. Minimum of 12 ministers allowed in smaller states. This aimed to reduce political inducements and office-based defections.
  • Removal of the ‘Split’ Provision - The earlier provision recognising a one-third split as legitimate was removed because it enabled frequent defections. The new two-thirds rule makes switching parties more difficult and accountable.
• Flipsides of the Anti-Defection Law: Erosion of Legislative Independence
  • While the anti-defection law was designed to curb political instability and horse-trading, it has significantly restricted the autonomy of legislators.
  • Members risk disqualification even for defying the party whip, limiting their ability to represent constituency interests or independent judgment.
  • This has led to increased centralisation of power within party leadership, making elected representatives largely subordinate to party decisions rather than accountable to voters.

Disqualification Debate After AAP MPs’ Defection

• The defection of seven Rajya Sabha MPs from the Aam Aadmi Party to the Bharatiya Janata Party has triggered a legal debate under the anti-defection law.
• One view suggests that no disqualification may occur if the Rajya Sabha Chairman accepts the shift as a valid merger, since more than two-thirds of AAP’s MPs in the House have joined the BJP—an exception allowed under the Tenth Schedule.
• However, others argue that the merger provision applies to the entire political party, not just MPs in one House.
• This implies that for the exception to hold, the party leadership—potentially including Arvind Kejriwal—would also need to formally merge with the BJP.
• Without this, the MPs could still face disqualification petitions, which any member can file before the Chairman.
• Role of the Rajya Sabha Chairman
  • Until a ruling is made, the defecting MPs will officially remain AAP members, even if they functionally align with the BJP.
  • The Chairman has the authority to either:
    • Accept the move as a merger, protecting them from disqualification, or
    • Reject it and proceed with disqualification proceedings
  • The decision can subsequently be challenged in court.
• Impact on Voting and Parliamentary Dynamics
  • During the interim period, a constitutional anomaly arises: although technically AAP members, the MPs may vote with the NDA, increasing its effective strength in the Rajya Sabha.
  • AAP can still issue a party whip, and any defiance by the defecting MPs could become separate grounds for disqualification.
  • The Chairman will also decide such cases, adding another layer of uncertainty.
  • The situation highlights legal grey areas in the anti-defection framework, where the final outcome depends on the Chairman’s interpretation of the merger clause and subsequent judicial scrutiny.

Anti-Defection Law: Consequences if Two-Thirds Threshold Is Not Met

• If fewer than two-thirds of members had defected, the rebels would have been liable for disqualification under the Tenth Schedule.
• Any member could petition the Rajya Sabha Chairman to act against them for switching sides or defying the party whip.
• However, the law does not prescribe a time limit for the presiding officer’s decision, allowing delays that can let members continue in office despite being liable for disqualification.
• Judicial review is possible only after the Chairman’s ruling, creating scope for prolonged uncertainty, even though the Supreme Court of India has advised that such cases be decided within a reasonable time.

Why in news?

Anthropic’s new AI model Claude Mythos has triggered global concern due to its advanced capabilities, marking a significant leap over earlier systems.

In India, the issue has gained urgency, with FM Nirmala Sitharaman chairing a high-level meeting over potential threats to the banking sector, and the government engaging directly with Anthropic’s leadership.

Concerns have intensified further with reports that China has developed a similar system, Qihoo 360, capable of identifying software vulnerabilities at scale. While such tools offer breakthroughs in cyber defence, they also raise fears of misuse, cyber risks, and global technological competition.

What’s in Today’s Article?

• About Mythos
• Why Mythos Has Alarmed Policymakers Worldwide?
• Mythos AI in Real-World Testing: Validation of Cybersecurity Risks
• Mythos Breach and Global Fallout: Rising Cybersecurity and Governance Concerns
• India’s AI Policy Reassessment After Mythos Concerns

About Mythos

• Mythos is the latest model in Anthropic’s Claude AI family, currently released only in a limited preview.
• It represents a major leap in artificial intelligence capability, particularly in cybersecurity.
• What sets Mythos apart is its ability to autonomously detect critical vulnerabilities in widely used software and infrastructure at a speed far exceeding human researchers.
• At the same time, it can also fix these vulnerabilities when used defensively—but poses serious risks because it can exploit them if used maliciously, making it a powerful yet potentially dangerous tool.

Why Mythos Has Alarmed Policymakers Worldwide?

• Anthropic claims that Mythos has identified serious flaws across major operating systems and web browsers, including vulnerabilities that had remained undetected for decades.
• The speed and scale of discovery have raised immediate global concerns.
• Compared to its predecessor Opus 4.6—which had near-zero success in exploit development—Mythos demonstrates a dramatic leap.
• It can convert vulnerabilities into working exploits at a far higher success rate, placing it in an entirely different capability class.
• Ease of Use and Automation Risks
  • A major concern is accessibility: even non-experts can use Mythos to identify and exploit vulnerabilities.
  • Reports indicate that engineers without formal cybersecurity training could generate fully functional exploits overnight, highlighting the risks of widespread misuse.
• Dual-Use Nature: Defence vs Exploitation
  • Mythos embodies a classic dual-use dilemma—the same capabilities that allow it to fix vulnerabilities also enable it to exploit them effectively, amplifying cybersecurity threats if deployed maliciously.
  • Anthropic noted that these powerful features were not explicitly programmed, but emerged from improvements in reasoning, coding, and autonomy.
  • This unpredictability has heightened concerns about control and unintended consequences, prompting the company to pause wider release.

Mythos AI in Real-World Testing: Validation of Cybersecurity Risks

• Strong Performance in Cybersecurity Benchmarks - Independent testing found that Mythos solved 73% of expert-level cybersecurity challenges, far outperforming earlier AI models.
• Improved Reasoning and Problem-Solving Ability - Mythos showed the ability to sustain performance across complex, multi-layered problems, indicating significant improvements in reasoning, planning, and technical depth.
• Emergence of “Agentic” Behaviour - A key concern is Mythos’s agentic capability—its ability to autonomously execute multi-step attack sequences. Instead of acting as a simple tool, it can string together actions into a coherent attack pathway, raising risks of automation in cyberattacks.
• Lowering the Barrier for Cybercrime - The model’s ability to handle complex operations suggests that even less-skilled actors could conduct sophisticated cyberattacks, significantly increasing global cybersecurity risks.

Mythos Breach and Global Fallout: Rising Cybersecurity and Governance Concerns

• Controlled Rollout and Defensive Initiatives - Even while withholding full release, Anthropic launched Project Glasswing to help firms strengthen cyber defences using Mythos. Major players like Apple, Nvidia, Linux Foundation, CrowdStrike, and Google are part of this effort.
• Leak Raises Immediate Alarm - Despite restricted access, Mythos was reportedly accessed by users via a private Discord channel, raising serious concerns about containment and security breaches of highly sensitive AI systems.
• Need for Global AI Governance - The incident highlights the urgent need for international coordination on AI regulation. Experts stress that without common standards and guardrails, controlling such powerful technologies will be extremely difficult across jurisdictions.

India’s AI Policy Reassessment After Mythos Concerns

• Following concerns over Mythos, Union Finance Minister Nirmala Sitharaman directed banks to maintain a high degree of vigilance and develop coordinated mechanisms to counter emerging cybersecurity threats.
• The Mythos episode is prompting India to recalibrate its AI strategy, balancing innovation with stronger governance, coordination, and risk mitigation frameworks.
• Shift from Light-Touch Regulation
  • India had so far followed a light-touch approach to AI regulation, focusing on innovation and economic growth.
  • However, the risks highlighted by Mythos may push policymakers toward a more cautious and security-oriented framework.
• Creation of Institutional Mechanisms
  • The Ministry of Electronics and Information Technology has set up:
    • AI Governance and Economic Group: An inter-ministerial body to coordinate AI policy.
    • Technology and Policy Expert Committee: To provide technical and regulatory guidance.

Why in News?

• The Reserve Bank of India (RBI) has cancelled the banking licence of Paytm Payments Bank Limited (PPBL) with immediate effect, more than two years after initially restricting it from accepting new deposits.
• The RBI will approach the High Court to wind up the bank's operations, ensuring depositor interests are protected through a structured process.
• This case has become a landmark instance of regulatory enforcement in India's fintech and digital payments sector.

What’s in Today’s Article?

• What Are Payments Banks?
• Timeline of Regulatory Scrutiny
• Legal Basis for Cancellation
• Impact
• Challenges
• Way Forward
• Conclusion

What Are Payments Banks?

• Payments banks are a unique category of banks introduced by the RBI to promote financial inclusion.
• They operate under tight restrictions, for instance,
  • Can accept deposits only up to ₹2 lakh per customer.
  • Cannot offer loans or credit cards.
  • Primarily serve as platforms for remittances, utility payments, and digital transactions.
• PPBL was founded by One97 Communications (49% stake) and Vijay Shekhar Sharma (51% stake), operating within the larger Paytm ecosystem.

Timeline of Regulatory Scrutiny:

• The beginning of oversight (2018):
  • The RBI conducted an audit of PPBL's customer onboarding processes and found critical gaps in KYC (Know Your Customer) compliance. For example,
    • A single PAN (Permanent Account Number) linked to multiple customer accounts — a red flag for regulatory bypass.
    • Transactions allowed beyond prescribed account limits, raising money laundering concerns.
    • Inconsistent customer identity verification during acquisition.
  • PPBL was directed to halt onboarding of new customers until systems were strengthened.
• New customer ban (2022): The bank was formally directed to stop onboarding new customers from March 11, 2022.
• Financial penalty (2023): The RBI imposed a monetary penalty of ₹5.39 crore for non-compliance with regulatory guidelines.
• Business restrictions (2024): The RBI barred PPBL from accepting deposits, credits, or top-ups in customer accounts, prepaid instruments and wallets, and FASTags and NCMC (National Common Mobility Cards), citing "persistent non-compliances and material supervisory concerns."
• Licence cancelled (2025): The RBI cancelled PPBL's banking licence, invoking provisions of the Banking Regulation (BR) Act, 1949.

Legal Basis for Cancellation:

• The RBI cited the following provisions of the Banking Regulation Act, 1949 -
  • Section 22(3)(c): Management character must not be prejudicial to depositors or public interest.
  • Section 22(3)(e): No public interest served by allowing the bank to continue.
  • Section 22(3)(g): Failure to comply with conditions of the Payments Bank licence.
  • Section 5(b) and Section 6: Prohibited from conducting banking business with immediate effect.
• Key compliance violations: Failure to maintain a "Chinese wall" (operational separation) between PPBL and its group entity, One97 Communications — a critical governance requirement to prevent conflict of interest.

Impact:

• On One97 Communications and the Paytm ecosystem: The regulatory crackdown had cascading consequences -
  • Stock fell 40–50%, reflecting investor panic.
  • Wallet services, merchant settlements, FASTag, and autopay services were disrupted.
  • Paytm was forced to forge emergency partnerships with Axis Bank and Yes Bank for continuity.
  • User and merchant migration to rivals like Google Pay and PhonePe.
  • Increased compliance costs and operational restructuring.
  • Long-term shift towards a leaner, partner-bank-driven business model.
• Broader significance for India:
  • Consumer protection: RBI action demonstrates zero tolerance toward practices harming depositors.
  • Strengthening digital finance: India’s digital payments revolution must rest on strong compliance architecture.
  • Fintech regulation: Innovation cannot bypass prudential norms.
  • Institutional credibility: Shows RBI’s willingness to act against even large, popular market players.

Challenges:

• Regulatory arbitrage risk in the fintech space, where rapid growth often outpaces compliance infrastructure.
• Difficulty in maintaining KYC standards at scale for digital-first banks.
• The tension between financial innovation and depositor protection.
• Risks of group entity entanglement in banking operations, undermining independence.
• Systemic disruption to millions of users dependent on integrated payment ecosystems.

Way Forward:

• This episode reinforces the need for robust compliance frameworks in payments banks before scaling operations.
• It highlights broad supervisory and enforcement powers of the RBI under the BR Act.
• Fintech companies must institutionalise independent compliance functions and maintain strict separation from parent entities.
• Policymakers may re-examine the regulatory framework for payments banks, balancing inclusion goals with governance standards.

Conclusion:

• The cancellation of licence underscores that digital innovation cannot substitute regulatory discipline.
• While fintech firms are central to India’s inclusive growth and cashless economy goals, public trust depends on transparency, governance, and depositor protection.
• The episode reinforces the principle that in banking, compliance is as important as innovation.

Why in News?

• When the Union Budget 2026-27 was presented, a widely held belief was that India had entered a “Goldilocks period” — a phase where economic conditions are ideal — steady growth, low inflation, and low unemployment.
• This phrase, used by the RBI Governor Sanjay Malhotra, suggested that the Indian economy was well-balanced and resilient.
• However, recent developments have challenged this optimism, triggering an important debate: Was India really in a Goldilocks phase, or was the economy weaker than projected?

What’s in Today’s Article?

• Recent Developments
• Understanding the Growth Reality
• Why the “Goldilocks” Narrative May Be Misleading?
• Way Forward
• Conclusion

Recent Developments:

• GDP calculation revision with a new base year (2022-23) revealed that earlier estimates (base year 2011-12) had overstated GDP.
• Global geopolitical instability, especially the US-Iran conflict, raised concerns over oil prices and supply disruptions.
• The Indian rupee weakened further against the US dollar.
• Japan and the UK overtook India in nominal GDP rankings.
• Rising concerns of slower growth with higher inflation (stagflationary risks) emerged.

Understanding the Growth Reality:

• Deceleration in nominal GDP growth:
  • Key trends of nominal GDP (measures output at current prices) - Compounded annual growth rate (CAGR) is just above 10% (2014–2026), while it is around 12.3% (2004–2026), and 9.5% (2019–2026).
  • Interpretation: India’s nominal GDP growth has steadily slowed over time, indicating weakening economic momentum.
• Moderate real GDP growth:
  • Real GDP removes the impact of inflation and better reflects actual output growth. Key trends are a CAGR of above 12% since 2004, 6.2% (2014–2026), and below 5.5% (2019–2026).
  • Interpretation: This growth rate is modest, especially for a developing country aspiring to become a developed nation by 2047.

Why the “Goldilocks” Narrative May Be Misleading?

• The base effect trap:
  • A critical methodological caution, for example, cherry-picking post-COVID years distorts the true picture.
  • The sharp rebound in 2021-22 and 2022-23 reflected recovery from the low base of the 2020 contraction, not genuine structural acceleration.
  • Citing only these figures creates a false goldilocks narrative — misleading both public discourse and policymaking.
• Growth inadequacy for developed nation status:
  • A real GDP growth rate of barely 5.5% over seven years is insufficient for India to achieve Viksit Bharat (Developed India) by 2047.
  • Economists broadly agree that India needs sustained 8–9% real growth annually for such a transformation.
• Weak corporate earnings: Modest GDP growth has directly translated into underwhelming corporate earnings, reducing India's attractiveness to both domestic and foreign investors.
• Negative net FDI and rupee weakness:
  • Net Foreign Direct Investment (FDI) has turned negative, reflecting diminished investor confidence.
  • The resultant capital outflow is a major structural reason for the rupee's depreciation — notably, the rupee is weakening even as the dollar itself weakens against most global currencies, signalling an India-specific confidence deficit.
• GDP revision downgrades India's economic size:
  • The new GDP series has effectively shrunk India's measured economy, meaning India is a smaller economy in absolute terms than previously believed.
  • This is a significant setback to narratives around India's imminent rise to the world's third-largest economy.
• Energy import vulnerability: India's near-total dependence on energy imports via the Strait of Hormuz makes it acutely vulnerable to West Asian geopolitical instability, threatening both the current account and inflation management.

Way Forward:

• Structural reforms: Targeting manufacturing competitiveness, labour markets, and land acquisition are urgently needed to meaningfully lift the sustainable growth rate.
• Improving the investment climate: Through regulatory predictability and ease of doing business (EoDB) is essential to reversing the negative FDI trend.
• Energy diversification: Accelerating the transition to renewables and diversifying import sources — can reduce geopolitical exposure.
• Honest economic assessment by policymakers: Avoiding base-effect-driven optimism is necessary for designing credible long-term strategy.
• Transparent GDP methodology: And timely data revisions should be institutionalised to ensure policy decisions rest on accurate ground realities.

Conclusion:

• The recent data suggests that India’s economy may not have been in a true Goldilocks phase, but rather in a period where headline numbers masked deeper structural slowdowns.
• For India to realise its long-term ambitions, policymakers must move beyond celebratory narratives and undertake hard reforms that generate sustained growth, jobs, investment, and resilience.
• Only then can India transition from a large economy to a genuinely prosperous one.

Context

• The foundation of India’s democracy rests on the principle of universal adult franchise, envisioned by B. R. Ambedkar as a pathway from political equality to economic justice.
• However, this vision remains unfulfilled. Instead, structural inequality, marginalisation, and democratic exclusion have intensified, particularly in urban India.
• Groups such as migrants, urban poor, minorities, and unorganised workers face growing barriers to political participation, weakening the democratic framework.

The Growing Reality of Urban Disenfranchisement

• Urban India has experienced a steady erosion of voting rights due to bureaucratic processes and institutional barriers.
• The Special Intensive Revision (SIR) of electoral rolls has amplified concerns regarding voter exclusion and accessibility.
• The principle that the right to vote should not depend on formal housing or rigid documentation, as emphasised by T. N. Seshan, is increasingly undermined.
• A significant proportion of urban residents, especially those in slums and informal settlements, remain excluded from voter lists.
• With nearly 28% of the population below 18 years, the remaining eligible population should ideally be enfranchised.
• However, according to the World Bank, about 40% of urban residents live in slums, highlighting the scale of disenfranchisement.
• This creates a paradox where those most affected by governance are least represented in electoral processes.

Consequences of Urban Disenfranchisement

• Threats to Electoral Integrity
  • The integrity of elections is further challenged by concerns around voter secrecy.
  • The use of electronic voting machines (EVMs), while efficient, allows booth-level data analysis.
  • In smaller polling stations, voting patterns can be inferred, compromising confidentiality and exposing vulnerable groups to potential pressure.
  • This weakens the principle of free and fair elections and raises questions about electoral transparency.
• Disproportionate Impact on the Urban Poor
  • The burden of disenfranchisement falls disproportionately on Dalits, minorities, and economically weaker sections.
  • High rates of voter deletions have been observed across major urban centres, reflecting systemic vulnerabilities.
  • Factors such as high mobility, lack of permanent residence, and limited access to documentation create barriers to both registration and retention in voter rolls.
  • This results in a dual challenge: difficulty in enrolling as voters and a high risk of deletion from electoral rolls.
  • The exclusion of these groups reduces their political voice and reinforces cycles of social inequality and economic marginalisation.

Bureaucratic Barriers and Structural Exclusion

• The reliance on strict documentation, including proof of long-term residence, creates administrative hurdles that many urban residents cannot overcome.
• In a rapidly urbanising society driven by migration, such requirements are impractical and exclusionary.
• The system prioritises formal identity and residential stability, conditions rarely met by the urban poor.
• Instead of facilitating participation, these mechanisms discourage engagement, leading to reduced voter participation.
• This reflects a shift away from the inclusive spirit of democracy toward a system shaped by institutional rigidity.

Selective Filtration and Democratic Concerns

• A critical concern is the emergence of selective filtration within the electorate.
• The exclusion of certain populations, whether due to administrative bias or systemic design, raises questions about political neutrality.
• Groups perceived as inconvenient or less aligned with dominant interest risk being disproportionately excluded.
• Such practices undermine representative democracy by narrowing the electorate and distorting electoral outcomes.
• The weakening of inclusive participation threatens the legitimacy of governance and erodes trust in democratic institutions.

Conclusion

• Democratic rights, particularly the right to vote, are increasingly shaped by bureaucratic exclusion and structural constraints.
• Addressing this crisis requires simplifying registration processes, recognising the realities of urban life, and ensuring inclusive participation.
• Strengthening electoral access, safeguarding voter rights, and promoting institutional accountability are essential to restoring democratic integrity.
• Only then can the vision of political equality translating into economic justice be meaningfully realised.