HYDROCARBONS BIDDING IN INDIA: NELP & PRE …pezzottaitejournals.net/pezzottaite/images/ISSUES/...Cauvery, Assam Arakan Fold Belt and Rajasthan Category II ( 3 Basins) 1,64,000 Known

Volume 4, Number 1, January – March’ 2015

ISSN (Print):2319-9059, (Online):2319-9067

PEZZOTTAITE JOURNALS SJIF (2012): 3.946, SJIF (2013): 5.017

International Journal of Trade & Global Business Perspectives© Pezzottaite Journals. 1473 |P a g e

HYDROCARBONS BIDDING IN INDIA: NELP & PRE-NELP

Vineet Sarawagi1 Manmohan Krishna Sarawagi2 Dr. Awadesh Mishra3 Dr. Ashok Kumar Poddar4

ABSTRACT

Consumption of Hydrocarbons in India is much higher than production of the same, which is leading to Import of Oil and thus

contributing a lot to the Fiscal Deficit of the Nation. We have been attempting for liberalization of Exploration & Exploitation

of hydrocarbons by various bidding rounds since 1980, with changes in the methodologies and process with time to time.

However, we have not been able to work much on our methodology of working as being conservative and a nature of not

taking risks, leading to lot of Red-Tapism and restrictions in awarding these blocks to various private players. Last biddings

for Blocks happened in 2012 only, and the reason for not conducting further bidding is that we have kept it as back burner and

are not being able to formulate the tender documents for the bidding to take place.

KEYWORDS

PSC, NELP, Pre-NELP, Hydrocarbons, Oil etc.

INTRODUCTION

The Exploration of Hydrocarbons commenced in India in 1886 in Upper Assam, when an oil well was drilled by Mr. Good

enough from Mckilop Stewart Co. and struck oil. The first commercial discovery was however in 1889 in Digboi. Since then, we

have been looking for Oil in India and have entered into various phases of Oil discovery and exploration phases. Exploratory

drilling was initiated in 1957 with drilling of 1st well in Jawamukhi-1 in Himachal Pradesh. Offshore exploration was initiated in

1962 in the Gulf of Cambay through experimental seismic surveys. Oil and Natural Gas Directorate (ONGD) was set up in the

end of 1955 and Directorate General of Hydrocarbons (DGH) was set up in 1993, both with an objective of development and

regulatory purposes for exploration and exploitation of hydrocarbons in India.

India’s sedimentary basin is comprised of 26 sedimentary basins and deep-water basins with an area of approximately 3.14

Million Sq. km. Today, the unexplored areas have come down to 15%, from 50% in 1995-96.

Table-1: Categories of Indian Sedimentary Basins

Type of Basins Area

(Sq. KM)

Hydrocarbons Prospectively Basins / Region

Category I

( 7 Basins) 5,18,500 Established commercial production

Cambay, Assam Shelf, Mumbai

offshore, Krishna Godavari,

Cauvery, Assam Arakan Fold Belt

and Rajasthan

Category II

( 3 Basins) 1,64,000

Known accumulation of hydrocarbons but

no commercial production as yet Kutch, Mahanadi-NEC & Andaman Nicobar

Category III

( 6 Basins) 6,41,000

Indicated hydrocarbon shows that are

considered

geologically Prospectively

Himalayan Foreland, Ganga, Vindhyan,

Saurashtra, Kerala, Konkan-Lakshadweep &

Bengal

Category IV

(10 basins) 4,61,200

Uncertain potential, which may be

prospective by analogy with similar basins

in the world.

Karewa, Spiti-Zanskar, Satpura South

Rewa-Damodar, Narmada, Decan Syneclise,

Bhima-Kaladgi, Cuddapah, Pranhita-Godavari,

Bastar, Chhattisgarh

Deep Water 13,50,000

East & west cost from 400 m water depth to

EEZ

Total 31,34,700

Sources: Directorate General of Hydrocarbons (DGH)

Our consumption has been keep growing, but the production has been at a very lethargic pace.

1Manager, Adhunik Power and Natural Resources Limited; Ph.D. Scholar, Lalit Narayan Mithila University, Bihar, India,

[email protected] 2Research Scholar, Lalit Narayan Mithila University, Bihar, India, [email protected] 3Lecturer, Department of Commerce of MLSM College, L.N.M.U., Bihar, India, [email protected] 4Assistant Professor, Department of Commerce, C. M. College, L.N.M.U., Bihar, India, [email protected]

mailto:[email protected]








The sector has been highly regulated and thus is not being able to attract investments required for the exploration work leading

very low production. Until now 1.06 Million square kilometers, area is under active petroleum Exploration Licenses in 18 basins

by national oil companies and Private / Joint Venture companies. A total of 35601 Sq. Km area is under Mining Lease. Operations

are being carried out by National and Private Oil companies in 597 concessions, of which 259 are under Petroleum Exploration

License (PEL) and 338 are under Mining Lease (ML). We have been striving since long and have been in the process of granting

areas for lease, but still the same have not seen the success it was supposed to see.

Figure-1: India: Oil Consumption verses Production

Sources: Authors Compilation from BP Statistical Review

Pre-NELP Period

During India’s first round of exploration in 1980s, total 32 blocks were offered, but only 4 bids were received and out of the same

only one agreement were signed. Various national and international factors like, opening of offshore acreage to international

companies by China, falling oil prices, etc. lead to such poor response. The result was poorer in the 2nd round, wherein

government has offered 50 offshore and onshore blocks, but no bids were received. During 3rd round of exploration, the terms &

conditions were changed, royalty charge of 15% was withdrawn and Corporate Tax was reduced from 56.375% to 50%. 13 bids

were received for 27 blocks and 4 contracts were signed for exploration in offshore east coast. In 4th round of bidding for

exploration, 24 bids were received by various national/international entities against 72 blocks on offer and finally 5 contracts were

signed. Exploration round of biddings was started in 1992 and more than 15 blocks were signed by 1994. In 1995, JV exploration

round started, wherein GoI offered blocks under license to ONGC and OIL, out of which 2 contracts of JV were signed.

The response during all these bidding rounds was comparatively poor and there were various reasons contributing to the same.

The blocks offered were under high-risk areas and much of the acreages were offered because it had already been unsuccessfully

explored by Indian government entities. Blocks with high prospects were not given in bidding process; there had been incidents

wherein blocks advertised for bidding were withdrawn at the instance of National Oil Companies (NOCs). The size of various

blocks were small and not of the size as in international markets. The data of the maximum of the acreage were either not proper

or not available, leading analysis to be very tough and thus leading bidders with high risk in bidding. Even the data available were

not given easy access to bidders thereby making them tough to analyze any block. Taxes were very high and there were very less

options for pass-on of the benefits to be ultimate private players. Even the data Even the Production Sharing Contracts (PSCs) use

to go under high Red Tapism and this leads to unnecessary delays. Signing of contracts and award of licenses use to take years too

materialized on grounds and there were incidences of difference in opinion between the central and state governments, because of

exploration license being issued by state authority. Adding to it, there were various teams at various stages, team involved at

negotiation process of sales arrangements normally used to be different from the team negotiating the PSCs. These are the

problems of todays too.

New Exploration Licensing Policy (NELP)

New Exploration Licensing Policy (NELP) finally took shape at the beginning of 1999 wherein various attractive fiscal and

contractual terms were made.

NELP I was announced in 1999 and for the first time, Deep water blocks were put on offer. For 27 blocks offered, 45 bids were

received and finally, 24 PSCs were signed, with 5 foreign players being successful out of 10. NELP II was launched soon in 2000

itself and biggest achievement was of closure of bids in 3-4 months against 7-8 months taken during NELP I. Bids were received

for approximately 90% of the blocks offered compared to approximately only 50% in NELP I. finally 24 PSCs were signed in

NELP II expecting an investment of more than Rs. 5,000 Cr. in phases.

0

20

40

60

80

100

120

140

160

180

200





NELP III was announced in 2002 for 27 blocks and 24 bids were received with 18 blocks having multiple bids, which was about

78% of the blocks offered compared to 50% in NELP I & II. Income tax rates for foreign companies were reduced from 48% to

40%. Response from foreign companies was poor with only 4 companies participating in the NELP III tendering process. 23 PSCs

were signed leading to award of more than 2 lakhs Sq. km. Next round of bidding, i.e. NELP IV started in 2003 offering 24

blocks, wherein 21 blocks received 44 bids and finally PSCs were signed for 20 blocks. Surcharge on Income Tax for companies

were abolished and higher weightage were given for technical and capabilities.

NELP V was launched in 2005 offering 20 blocks receiving 69 bids from national and international entities. The Process was

made more transparent, weightage for all bid evaluation criteria and sub-criteria was made public and access to data were more

simplified and was made more available. 26 foreign companies participated in the tendering process, which was highest until that

time, all 20 blocks were awarded, and accordingly PSC were signed. NELP VI was launched in 2007 offering 55 blocks receiving

165 bids from various bidders for 52 blocks and PSCs were signed for all 52 blocks for an acreage of more than 3 lakhs sq. km.

NELP VII was launched in 2008 offering 57 blocks receiving highest bids ever with total of 181 bids from various bidders for 45

blocks and PSCs were signed for 41 blocks.

NELP VIII was launched in 2010 offering 70 blocks receiving lesser number of bids limited to 76 bids only from various bidders

for very less number of blocks limiting to just 36 blocks and PSCs were signed for 32 blocks. NELP IX was launched in 2012

offering 34 blocks receiving 74 bids only from various bidders for 33 blocks and PSCs were signed only for 19 blocks.

Figure-2: Exploration Blocks awarded under 9 rounds of NELP

Sources: Authors Compilation from BP Statistical Review

NELP have increase under exploration from 11% of the Sedimentary Basins area to more than 70%, which is intended to be

increased to more than 90% in forthcoming NELP bidding, i.e. in NELP X. No further bidding has been launched until date.

Blocks to be offered in NELP X are already marked by Ministry of Petroleum and Natural Gases (MoPNG), total 46 blocks are

being offered under NELP X in 13 perspective sedimentary basins. Considering the requirement of more liberalization and taking

concerns of domestic and international Operators PSC is being revised by MoPNG, wherein, it is being considered as back burner

and is the concerned departments are taking longer time to finalize the model document, which is unnecessarily delaying the

process of bidding.

CONCLUSION

India has tried to be in the exploration of Oil & Natural Gases domestically, but, because of strict government norms, those

endeavors have failed and have not seen proper daylight until date. We are still to realize from our experiences. There are always

penalties on the developers for not completing/starting the work in time, but there had never been any penalty on the

approving/awarding authority (predominantly various government authorities). Therefore, in order to get the hydrocarbons in

India through its own production, we need to invest more into Exploration and Data generation. The same can be done by

liberalizing the process and giving an easy steps and fast solution.

REFERENCES

1. Anoruo, E., & Mustafa, M. (2007). An empirical investigation into the relation of oil to stock market prices. North

American Journal of Finance and Banking Research, 1(1), 22-36.

0

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60

80

100

120

140

160

180

200

NELP I NELP II NELP III NELP IV NELP V NELP VI NELP VII NELP VIII NELP IX

No

. o

f B

Lo

ck

s

No. of Blocks Offered No. of Blocks Bid for No. of Blocks awarded

No. of PSCs signed No. of Bids Received





2. (2014, June). BP Statistical Review of World Energy.

3. Ciner, C. (2001). Energy Shocks and Financial Markets: Nonlinear Linkages. Studies in Non- Linear Dynamics and

Econometrics, 5, 203-212.

4. Directorate General of Hydrocarbons. Retrieved from http://www.dghindia.org/Index.aspx

5. Kilian, L. (2008). Exogenous Oil Supply Shocks: How Big Are They and How Much Do They Matter for the US

Economy? Review of Economics and Statistics, 90, 216-240.

6. Pandey, Radhika. (2005). Macroeconomic Implications of Oil Price Hike (Working paper series). National Law

University.

7. Review of E&P Licensing Policy. Petrofed. Retrieved from http://petrofed.winwinhosting.net/upload/Part3.pdf

8. Retrieved from http://petroleum.nic.in/docs/basins.pdf

9. Retrieved from

http://www.ukessays.com/essays/environmental-sciences/sedimentary-basins-and-offered-blocks-environm...

10. Retrieved from http://mpra.ub.uni-muenchen.de/35334/

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http://www.ukessays.com/essays/environmental-sciences/indian-petroleum-and-natural-gas-resources-env...

12. Retrieved from http://www.dghindia.org/EandPAcreages.aspx

13. Retrieved from

http://defence.pk/threads/india%E2%80%99s-energy-security-role-of-offshore-helicopter-operations.291...

14. Retrieved from http://www.moneycontrol.com/news-topic/new-exploration-licensing-policy-(nelp)

15. Retrieved from http://mpra.ub.uni-muenchen.de/31753

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‘COMPANIES ACT 2013’ A LIGHTHOUSE FOR INDIA’S CORPORATE SECTOR:

AN ANALYTICAL STUDY OF THE ORIGIN OF COMPANY LAW

TILL THE PASSAGE OF THE NEW COMPANIES ACT

AND A BIRD’S EYE VIEW OF GLOBAL SCENARIO

Dr. Krishnarao L. Ukey5

ABSTRACT

The corporate sector plays a vital role in the economy of India and therefore regulating the realm of corporate sector is of great

importance. The companies Act are one of the most powerful legislations, which monitor the journey of a corporate entity

from, cradle to grave i.e. from inception to its liquidation. It controls more than two lakh private limited companies and about

twenty thousand public limited and other types of companies. The corporate sector is one of the indicators of the financial

health and economic growth of the country. It will not be inappropriate to state that the success and or the failure of the

economy largely depend on the smooth working of the corporate sector.

The companies act also displays the corporate culture and the professionalism in the business and industry and indirectly

reflects upon the image of the country. The Indian Companies Act has a very long legislative history dating back to 1850. We

also witness a unique relationship between the English Companies Act and the Indian companies Act, the reasons being India

was under the British regime for a long time and was one of the British colonies where the Great Britain Government

(Erstwhile East India Company and later United Kingdom) tried to impose uniform laws throughout the colonies.

The Companies Act 1956 was perhaps the bulkiest law in India and probably in the world and the new Companies Act in its

present silhouette would continue to carry the same tag. This article aims at peeking into the historical background of the

companies Act and the global scenario, comparison of the Indian and English Act in general and critical review of the

erstwhile Act of 1956. The article also examines the provisions of the new Act; its relevance in the modern setting and try to

find out the extent to which it would meets the aspirations of the industry, business, Government and the common investors.

KEYWORDS

Company, Companies Act, Corporate Sector, Economy of India, Global Scenario, Joint Stock Companies, Limited

Liability, Professionalism etc.

HISTORY OF INDIAN COMPANY LAW

The Company law is a very important piece of legislation and occupies a pivotal position in the economy of the country. It is that

branch of law, which deals exclusively with all aspects of companies starting from birth i.e. incorporation, development, growth,

management, mergers, acquisition until the end i.e. winding up. It deals with and defines the rights, liabilities and status of various

stakeholders like owners (shareholders), creditors, lenders, borrowers, investors, depositors. The English Company law is drafted

very intelligently and enjoys the distinction of being comprehensive and a masterpiece in the field of corporate legislation. The

Indian Companies Act owes its origin, development, growth and transformation to the English Company law. The Indian

Companies Act in fact largely borrows its contour and contents from the English Companies Act. Whenever there was any

amendment in the English Companies Act, the Indian Companies Act followed the suit. The first legislative enactment for

"Registration of Joint Stock Companies" was passed in the year 1850, which was based on the English Companies Act, 1844 that

recognized company as a distinct legal entity, but did not grant to it the privilege of limited liability. The Act of 1850 was replaced

in 1857 and conferred, for the first time in India the privilege of limited liability on the members of the companies (excluding

banking companies and insurance companies). The 1857 act was replaced in 1860 extending the benefit of limited liability to the

Banking and Insurance Companies. The Act of 1860 was once more replaced by the Companies Act of 1866, which was the first

comprehensive statute, passed in India after a long gap. This Act was again based on the English Companies Act of 1862. Yet

again, a new Companies Act was passed known as The Indian Companies Act, 1913. However, this Act did not take into account

the peculiar features of the Indian trade and commerce and some peculiar institution such as "managing agency.” The Act was,

therefore, found to be highly disappointing and posed several problems in the course of its operation. As such, this Act was

subjected to a large number of amendments from time to time.

While dwelling on the topic it is necessary to familiarize with certain basic terms:

5Legal Advisor to SMEs & Professional Colleges, Ex- Director / Principal MBA College, Raisoni Group, Maharashtra; Ex-

Company Secretary and Senior Dy. General Manager (Legal) MOIL Ltd, Maharashtra, India, [email protected]






# Joint Stock Company- An incorporated association formed for carrying on lawful business with a distinctive name and a

Common seal, so it is a separate legal entity (artificial person) with perpetual succession and limited liability. Since the entity is

created by law, its existence can be brought to an end by the process of law- winding up / liquidation.

# Kinds of Companies - Chartered companies: Incorporated under a special charter granted by the monarch and regulated by that

charter.

# Statutory Companies: Incorporated under a special/ separate act of the legislature for certain special powers, which it does not

get under the companies Act and is regulated by that special act.

# Registered Companies: (i) Limited by Shares- the liability of a member is limited to the nominal or face value of the shares held

by him. (ii) Limited by Guarantee- The members are required to pay the amount guaranteed by them, only when the company is

wound up. (iii) Unlimited Companies: The liability of members is unlimited. (iv) Government companies- Not less than 51% of

the share capital is held by the central government and or by any state government/ governments. (v) Non-government companies-

which is owned and managed by private investors. (vi) Foreign companies incorporated in a foreign country, but which has

established a place of business in India. (vii) Domestic companies which are incorporated in India. (viii) Holding and Subsidiary

Companies- holding Company is a controlling company and subsidiary is a controlled company by a holding Company. (ix)

Private Companies- which has maximum fifty members, restricts the right to transfer shares, and prohibits issue of its shares or

debentures to the public, (x) Public Companies-which do not have the restriction, like private companies. (xi) One man company

refers to a company in which one person holds practically the whole of or the substantial no of shares, and has controlling powers

over the company. (xii) Licensed Companies: Association formed not for profit, but for promoting non-trading purposes, such as

art, science, education, sports, religion, charity etc.

THE REGIME OF COMPANIES ACT 1956

The Indian Companies Act, 1913 did not serve the purpose and failed to withstand the test of time. Therefore, after the end of

World War II, the need for revision and strengthening of the company law was felt strongly. The Government of India, on 25 th

October, 1950 appointed a committee of 12 members under the Chairmanship of Shri. H. C. Bhabha for a comprehensive review

of the Indian companies Act 1913. The committee submitted its report in April 1952 and based on its recommendation the

Companies Act of 1956 was passed (came into force from 1st April, 1956) which was largely based on the English Companies

Act of 1948, with some modifications to suit the Indian conditions. The Companies Act 1956 was perhaps the bulkiest law in

India and probably in the world containing 658 Sections and 14 Schedules. As the companies Act 1956 reigned for more than five

decades, it will be worthwhile to cast a glance at the objectives and salient features of this masterpiece of legislation. The main

objectives of the companies Act of I956 were:

To protect interests of investors by furnishing fair and accurate information in prospectus and fair disclosure of

companies affairs in published annual accounts

To protect interests of shareholders by holding general meetings and providing for prevention of oppression of minority

and mismanagement.

To protect interest of creditors by preventing reduction of capital, by convening their meeting, taking over the

companies in case of mismanagement.

To promote healthy growth of companies by ensuring integrity, proper performance by Directors & others responsible

for management.

To ensure that activities of company are carried in the interests of all directly concerned and in furtherance of the

economic and social policy.

To empower government to interfere and investigate into the affairs of the Company to protect the interests of the

Shareholders, company and general public.

Amendments: The act was amended more than twenty times (from 1960 till 2009) prominent being the amendment in 1967,

1974, 1977, 1988, 1999, 2000, 2008 and 2009. These amendments were necessary as per the changing needs of time and the

government policies consequent upon the change of guards in the center. The 1974 amendment introduced section58A about the

regulation of the public while the amendment in 1977 was made following the change of Government in the center when ruling

congress was defeated and new Janata party took the reins. While the 1988 act made several important changes regarding payment

of dividends etc., the 1999 amendment empowered the company to buy back its own shares. The 2000 amendment witnessed

crucial provisions like abolition of deemed public companies, giving more powers to SEBI in certain matters about listed

companies, introduction of postal ballot, increase in Directors' responsibilities & disqualifications, constitution of audit committee





and secretarial compliance audit etc. The amendment introduced on 23/10/2008 by withdrawing the earlier bill of 2003 was based

on the recommendations of J.J Irani committee report of 2004, seeking to operate in a regulatory environment of best international

practices that foster entrepreneurship, investment and growth. The amendment proposed inter-alia strengthening internal

governance and shareholders democracy, a new entity in the form of One-Person Company (OPC), application of the successful

e-Governance initiative of the Ministry of Corporate Affairs (MCA-21), Director Identification number (DIN), Key Managerial

Personnel (KMP), more effective regime for inspections and investigations and Special Courts to deal with offences. However,

the bill did not see the light of the day consequent upon dissolution of the 14th Loksabha, so it was reintroduced on 03/08/2009 as

amendment bill 2009.

THE PASSAGE OF NEW COMPANIES ACT

Though the Companies act 1956 largely stood the vagaries of time, it felt the litmus test. With the passage of time the necessity to

have a comprehensive yet practicable corporate legislation became strong owing to the following compelling factors- i] after the

economic reforms the Indian economy started ascending, ii] public sector also felt the heat of competition consequent to abolition

of license raj, iii] mergers/acquisitions became the order of the day as an aftermath of globalization, iv] political compulsions of

coalition government at the center, v] thrust to the industrialization, vi] creating cordial environment for foreign direct investment,

vii] give fillip to the fast emerging service sector particularly, IT, KPO, BPOs et el. There is a long journey associated with the

coming into existence of the Companies’ Act 2013. The need for a new Company law was felt sometimes in 2008-09 and the

required steps were being taken in that direction from that period. Finally, Bill No. 121-C of 2011 was introduced in Loksabha on

14th December 2011, and passed on 18-12-2012. It received the assent of the President of India on 29th August, 2013 and has been

published in the Gazette of India on August, 30, 2013. It has 470 Sections, VII Schedules as against 658 Sections and 15

Schedules in the Act of 1956. It extends to the whole of India and applies to (a) companies incorporated under this Act or under

any previous company law; (b) insurance companies, except in so far as the said provisions are inconsistent with the provisions of

the Insurance Act, 1938 or the Insurance Regulatory and Development Authority Act, 1999; (c) banking companies, except in so

far as the said provisions are inconsistent with the provisions of the Banking Regulation Act, 1949; (d) companies engaged in the

generation or supply of electricity, except in so far as the said provisions are inconsistent with the provisions of the Electricity

Act, 2003; (e) any other company governed by any special Act for the time being in force, except in so far as the said provisions

are inconsistent with the provisions of such special Act; and (f) such body corporate, incorporated by any Act for the time being in

force, as the Central Government may, by notification, specify in this behalf, subject to such exceptions, modifications or

adaptation, as may be specified in the notification.

The major highlights of the Act are summarized below:

The Bill prescribes 33 new definitions like Associate Company, Small Company, Employee Stock Option, Promoter,

Related Party, Turnover, Chief Executive Officer, Chief Financial Officer and Global Depository Receipt etc.

The maximum number of members, which a Private Company can have, is increased from 50 to 200.

The scope of officer under default has been broadened. The Share transfer agents, Registrars and Merchant bankers to

the issue & Chief Financial Officer are brought under its ambit.

No stipulation of bifurcation of objects clause into main, ancillary and other objects in the Memorandum of Association

(MA).

Articles of Association (AA) of the Company may contain provision with respect to entrenchment.

Small companies (maximum paid-up share capital not exceeding Rs. 50 Lakhs) have been subjected to a less stringent

regulatory framework.

E-Governance proposed for almost all records and returns and voting through electronic means introduced.

Key Managerial Personnel (KMP) the scope increased by including more categories: (i) the Chief Executive Officer or

the managing director or the manager, (ii) the Company Secretary, (iii) the Chief Financial Officer if the Board of

Directors appoints him, and (iv) such other officer as may be prescribed Appointment of Key Managerial Personnel.

Independent Directors - all listed companies / other public companies as may be prescribed by the Central Government

must appoint Independent Directors (IDs) at least one-third of the strength. Nominee director shall not be deemed an

independent director. Further IDs not entitled for stock option but may get payment of fee and profit linked commission

subject to limits specified in act.





Participation of directors at Board Meetings permitted through video-conferencing or other audiovisual means provided

such participation is capable of recording and recognizing.

The Audit committee shall consist of a minimum of three directors with independent directors forming majority.

Nomination and Remuneration Committee (NRC) made mandatory in the case of listed companies and such other

class or description of companies as may be prescribed. The NRC shall consist of three or more non-executive director(s)

out of which not less than one half shall be IDs. The NRC shall formulate the criteria for determining qualifications,

positive attributes and independence of a director and recommend to the Board a policy, relating to the remuneration for

the directors, key managerial personnel and other employees.

If the combined membership of the shareholders, debenture holders, deposit holders and other security holders is more

than 1000 at any time during the financial year, the company shall constitute a Stakeholders’ Relationship Committee.

The Chairman of the Committee shall be a nonexecutive director.

For the first time duties of directors have been defined - a director of a company shall act in accordance with the AA of

the company, act in good faith in order to promote the objects of the company for the benefit of its members as a whole,

and in the best interests of the company, its employees, the shareholders, the community and for the protection of

environment. The director must exercise his duties with due and reasonable care, skill and diligence, independent

judgment avoiding a situation of conflict of interest, should not misuse position for achieve or attempt to achieve any

undue gain or advantage either to himself or to his relatives, partners, or associates and not assign his office. Heavy

penalty of Rs one to five lakhs has been proposed for violation.

At least seven days’ notice is required to be given for a Board meeting. The notice may be sent by electronic means to

every director at his address registered with the company, however a Board Meeting may be called at shorter notice if at

least one independent director, if any, shall be present at the meeting. However, in the absence of any independent

director the decisions taken at such meeting must be ratified by at least one independent director.

A director may resign from his office by giving notice in writing.

Woman Director - At least one woman director being made mandatory in the prescribed class or classes of companies

Managerial Remuneration - Maximum limit of 11% of net profits has been retained.

Board’s Report has been made more informative and includes extensive disclosures like – (i) extract of annual return

(ii) number of meetings of Board (iii) report of the committee on directors’ remuneration (iv) a declaration by

independent directors (v) particulars of loans, guarantees, or investments (vi) particulars of contracts or arrangements

entered into (vii) Explanation or comments on every qualification, reservation made - a) by auditor in his report b) by the

Company Secretary in his Secretarial Audit Report (viii) The details about the policy developed on corporate social

responsibility initiatives taken during the year.

Vote by the electronic means has been allowed in General Meetings for certain classes of companies.

For the first time, the Secretarial Standards have been introduced and made statutory. Every company shall observe

Secretarial Standards with respect General and Board Meetings specified by the Institute of Company Secretaries of

India. Company Secretary has to ensure that the compliance of the applicable Secretarial Standards. It is the beginning of

a new era where non-financial standards have been given importance and statutory recognition. .

Secretarial Audit which was earlier (from December 2009) voluntary has been now included in the act itself.

Secretarial Audit Report given by a Company Secretary in Practice shall be annexed with Director’s report by every

listed company / other class of companies as may be prescribed by central government. The company has to give all

assistance/facilities for secretarial audit. The Board of Directors, in their report has to give explanation in full for any

qualification/observation or other remarks made in the Secretarial Audit report.

Statutory Audit - the Rotation of auditors/ audit firms- No listed company or a company belonging to such class or

classes of companies as may be prescribed shall appoint or re-appoint (a) an individual as auditor for more than one term

of five consecutive years; and (b) an audit firm as auditor for more than two terms of five consecutive years. Further, a

period of five years has to elapse before making reappointment of individual auditor /audit firm. Moreover as on the date

of appointment, no audit firm having a common partner or partners to the other audit firm, whose tenure has expired in a

company immediately, proceeding the financial year, shall be appointed as auditor of the same company for a period of

five years.





Investor Protection Measures - Issue and transfer of securities and non-payment of dividend by listed companies, has to

be administered by SEBI. An act of fraudulent inducement of persons to invest money is punishable with imprisonment.

A suit may be filed by a person who is affected by any misleading statement or the inclusion or omission of any matter in

the prospectus or who has invested money by fraudulent inducement

Acceptance of Deposits by a company has been made more stringent. Passing of resolution in a general meeting, filing a

copy of the circular with the Registrar within 30 days before the date of issue of the circular, providing deposit insurance,

certification by the company that it has not defaulted in the repayment of deposits, creation of charge on company’s

properties and assets in respect of deposit and interest and depositing an amount of not less than 15% of the deposits

maturing during a financial year in a reserve account are some of the conditions to be complied with.

Annual Return in respect of all the companies, whether private or public, listed or unlisted, is compulsorily required to

be signed by the Company Secretary in practice if no Company Secretary is appointed. Further in case of a listed

company and a company having such paid up capital and turnover as may be prescribed by central government (even if

not listed), the Annual Return is required to be signed by Company Secretary in practice in addition to the Company

Secretary in employment.

Certification regarding compliances - The onus has been placed on the Company Secretary about compliance who

signs the Annual Return. He has to certify that the annual return states the facts correctly and adequately and that the

company has complied with all the provisions of the Act. Very strict penalty has been proposed for contravention of this

provision.

Insider Trading of Securities - New clause has been introduced with respect to prohibition of insider trading of

securities. The definition of price sensitive information has also been included.

Corporate Social Responsibility (CSR) - Every company having net worth of rupees 500 crore or more or turnover of

rupees 1000 crore more or a net profit of rupees 5 crore or more during any financial year must constitute a CSR

Committee of the Board consisting of three or more directors, out of which at least one shall be an independent director.

The CSR committee has to formulate and recommend to the Board, a CSR Policy indicating the activities to be

undertaken by the company as specified in Schedule VII and recommend the amount to be spent. The Board shall ensure

that the company spends, in every financial year, at least 2% of the average net profits made during the three immediately

preceding financial years, in pursuance of its CSR Policy. If the company fails to spend such amount, the Board in its

report has to specify the reasons for the same.

Related Party Transactions - Every contract or arrangement entered into with a related party shall be referred to in the

Board’s Report along with full justification. Further, the directors and the key managerial personnel of a company are

prohibited from forward dealings in securities of the company.

Some minor changes have been made to the definition of preference shares and provisions relating to inspections,

enquiry and investigations.

Statutory status to Serious Fraud Investigation Office (SFIO) has been granted. Investigation report of SFIO filed with

the Court for framing of charges shall be treated as a report filed by a Police Officer. The fraud in relation to affairs of a

company now includes any act, omission, concealment of any fact or abuse of position with intent to deceive, gain undue

advantage, and injures interests of company or its shareholders/creditors / any other person, with or without wrongful

gain or wrongful loss.

The entire restructuring and liquidation process has been made time bound. The Tribunal may appoint an interim

administrator or a company administrator from the panel of Company Secretaries, CAs, CWAs, etc. maintained by the

Central Government who shall prepare a scheme of revival and rehabilitation. Winding up is to be resorted to only when

revival is not feasible.

Registered Valuers - Valuation in respect of any property, stock, shares, debentures, securities, goodwill, net worth or

assets of a company shall be valued only by a person registered as a valuer.

National Company Law Tribunal (NCLT) has been set up keeping in view the Supreme Court’s Judgment, dated 11th

May, 2010, accordingly, the appeals from NCLT shall lie to Appellate Tribunal.

Special Courts the Central Government has been empowered to establish special courts for speedy trial of offences, in

consultation with the Chief Justice of the High Court within whose jurisdiction the judge is to be appointed. All offences

under this Act shall be tried by the Special Court established for the area in which the registered office of the company.





Concept of ‘Dormant Companies’ has been introduced. This would allow a company to remain on the Register of

companies with minimal compliance requirements even without carrying on any operations.

Mediation and Conciliation Panel: Creation of ‘Mediation and Conciliation Panel’ for facilitating mediation and

conciliation between parties during any proceeding before the Central Government or Tribunal.

One Person Company (OPC limited) - This perhaps is a very innovative concept introduced by the Act and requires a special

mention. Generally, a company means an association of two or more persons but the act has given birth to OPC. Section2 (62)

defines OPC as a company which has only one person as a member; such a provision did not exist before. It is almost similar to

sole proprietorship granted the status of a company by the law based on the recommendations of J. J. Irani committee. Only one

member is required to incorporate OPC, which can be incorporated as private limited company and offers opportunity to start a

new venture. The words “One person Company” is to be written in the bracket below the name of the company. OPC enjoys

several benefits like-limited liability, separate legal entity, perpetual secession (nominee becomes member of OPC in the event of

death of the promoter), credibility etc. The sole member can be the Director however more directors can be appointed. If there is

only one director the provisions of Board meeting does not apply. OPC is exempted from holding AGM, and base tax rate of 30%

is applicable. However, when the paid up capital of OPC exceeds Rs50lakhs or average annual turnover of preceding 3 financial

years exceeds Rs2crores, it becomes mandatory for OPC to convert into Private or Public company. Though the concept is new to

India OPCs have been in practice in some form or other in several countries around the world prominent being Liechtenstein,

United Kingdom, Singapore, Hong Kong, Delaware and China. In the nutshell, OPC is like a “One Man Army”.

GLOBAL SCENARIO

Most of the industrialized and progressive countries have quite elaborate statutes for governing and regulating their corporate

sector; glance at such legislation from some of the European and Asian countries:

Canada Corporations Act (R.S.C. 1970, c. C-32) recently amended in 2003, 2004, 2011 and 2014. The original act

had 217 sections containing provisions regarding general information about the companies, its general powers,

borrowing powers, issue of shares, meetings of the shareholders, maintenance of books of accounts, audit, the meetings

of the shareholders and penal provisions. The act has similar provisions to the UK act barring certain details and some

variations to suit the industrial climate in Canada and the policies of the government.

Corporate law in the United States- There is no single piece of corporate law in USA like India and Canada. Each state

in USA has a different system of corporate law about fifty-one, different systems i.e. one law for each state plus for the

District of Columbia. Prior to 19th century most of the companies were incorporated by a special bill of the legislature

like statutory corporations in India and there were about three hundred such companies. Later on Model Business

Corporation Act (MBCA), drafted by the American Bar Association was adopted by twenty-four states. One of the

important features of USA law is that the companies are free to incorporate under any state under the United States

Constitution, irrespective of their nature of business and location of head office. Many corporations (especially public

ones) found Delaware's laws and specialized courts attractive hence; more than half of US corporations are incorporated

under the Delaware General Corporation Law (DGCL). However many private corporations preferred and were setup

under Nevada's corporation law. The corporate laws of large states such as New York and California are also prominent.

The corporate laws in USA also covers all the aspects like status of corporate entity, shareholders and investors right,

corporate governance, duties of the directors, meetings of the shareholders and directors, maintenance of books of

accounts, audit, mergers and acquisitions and bankruptcy. Chapter 11 needs a special mention, as the bankruptcy is

available to every business, whether organized as a corporation, partnership or sole proprietorship, and to individuals,

although it is most prominently used by corporate entities. WorldCom, AOL Time Warner, Conseco Inc., Global

Crossing Ltd, Adelphia Communication Corp and Enron Corp are some of the big companies who had filed for the

bankruptcy under chapter 11.

Germany is one of the most industrially advanced countries in the world and in Europe. Companies in Germany are

regulated by company law called as Gesellschaftsrecht. Public company Aktiengesellschaft (AG) is the most popular

form of company. The private company with limited liability is known as a Gesellschaft mit beschränkter Haftung

(GmbH). Since 2004, many prominent German companies have opted to become a European Company, or Societas

Europaea (SE). The company law in Germany also covers almost all the topics like their counterparts. The most striking

feature of the Germany company law is two tier Board system i.e. Executive directors and Supervisory board. The

executive directors are generally appointed for five years and cannot be removed directly by the members of the

company but only by a second tier "supervisory" board. The primary role of the executive is to look after day-to-day

affairs and the supervisory board's role is to "supervise" (überwachen). The supervisory board ("Aufsichtsrat") in

companies with more than 2000 employees is composed of half shareholders’ appointees who can only remove the

supervisory board members by 75% votes. The employees elect the other half; though in companies with over 8000

employees the employees can let the unions vote on their behalf. The law incorporates provision regarding corporate

governance analogous to the UK Corporate Governance Code.





The Japanese economy grew very rapidly after World War II. It reached its heyday in the 1980’s, but in the 1990’s

struggled through a long recession. The old Japanese corporate law is believed to be heavily influenced by the Chinese

law. Until the end of the 1980's, the Japanese corporate practices were successful in increasing shareholder’s wealth but

it failed in the 1990’s. At present, there are no fundamental differences in Japanese and American corporate law. On

June 29, 2005, Japan’s parliament enacted a new Corporations Law (Kaisha Hou), the largest reform of its kind in the

half century, which became effective from May 1, 2006. Under the current law, a minimum of 10 million yen

capitalization is required for a corporation (a Kabushiki Kaisha or “KK”) at the time of incorporation. The law inter alia

deals with limited liability {Godo Gaisha-GK}, Corporate Governance Mergers and Acquisitions and foreign

companies. The entire focus is on ease of doing the business.

The law of Hong Kong is based on the rule of law and the independence of the judiciary. The first corporate law was

passed in 1865 known as The Companies Ordinance 1865, followed by ordinances of 1911, 1932, 2006 latest ordinance

is passed in 2014. The new Companies Ordinance ("the new CO"), which consists of 921 sections and 11 schedules,

provides a modernized legal framework for the incorporation and operation of companies in Hong Kong and contains all

the standard provisions like Indian act i.e. about the companies, its general powers, borrowing powers, issue of shares,

meetings of the shareholders, maintenance of books of accounts, audit, the meetings of the shareholders and penal

provisions.

The English Companies Act - The first statute on the subject of Companies Act was passed in 1834 and amended 25 times till

1947, in the years1837,1844,1845,1856,1862,1863,1864,1867 1869,1870,1877,1879, 1880,1883,1884,1886, 1888, 1889, 1890,

1893, 1907,1908,1928,1929 and in 1947. As mentioned in earlier paragraphs there are many similarities between the English Act

and the Indian Companies Act. The Companies Act 1948 (11 & 12 Geo.6 c.38) was an Act of the Parliament of the United

Kingdom, which regulated UK company law. It contained 462 sections and 18 schedules. The Indian Companies Act 1956 was

largely based on the scheme of the 1948 Act of UK having similar provisions about MA, AA, Share capital, Allotment, Accounts

& Audit, Meetings of shareholders and Board of Directors, Inspection, Annual returns, Winding up etc. The UK companies Act is

considered as a masterpiece so all the further amendments to the Indian Companies Act were also mostly based on the

amendments made in UK law namely 1967, 1974, 1976, 1985,1989,2004 & latest in 2006. Both the Acts contain almost the

similar provisions right from the incorporation, issue of shares, management and administration until the winding up of the

company.

SUMMARY AND CONCLUSIONS

The new Companies Act is a progressive and futuristic law, which promises improved corporate governance norms, superior

disclosures, and transparency, facilitation of responsible entrepreneurship, increased accountability of company managements and

auditors, protection of interest of investors particularly small and minority investors, better shareholder democracy, norms of

corporate social responsibility (CSR) and stricter enforcement processes. It also defines a new challenging role for company

secretaries and puts them in the category of key managerial personnel holding responsible for implementation and compliance of

all relevant laws applicable to the companies. It is felt by the experts that the erstwhile Act of 1956 did not withstand the test of

time & tide and hence there are greater expectations from the new company law. Before concluding let us have look at the recent

amendment, 2014 proposed in the Act - the Companies (Amendment) Bill, 2014 has been introduced in the Parliament on

December 2, 2014 to make certain amendments in the Companies Act, 2013.

The several provisions proposed in the amendment are: # omitting requirement for minimum paid up share capital and making

common seal optional. # prescribing specific punishment for deposits accepted under the new Act. # prohibiting public inspection

of Board resolutions filed with ROC. # including provision for writing off past losses/depreciation before declaring dividend #

rectifying the requirement of transferring equity shares for which unclaimed/unpaid dividend has been transferred to the IEPF #

enabling provisions to prescribe thresholds beyond which fraud shall be reported to the Central Government (below the threshold,

it will be reported to the Audit Committee). # exemption u/s 185 (Loans to Directors) # empowering Audit Committee to give

omnibus approvals for related party transactions on annual basis # replacing ‘special resolution’ with ‘ordinary resolution’ for

approval of related party transactions by non-related shareholders. # Bail restrictions to apply only for offence relating to fraud u/s

447 # winding up cases to be heard by 2-member Bench instead of 3 members # special courts to try only offences carrying

imprisonment of two years or more. It is hoped that the new law will align itself with the latest and best international practices in

corporate management and governance and allow ease of business for the MNCs and TNCs. It will facilitate mergers,

acquisitions, and flow of capital/FDI into various sectors like production, manufacturing, services and others. It will also attract

new professionals, experts and technocrats for the enrichment of manpower in the Indian companies. By putting the deterrents on

the habitual offenders and defaulters like promoters, directors and senior managerial personnel, the law will be able to herald a

new era of investors’ protection while minimizing the instances of frauds and misappropriation of stakeholder’s money. It would

be able create an environment whereby the confidence of the investors and public will get a boost. In the nutshell, the new act will

be user friendly, act as a facilitator to various stakeholders and in the true sense will become a lighthouse for India’s corporate

sector.





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*****

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http://en.www.wikipedia.org/

http://anilkumarjainca.blogspot.in/2013/08/highlights-of-companies-bill.html

https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=1694

http://www.caclubindia.com/articles/highlights-of-companies-bill-2011-15998.asp

http://www.caacademy.co.in/caa/media/study_aids/1349434310.48_Company%20Law.docx

http://dynamictutorial.blogspot.in/2014/05/objective-of-companies-act-of-1956.html

http://www.caclubindia.com/articles/synopsis-of-companies-act-2013-18424.asp

http://en.wikipedia.org/wiki/German_company_law

http://pmindia.gov.in/en/news_updates/companies-amendment-bill-2014

http://pib.nic.in/newsite/PrintRelease.aspx?relid=112434





ROLE OF MEDIA IN THE EMPOWERMENT

OF TRIBAL WOMEN IN KARNATAKA STATE: A STUDY

Dr. B. P. Mahesh Chandra Guru6 H. S. Shivaraj7 Dr. Madhu Gundlupet8 M. Dileepkumar9

ABSTRACT

India has the largest concentration of the tribal population among the countries in the world, next only to Africa. According to

2011 Census, the total tribal population is less than 9% of the country’s total population. The majority of the tribal population

is found in the Eastern, Central and Western regions of India. They are mostly backward, deprived and oppressed sections of

Indian society. The present investigation was carried out to assess the role of media in the empowerment of tribal women in

Karnataka state. The present study was carried out based on systematic survey research method. The primary data were

gathered from 397 respondents consisting of stakeholders of tribal women empowerment (91) and tribal women beneficiaries

(306). A majority of the stakeholders of tribal women empowerment and tribal women beneficiaries are not satisfied with the

role of media in the empowerment of tribal women. The data reveal that the stakeholders of tribal women empowerment and

beneficiaries of tribal women development projects in Karnataka state were not happy with the media support for various

tribal development projects in Karnataka state. The tribal development project authorities should conduct field survey and

identify deserving tribal women beneficiaries for providing financial assistance. The tribal development project authorities

should identify the worthy tribal women beneficiaries and extend financial benefits.

The tribal development project authorities should design the development projects in consultation with the tribal women

beneficiaries. The media services should be decentralized in the tribal areas to facilitate active participation of beneficiaries in

the development projects. The Government of India, State Government of Karnataka, Non-Government Organizations, media

institutions, community organizations, educational institutions, research institutions and development institutions have to work

in close collaboration toward designing tribal development management in general and delivering tribal women empowerment

oriented communication services in particular.

KEYWORDS

Tribal Women Empowerment, Civil Society, Media, Communication Economic Security etc.

PREAMBLE

India has the largest concentration of the tribal population among the countries in the world, next only to Africa, according to

Ratha (1986). According to 2011 Census, the total tribal population is less than 9% of the country’s total population. The majority

of the tribal population is found in the Eastern, Central and Western regions of India. They are mostly backward, deprived and

oppressed sections of Indian society. The tribal economy can be termed as a subsistence economy or a primitive economy. A large

number of tribes are still dependent on cultivation, food gathering and fruit collecting exercises for their survival. They are at the

lowest rung of national development in India. The tribal issues received prominence in the draft constitution, largely through the

efforts of Jaipal Singh, the most prominent among the tribal leaders of that time, on the advice of Verrier Elwin. The basic

principles that should guide the approach to the development of tribes were closely set out by the Prime Minister Pandit

Jawaharlal Nehru who formulated ‘Tribal Panchsheel’, which was later endorsed by the Renuka Ray Team (1959), Dhebar

Commission (1961) and the Shilu Ao Committee (1969). These commissions made important recommendations for the uplift of

tribes in India. Several tribal development schemes are implemented in the country in the post-independence era. Despite

constitutional provisions and welfare measures, the tribes continue to remain excluded from the mainstream of development in

India. The present investigation was carried out to assess the role of media in the empowerment of tribal women in Karnataka

state.

REVIEW OF LITERATURE

Empowerment of tribal women is a neglected sector from research and development points of view. Prominent studies carried out

by the scholars on tribal women in general and media interventions for tribal women empowerment in particular are subjected to a

brief overview in this chapter. They include - Sen (1978:10), Mann (1987:07), Zoonen (1996:14), Sharma and Mittal (1998:11),

Bathla (2000:01), Lipi (2002:06), Devon (2003:03), Bhowmik (2005:02), Kumar (2006:04), Mariswamy (2006:08), Sindhi

6 Professor, Department of Studies in Communication and Journalism, University of Mysore, Karnataka, India,

[email protected] 7RGNF Research Scholar, Department of Studies in Communication and Journalism, University of Mysore, Karnataka, India. 8Post-Doctoral Fellow, Department of Studies in Anthropology, University of Mysore, Karnataka, India. 9RGNF Research Scholar, Department of Studies in Communication and Journalism, University of Mysore, Karnataka, India,

[email protected]

http://www.google.co.in/search?tbo=p&tbm=bks&q=inauthor:%22Devon+Abbott+Mihesuah%22







(2012:12), Kumar (2013:05) and Ravichandran (2014:09). The review of literature clearly indicates that adequate scientific

investigations are not carried out in the state of Karnataka on the role of media in the empowerment of tribal women.

STATEMENT OF PROBLEM

The concept of empowerment of women is gaining importance throughout the world. Series of constitutional safeguards and

provisions are included in the Constitution of India for the empowerment of women and weaker sections by the founders of

constitution and builders of modern India. The central and state governments have also implemented several tribal development

specific programmes in the post-independence era for the empowerment of women in general and tribes in particular. Studies have

reported that the social and economic status of general women and tribal women remains pathetic in the country due to non-

implementation of constitutional provisions and development projects. Studies have revealed that tribal women remain

disadvantaged in India in the absence of state patronage and civil society support. There is a growing recognition all over the

world about the crucial role of media in the empowerment of women.

A synthesis of the available literature suggests that societal, governmental, educational and media intervention for the

empowerment of women in general and tribal women in particular with special reference to Karnataka suffer from certain

limitations from research and development points of view. Therefore, the primary tasks of present study were concerned with

identifying a reasonably representative sample of stakeholders of tribal development and beneficiaries of tribal development to

assess their views on the role of media in the empowerment of tribal women in Karnataka state. The present topic has been chosen

because:

Empowerment of women has become an important Millennium Development Goal.

Tribal development has become a thrust area of national development.

Tribal women empowerment has become a challenging task of our times.

Karnataka state has emerged as a model state over a period.

Media intervention for tribal women empowerment assumes great significance in the present times.

A constant and continued research on the role of media in the empowerment of tribal women is imperative in a

developing state like Karnataka.

OBJECTIVES OF STUDY

Assess the growth and development of tribes in Karnataka state,

Analyze the media exposure among tribal women in Karnataka state,

Examine the role of media in the empowerment of tribal women in Karnataka state.

Evaluate the opportunities and limitations of media from tribal women empowerment point of view, and

Suggest appropriate methods for the betterment of media services for the empowerment of tribal women in Karnataka

state.

METHODOLOGY OF RESEARCH

Research Design

The present study was carried out based on systematic survey research method. A structured and pre-tested interview schedule

was administered to the stakeholders of tribal women empowerment and tribal women beneficiaries of Karnataka state. The

respondents were selected from about 08 districts of Karnataka state, which practically represented the four revenue divisions. The

primary data were gathered from 397 respondents consisting of stakeholders of tribal women empowerment (91) and tribal

women beneficiaries (306). Two separate interview schedules were administered to them in order to explore the understanding of

the respondents have about the role of media in the empowerment of tribal women in Karnataka state.

Distribution of Study Area and Sample

Table-1

S. No. Revenue Division Stakeholders Beneficiaries Total

1 Kalburgi 20 76 96

2 Belgaum 22 68 90

3 Mysore 24 78 102

4 Bengaluru 25 84 109

Total 91 306 397

Sources: Authors Compilation

Note: n = 397





Statistical Analysis

The primary data were analyzed based on certain standardized statistical tests, which includes - percentage analysis, graphical

representation, Chi-square test, and cross tabulation. All the statistical methods were carried out through the SPSS for Windows

(version 16.0). A brief discussion of these statistical tests is as follows.

FINDINGS OF STUDY

Role of Media in the Empowerment of Tribal Women

A majority of the stakeholders of tribal women empowerment and tribal women beneficiaries are not satisfied with the role of

media in the empowerment of tribal women. The distribution of responses in this regard is as follows:

Absence of media support for social equality (stakeholders of tribal women empowerment -68.13% and tribal women

beneficiaries- 76.67%),

Promotion of social freedom (stakeholders of tribal women empowerment -61.54% and tribal women beneficiaries-

73.86%),

Promotion of social justice (stakeholders of tribal women empowerment -57.14% and tribal women beneficiaries-

71.90%),

Eradication of superstitions (stakeholders of tribal women empowerment -68.13% and tribal women beneficiaries-

68.63%),

Prevention of human trafficking (stakeholders of tribal women empowerment -57.14% and tribal women beneficiaries-

71.90%),

Prevention of human rights violation (stakeholders of tribal women empowerment -63.74% and tribal women

beneficiaries- 67.97%), promotion of small family (stakeholders of tribal women empowerment -59.34% and tribal

women beneficiaries- 66.01%),

Prevention of atrocities (stakeholders of tribal women empowerment -65.93% and tribal women beneficiaries- 67.97%),

Prevention of female infanticide and feticides (stakeholders of tribal women empowerment -61.54% and tribal women


Fight against the drug and liquor addiction (stakeholders of tribal women empowerment -52.75% and tribal women


Prevention of child labor and bonded labor (stakeholders of tribal women empowerment -57.14% and tribal women


Prevention of dowry system and fight against early marriage (stakeholders of tribal women empowerment -63.74% and

tribal women beneficiaries- 73.20%),

Promotion of social mobility (stakeholders of tribal women empowerment -57.14% and tribal women beneficiaries-

70.59%),

Promotion of remarriage of divorced / widowed persons (stakeholders of tribal women empowerment -52.75% and


Involvement in social service (stakeholders of tribal women empowerment -72.53% and tribal women beneficiaries-

65.36%),

Promotion of agricultural and cottage industrial development (stakeholders of tribal women empowerment -65.93% and


Control of economic assets and achievement of financial independence (stakeholders of tribal women empowerment -

57.14% and tribal women beneficiaries- 66.01%),

Promotion of equal property rights (stakeholders of tribal women empowerment -54.95% and tribal women


Promotion of family infrastructural development (stakeholders of tribal women empowerment -63.74% and tribal


Promotion of self-employment opportunities (stakeholders of tribal women empowerment -70.33% and tribal women


Improvement of economic bargaining power (stakeholders of tribal women empowerment -63.74% and tribal women


Business promotion (stakeholders of tribal women empowerment -62.64% and tribal women beneficiaries- 63.73%),

Betterment of economic status (stakeholders of tribal women empowerment -56.04% and tribal women beneficiaries-

68.63%),

Development of professional skill and competence (stakeholders of tribal women empowerment -67.03% and tribal


Improvement of saving ability (stakeholders of tribal women empowerment -59.34% and tribal women beneficiaries-

66.01%),





Preserving goods and services (stakeholders of tribal women empowerment -64.84% and tribal women beneficiaries-

67.65%),

Marketing goods and services (stakeholders of tribal women empowerment -73.63% and tribal women beneficiaries-

71.57%),

Obtaining benefits of development projects (stakeholders of tribal women empowerment -62.64% and tribal women


Participation in development projects (stakeholders of tribal women empowerment -58.24% and tribal women


Development of economic self-sufficiency (stakeholders of tribal women empowerment -60.44% and tribal women


Understanding constitutional safeguards and provisions (stakeholders of tribal women empowerment -68.13% and tribal


Understanding the activities of women’s commission (stakeholders of tribal women empowerment -58.24% and tribal


Protection of tribal women’s political reservation (stakeholders of tribal women empowerment -59.34% and tribal


Understanding the significance of adult franchise (stakeholders of tribal women empowerment -63.74% and tribal


Understanding the significance of electoral reforms (stakeholders of tribal women empowerment -62.64% and tribal


Enhancement of leadership development opportunities (stakeholders of tribal women empowerment -61.54% and tribal


Participation in political activities (stakeholders of tribal women empowerment -67.03% and tribal women


Improving political bargaining power (stakeholders of tribal women empowerment -55.24% and tribal women


Enhancing political status (stakeholders of tribal women empowerment -53.85% and tribal women beneficiaries-

64.37%),

Managing political crises (stakeholders of tribal women empowerment -56.04% and tribal women beneficiaries-

66.34%),

Achieving political equality (stakeholders of tribal women empowerment -72.53% and tribal women beneficiaries-

63.40%),

Participation in political movements (stakeholders of tribal women empowerment -53.85% and tribal women


Participation in elections (stakeholders of tribal women empowerment -56.04% and tribal women beneficiaries-

66.67%),

Assertion of rights and privileges (stakeholders of tribal women empowerment -58.24% and tribal women beneficiaries-

66.99%), and

Networking with civil society institutions (stakeholders of tribal women empowerment -57.14% and tribal women

beneficiaries- 63.73%).

Testing of Hypotheses

H1. The stakeholders of tribal women empowerment and beneficiaries of tribal women development projects in Karnataka State

have not obtained adequate communication support from the media.

The data reveal that the stakeholders of tribal women empowerment and beneficiaries of tribal women development projects in

Karnataka state were not happy with the media support for various tribal development projects in Karnataka state. Hence, the

above hypothesis stands proved according to the data analysis.

H2. The stakeholders of tribal women empowerment and tribal women beneficiaries have found that communications media did

not play a vital role in the empowerment of tribal women.

The data reveal that stakeholders of tribal women empowerment and tribal women beneficiaries have perceived that

communications media did not play a crucial role in the empowerment of tribal women. Hence, the above hypothesis stands

proved according to the data analysis.

LIMITATIONS OF STUDY

It was not practically possible for the researcher to enjoy the benefit of accessibility of data to all the stakeholders of tribal women

empowerment and tribal women beneficiaries due to large numbers and lack of time. The usual limitations of the survey method





such as time, human inadequacies, resource constraints, recollection and communication were experienced by the researcher.

Incidental, purposive and stratified sampling methods were followed in selecting the respondents. Though much care has been

taken to collect the primary data, the memory bias on the part of the respondents cannot be completely ruled out.

IMPLICATIONS OF STUDY

The state has the obligation to empower the tribes who are excluded from the mainstream of national development. The central,

state and local-self governments have a responsibility to formulate suitable policies and develop the tribes who should not be

treated as mere receivers of benefits but they must be actively involved in policymaking, planning, implementation and evaluation

of tribal development programmes in a pluralistic society like India. The tribal development projects should be designed after

proper analysis of the situations and consultation with the specialists and beneficiaries. The following suggestions are made with a

view to improve the status of tribal women in the present times.

Tribal Women Empowerment Related Suggestions:

The tribal development project authorities should conduct field survey and identify deserving tribal women beneficiaries

for providing financial assistance.

The tribal development project authorities should identify the worthy tribal women beneficiaries and extend financial

benefits.

The tribal development project authorities should design the development projects in consultation with the tribal women

beneficiaries.

The tribal development project authorities should give proper orientation to the office-bearers, members and officials

about the empowerment of tribal women.

The tribal development project authorities should deliver the services based on corporate social responsibility.

The tribal development project authorities should enable the tribal women beneficiaries to develop civic responsibility.

The tribal development project authorities should enable the tribal women beneficiaries to achieve the goal of gender

equity and justice.

The tribal development project authorities should enable the tribal women beneficiaries to achieve the goal of human

rights protection.

The tribal development project authorities should enable the tribal women beneficiaries to achieve the goal of social

harmony and unity.

The tribal development project authorities should enable the tribal women beneficiaries to achieve the goal of

environment protection.

The tribal development project authorities should enable the tribal women beneficiaries to achieve the goal of cultural

promotion.


community development.

The tribal development project authorities should enable the tribal women beneficiaries to fight against the oppressive

forces in the society.

The tribal development project authorities should enable the tribal women beneficiaries to adopt the scientific

innovations and technological advancements.

The tribal development project authorities should enable the tribal women beneficiaries to develop leadership qualities.

The tribal development project authorities should enable the tribal women beneficiaries to develop entrepreneurship.

The tribal development project authorities should enable the tribal women beneficiaries to develop personality.

The tribal development project authorities should enable the tribal women beneficiaries to participate in the

development projects of government and non-government agencies.

The tribal development project authorities should enable the tribal women beneficiaries to sensitize the policy makers

and officials about their developmental obligations.

The tribal development project authorities should enable the tribal women beneficiaries to become aware of

opportunities of empowerment of women.

The tribal development project authorities should enable the tribal women beneficiaries to work for social equality.

The tribal development project authorities should enable the tribal women beneficiaries to achieve the goal of social

freedom.

The tribal development project authorities should enable the tribal women beneficiaries to gain the benefit of social

justice.

The tribal development project authorities should enable the tribal women beneficiaries to fight against superstitions.

The tribal development project authorities should enable the tribal women beneficiaries to fight against human

trafficking.

The tribal development project authorities should enable the tribal women beneficiaries to fight against human rights

violation.





The tribal development project authorities should enable the tribal women beneficiaries to achieve the goal of small

family.

The tribal development project authorities should enable the tribal women beneficiaries to prevent atrocities against

women.

The tribal development project authorities should enable the tribal women beneficiaries to prevent female infanticide

and foeticide.

The tribal development project authorities should enable the tribal women beneficiaries to fight against the drug and

liquor addiction.

The tribal development project authorities should enable the tribal women beneficiaries to fight against the child labor

and bonded labor.

The tribal development project authorities should enable the tribal women beneficiaries to fight against the dowry

system and fight against early marriage.

The tribal development project authorities should enable the tribal women beneficiaries to gain the benefit of social

mobility.

The tribal development project authorities should enable the tribal women beneficiaries to actively in participate in

social service.


agricultural development and cottage industrial development.

The tribal development project authorities should enable the tribal women beneficiaries to gain control over their

economic assets and achieve financial independence.

The cooperatives should enable the tribal women beneficiaries to gain equal property rights.

The tribal development project authorities should enable the tribal women beneficiaries to achieve family infrastructural

development.

The tribal development project authorities should enable the tribal women beneficiaries to gain self – employment

opportunities.

The tribal development project authorities should enable the tribal women beneficiaries to improve production and

productivity.

The tribal development project authorities should enable the tribal women beneficiaries to achieve the goal of business

promotion.

The tribal development project authorities should enable the tribal women beneficiaries to improve their economic

bargaining power.

The tribal development project authorities should enable the tribal women beneficiaries to develop professional skill and

competence.

The tribal development project authorities should enable the tribal women beneficiaries to improve their saving ability.

The tribal development project authorities should enable the tribal women beneficiaries to preserve the goods and

services.

The tribal development project authorities should enable the tribal women beneficiaries to market their goods and

services.

The tribal development project authorities should enable the tribal women beneficiaries to avail the benefits of

development projects.

The tribal development project authorities should enable the tribal women beneficiaries to participate actively in the


The tribal development project authorities should enable the tribal women beneficiaries to achieve the goal of economic

self-sufficiency.

The tribal development project authorities should enable the tribal women beneficiaries to understand the constitutional

safeguards and provisions.

The tribal development project authorities should enable the tribal women beneficiaries to understand the activities of

women’s commission.

The tribal development project authorities should enable the tribal women beneficiaries to gain the benefit of women’s

political reservation.

The tribal development project authorities should enable the tribal women beneficiaries to understand the significance of

adult franchise.

The tribal development project authorities should enable the tribal women beneficiaries to understand the significance of

electoral reform.

The tribal development project authorities should enable the tribal women beneficiaries to actively participate in the

political activities.

The tribal development project authorities should enable the tribal women beneficiaries to improve their political

bargaining power.

The tribal development project authorities should enable the tribal women beneficiaries to enhance their political status.

The tribal development project authorities should enable the tribal women beneficiaries to manage political crisis.





The tribal development project authorities should enable the tribal women beneficiaries to achieve the goal of political

equality.

The tribal development project authorities should enable the tribal women beneficiaries to participate actively in

political movements.

The tribal development project authorities should enable the tribal women beneficiaries to participate actively in

elections.

The tribal development project authorities should sensitize the tribal women beneficiaries to demand their rights and

privileges.

The tribal development project authorities should enable the tribal women beneficiaries to network with civil society

institutions and to understand the role of getting together.

Tribal Development Communication Related Suggestions

The media services should be decentralized in the tribal areas to facilitate active participation of beneficiaries in the


The tribal development projects should have communication component in order to organize suitable media campaigns.

Area-specific communication services should be rendered in the tribal areas.

Adequate funds should be allocated for launching tribal development communication campaigns.

Adequate tribal development communication infrastructural services and facilities are required in the tribal areas.

The media experts should design tribal development communication projects.

The tribal development communication projects should have qualified and trained communication professionals.

Adequate tribal development project specific communication campaigns should be launched in the tribal areas.

Adequate participatory communication opportunities should be created in the tribal areas.

Tribal development communication projects should lay emphasis on tribal women empowerment.

Tribal development communication projects should lay emphasis on improving media literacy of tribal women.

Tribal development communication projects should lay emphasis on improving constitutional literacy of tribal women.

Tribal development communication projects should lay emphasis on improving environment literacy of tribal women.

Tribal development communication projects should lay emphasis on improving development literacy of tribal women.

Tribal development communication projects should lay emphasis on human rights literacy of tribal women.

Tribal development communication projects should lay emphasis on social change among tribal women.

Tribal development communication projects should lay emphasis on economic development of tribal women.

Tribal development communication projects should lay emphasis on entrepreneurship development of tribal women.

Tribal development communication projects should lay emphasis on political leadership development of tribal women.

Tribal development communication projects should lay emphasis on crisis management capacity development of tribal

women.

Tribal development communication projects should lay emphasis on inclusive and integrated development of tribal

women.

CONCLUSION

The future agenda for the policy makers, administrators and other professionals at the grassroots level must deal with expansion of

communications media, manpower development, resource mobilization, improving the delivery system, implementation of

development programmes, involvement of women and weaker sections in the implementation of programmes and evaluation of

the role of communications media should be addressed. The Government of India, State Government of Karnataka, Non-

Government Organizations, media institutions, community organizations, educational institutions, research institutions and

development institutions have to work in close collaboration toward designing tribal development management in general and

delivering tribal women empowerment oriented communication services in particular.

REFERENCES

1. Bathla, Sonia. (2000). Women, Democracy and the Media. New Delhi: Sage Publications.

2. Bhowmik, Krishna Nath. (2005). Status and Empowerment of Tribal Women in Tripura. India. Tripura: Gyan

Publishing House.

3. Devon, Abbott Mihesuah. (2003). Indigenous American Women: Decolonization, Empowerment, and Activism. U of

Nebraska Press, pp. 246.

4. Kumar, Mahesh S. (2006). Television in Tribal Development: A Study with Special Reference to Jhabua District of

Madhya Pradesh (Doctoral Thesis Unpublished). India. University of Mysore.

http://www.google.co.in/search?tbo=p&tbm=bks&q=inauthor:%22Krishna+Nath+Bhowmik%22

http://www.google.co.in/search?tbo=p&tbm=bks&q=inauthor:%22Devon+Abbott+Mihesuah%22





5. Kumar, Sunil. (2013). Human Rights and Empowerment of Tribal Women. Shodh Sanchayan, 4(2), 1-4.

6. Lipi, Mukhopadhyay. (2002). Tribal women in Development, Publication Division. India. New Delhi, Ministry of

Information and Broadcasting.

7. Mann, K. (1987). Tribal Women in a Changing Society. Delhi: Mittal Publications.

8. Mariswamy. (2006). Role of Communication in the Development of Tribes of Karnataka State: A Study (Unpublished

Thesis). India. Karnataka State: University of Mysore.

9. Ravichandran, N. (2014, February 8-9). Tribal Women Education in India: Opportunities and Challenges. In National

Seminar on ‘The Status of Tribal Women in India: Issues, Challenges and Strategies for Empowerment. Guntur:

Acharya Nagarjuna University.

10. Sen, Jyothi. (1978). Status of women among Tribes in Tribal women in India, pp. 43. Calcutta: Indian Anthropological

Society.

11. Sharma, S. P., & Mittal. (2008). The Tribal Women in India. New Delhi: Radha Publications.

12. Sindhi, Swaleha. (2012). Prospects and Challenges in Empowerment of Tribal Women. IOSR Journal of Humanities

and Social Science (JHSS), 6(1), 46-45.

13. Wolf, Marshall. (1995). Globalization and Social Exclusion: Some Paradoxes. In Gerry Rodgers, Charles Gore, Jose B.

Figueiredo (eds.), Social Exclusion: Rhetoric, Reality, Responses, pp. 81-101. Geneva: ILO.

14. Zoonen, Liesbet van. (1996). Feminist Perspectives on the Media. In Curran, James and Michel Gurevitch (Eds), Mass

Media and Society, pp. 34. UK. London: Edward Arnold.

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ROLE OF MOBILE COMMERCE IN THE BAY-ISLANDS & GLOBAL BUSINESS

Dr. N. Rajavel10

ABSTRACT

Higher education provides a proper solution to each problem of human beings, trade, commerce, industry, social, spiritual,

culture, political, agriculture, administration, services, and the quality of overall environment. Commerce includes all

economic activities of financing, transportation, saving the owner from the unexpected losses, storage, disseminating the

information about the goods and services, buying and selling of the goods and services, and for further production of goods &

services. Hence, it covers almost all the activities of the human life cycle. That is to say Banking, Transport, Insurance,

Storage, Advertisement, Buying, Selling of goods & services.

The services include teaching, health care, entertainments, and tourism. Initially the commercial transactions among the then

population took place in person starting from the barter system named as B-Commerce (Barter Commerce). Then it grew

slowly to value exchange system had the name as V-Commerce (Value Commerce) then to P commerce (Personal

Commerce), T-Commerce (Telephonic Commerce) and E-Commerce (Electronic Commerce and presently reached to M-

Commerce (Mobile Commerce due to the need of Technology. All these application of the usages of the technology on the

commercial activities are called Techno Commerce, which started its role in all such economic transactions carried out across

national borders between two or more persons i.e. Global Business especially in the Islands Business.

Role of Mobile commerce in Islands Business and Global Business has been becoming very vital. How the M-Commerce

applications are helping the Global Business and Mainland-Islands Business is being explained clearly with the relevant data.

Possible problems and hindrances in the M-Commerce Application are highlighted and the suitable measures to overcome the

problems are suggested. Need for M-Commerce strategy in every organization, M-Commerce in curriculum, creation of legal

platforms on the part of the government are stressed for the further growth and development of the Islands and Global

Business.

KEYWORDS

M-Commerce, Global Business, T-Commerce, E-Commerce, P-Commerce, V-Commerce etc.

INTRODUCTION

Education is a unique future that plays the most dominant role in the life and evaluation of humankind. It is important, as eyes to a

man, to his life. A man who is fully educated is the real human resource and is considered as an important, a valuable, and

tangible asset to the country. The economic development of the country depends fully upon such real assets. Hence, education –

Primary, middle, secondary, higher secondary, college - plays a vital role in shaping, sharpening and refining the personality of

the person. In the Human Life Cycle the “Education” has been given a supreme place of special importance because it provide

ideas and human resource to give shape to the future and also sustain to all the other levels of education. Higher education

provides a proper solution to each problem of human beings, trade, commerce, industry, social, spiritual, culture, political,

agriculture, administration, services, and the quality of overall environment.

WHAT IS COMMERCE?

Commerce includes all economic activities of financing, transportation, saving the owner from the unexpected losses, storage,

disseminating the information about the goods and services, buying and selling of the goods and services, and for further

production of goods & services. Hence, it covers almost all the activities of the human life cycle. That is to say Banking,

Transport, Insurance, Storage, Advertisement, Buying, Selling of goods & services. The services include teaching, health care,

entertainments, and tourism. These activities may take place from Manufacturers to Distributors (M2D), Producers to

Wholesalers(P2W), Seller to Seller (S2S), Buyer to Seller (B2S) and Buyer to Buyer (B2B), Seller to Consumer (S2C), and all

these can also be expressed in terms of Business to consumer (B2C), Business to Business(B2B) and sometimes Consumer to

Consumer (C2C). Different authors explain these activities in their own style by keeping the base activities of the commerce.

FROM B-COMMERCE TO P-COMMERCE TO V-COMMERCE

Initially the commercial transactions among the then population took place in person starting from the barter system (goods to

goods, goods to service and service to goods), though the name was not given, now the author wish to give the name for such

commerce transactions as B - Commerce (Barter Commerce). Then it grew slowly to value exchange system (goods to money,

10Professor & Head, Department of Commerce, J. N. Government College, Port Blair, India, [email protected]






Service to money). That is buying and selling of goods and services by fixing the value in terms of money. However, the name

was not given, now the author wish to give the name for such commerce transactions as V-Commerce (Value Commerce). Since

then the basis “value” has occupied permanent position in the exchange of goods and services and in all the commercial

transactions. In addition, another important factor of commercial activities is the methods of buying and selling of the goods and

services. During those days the movements of the people was comparatively less and accordingly their needs were set up and

fixed. They (both buyers and sellers) had more time. That is why consumers used to go to the place of goods and services and

personally vouched and verified and after that, only they used to consume the goods and services. The sellers too have more time

for the buyers. So commercial transactions were fully based upon the Personal Visits and Personal Vouching and Personal

Verifications. Hence, such practice had become the Personal Commerce i.e. P-Commerce.

NEED FOR TECHNOLOGY

Now the situation is totally changed. People used to converse that they have no time. They want everything when they require

whether it is service or goods. They want everything, like particulars, availability, ingredients, usages, prices, quality, quantity and

finally the goods and services, immediately. Hence, to satisfy the needs of the consumers, the commercial activities and

transactions required the absorption of the advantages of the technology.

TECHNO COMMERCE

As everybody knows that the growth and development of technology has been providing number of advantages to the lives on the

earth. Since the commercial activities are the base for everything, it has become the basis for all the developments like political

development, educational development, technical development, social development, cultural development and economic

development in any region/country. To bring the ultimate purpose of life, the goods and services are to be produced in time,

distributed in time, reached in time, with the expected standard & quality to satisfy the needs of the final end user. The application

of the principles and functions of technology on the commercial activities is called Techno Commerce or Commerce Tech. The

usage of functions of technology on all commercial activities brings number of advantages to the business and all related persons

in the business including consumers and society as a whole.

T-COMMERCE & E-COMMERCE

Now the present world is a computer world, busy scheduled life, everybody wants a day should have more than 24 hours. Techno

Commerce has been fulfilling the needs of the people. First T-Commerce and T-Business i.e. Telephonic Business and Telephonic

Commerce were fulfilling the needs of the people i.e. consumers. Again, the movements, needs, and movements with needs of the

people started increasing. T-Commerce could not travel with the speed of the consumers’ need and their expectation and as a

result, the Techno Commerce introduces a new Computer Based method of business / commerce through the Electronic

Communication / Mail, i.e. E-mail that was widely used to transact the commercial activities including the financial transactions

which was called as the E-Commerce.

The visible drawbacks, like cost factor, space factor, time factor, of the B-Commerce, P-Commerce, T-Commerce, E-commerce

compelled the Techno Commerce Professionals to go for the new innovation and inventions to carry out the commercial activities

in the areas of banking, transport insurance, storage, and advertisements, buying and selling of goods and services with the help of

mobile phones. Comparatively the mobile phones are less cost, it is supported by the radio-based wireless technology. Mobile

phone reaches the needy customers in time. Mobile phones can reach from one corner in globe to the ultimate - end consumer of

the other corner just by pressing a button in the mobile. This technology is the absolute need of this hour and it is named as the M

Commerce.

MOBILE COMMERCE

As is already mentioned, the present style of human life is fast and quick requirements. If they think now means, their expectation

is that they should be satisfied immediately. If you go to the outdated T commerce, P-Commerce, and even the most recent E

Commerce, you require number of devices or you have to go the places where these resources are available may be to a browsing

center and to somebody’s house who keeps all the devices. Then relationship factor, economic factor, time factor, other

performance factor etc. will be there to consider. Hence, the present- high moving – real time-need–satisfaction based consumers

want their services and goods within no minute. Therefore, the goods and service providers are in need of a technical - less cost-

time saving - satisfaction centered device to carry out the commercial transactions. That device is Mobile Commerce or M-

Commerce. It is convenient, small handset, supported by the radio based wireless technology. It will reach the consumers who

demand for goods and services with their requirements of their choice in-time such as Tours and Travelling, booking of tickets

and hotels, Education by accessing the e books etc., In Commerce & Industry by getting the information about the availability of

goods and services, by purchasing and selling of goods and services etc., In Entertainment in booking of cinema theatre seats,

downloading games, music and pictures etc., and in Medical & Hospital by accessing the doctors and hospital information etc.,





GLOBAL BUSINESS

Global Business means all such economic transactions carried out across national borders between two or more persons.

Traditionally the international business means only the Export Trade and Import Trade. However, now-a-days the Global

Business includes many more transactions like foreign direct investment (FDI), joint ventures, international business licensing,

international business franchising, and international business management contracts. The central point vested here is the

“Satisfaction” of the international Buyers. For this purpose, the Global Traders should incorporate the international considerations

in their thinking and planning, making decisions related to: How can they introduce themselves to the international buyers and sell

their ideas? How can they fit their good, or service into the international market? What will be the requirements of total

investments and from where those may be arranged? How can they arrange for the goods and services to be sent to international

buyers? Should they need to produce or should they import and send? What are the formalities to be complied with? What are the

Global Competition-visible, invisible, automatic and secrete, Threats (direct and indirect), Fining out the ways and means to

counteract such competition and threats. Global Business involves in number of complex Decision Making Process.

MOBILE COMMERCE & GLOBAL BUSINESS

The rapid growth of mobile commerce is being driven by a number of positive factors - the demand for applications from an

increasingly mobile customer and consumer base; the rapid adoption of online commerce, and technological advances that have

given wireless handheld devices advanced capabilities and substantial computing power. In a recent survey, it is found out that

mobile consumers across about 20 countries gained a deeper understanding of the global trends affecting mobile user behavior

across multiple industries.

In an American Survey, the mobile transactions show a dramatic growth, increasing nearly six fold, from $25 million in 2008 to

141 million in 2009 and by 2010 it crossed $500 million. Globally consumers are expected to spend $ 119 billion by 2015 through

their mobile phones, accounting for 8% of all e commerce activity as per the ABI Research. India managed to go to the second

rank after the China in terms of mobile subscribers. India in the month of March 2011 has the base of 811 million mobile users.

As per Nielsen’s Report on 1st April 2014, M Commerce activity trails at just 08% in India.

Now in India M Commerce market growth is very low. The scope of the M Commerce in India is confined to the utility bill

payments, banking transactions. Service providers like Vodophone, Airtel provide the services in transacting money, booking

tickets on railway and other utility services.

In the Banking Sector, few banks like State Bank of India, Axis Bank, ICICI Bank, IDBI etc., started giving their Mobile services.

As far as the Global Business is concerned, India has to travel a very long distance to elicit and scramble the benefits of the

Mobile Commerce. For the further growth and development of the Global Business through M Commerce, the following services

may be taken into consideration and the new research work can be started.

Merchants can be located, information including the location details can be stored and the same can be used by number

of merchants, customers i.e. buyers and sellers at national and international level.

Through M- Commerce, sales can be shifted to digital channels by targeting the consumers based on the stored portfolio

of the commercial products.

Through M commerce, consumers at national and international level can be helped in saving time, saving money, and in

finding the products that are right for them.

Through M- Commerce, the consumers and customers can be satisfied by giving their expected benefits by reducing the

search and support costs.

Maximizing the return on marketing investment by gathering valuable data about consumer behavior through mobile.

Offering access to financial services via any mobile device, including feature phones and smart phones.

Provision of mobile banking via a cost-efficient solution that integrates with your existing platforms.

MOBILE COMMERCE & MAINLAND - ISLAND BUSINESS

Andaman and Nicobar Islands are located in the Bay of Bengal. It is popularly called as “The Bay Islands”, constitute the remotest

region of our country. These islands were once coined as KALAPANI (the Black water) indicating the dreaded transportation,

punishment of the British Government of India. The inhabitants of these islands are scattered far-flung and wide over the islands.

However, due to the location of the small villages, inhabitants are cut-off from civilization and from the source of supply of

essential commodities.

The seat of Administration is at Port Blair, the Capital of Andaman & Nicobar Islands that is connected with Kolkota by a sea

distance of 1225 Km and with Chennai by 1191 Km and with Vishakhapatnam by 1200 Km Even for Onion, tomato and potato

(called as primary vegetable by Dr. N. Rajavel: 1991) people of A & N islands used stand in “Q” when the ships arrived.

Information was sent by post by sea mail, which will take months together to reach the destinations. From salt to sleeper, rice to





wheat Atta, bi-cycle to car the people, used wait months together since the information were reaching much delayed. Even after

getting the goods and services, the ward satisfaction will be very far away.

Now the whole scenario has been changed. Consumer, buyers, traders are directly getting their necessaries just by pressing a small

button in their handheld small mobile. They get all information about the size, quantity, quality, mode of transportation, place of

delivery and hence everybody enjoys practically what a satisfaction is.

Island Businessmen, Inter-Island Businessmen, Intra-Island Businessmen are able to supply the goods and services from the

mainland of India and from the Capital of A& N Islands i.e. Port Blair or from any part of these islands and hence they are able to

keep up their words. Business develops, standard of living increased, Life Style changed, and people in these islands are living

healthy and wealthy. Everybody from Port Blair to Indira point is happy. This is only because of the latest technology of M

Commerce.

There are more 9670 commercial establishments having linkages with the Mainland of India and Capital of A&N islands for their

essential goods and services, luxury goods and services, knowledge and consultations. Orders are going by Mobiles, Tickets are

booked through mobiles, information is received through mobiles and feedback is going through mobiles. During 1980s and

1990s getting a book for a student, a medicine for a patient from mainland was a matter.

Now it is not a matter. Order by 0600 Hrs. through Mobile, books & Medicines reaches Port Blair when flight reached to Port

Blair within a maximum of 04 Hrs. Mobile Commerce for the Island Population is a God Gifted Technology. Thanks to the

Innovator and inventor. This area is the suitable area for their research. Therefore, the students can select this topic in A &N

islands for their Ph.D. Research.

LIMITATION OF THE M COMMERCE

Lack of Knowledge

Some businessmen still they will have to understand the importance of the consumers and customers to the Commerce / Business

and the units. Also still, some businessmen are in the brackets of the lack of knowledge on how to use the mobile phone and how

to converse clearly to the consumers. If he or she does not know how to use the mobile, it will slow down the M commerce usage.

Identification Problem

All the economic activities are necessarily to be undertaken between two or more well-known persons since it is involved in

financial issues and matters. As is already explained, P–Commerce, B-Commerce have the opportunity to meet each other

whereas in the M Commerce, identification of the parties is really a problem. Who is in the other end is the real problem in the M

Commerce. Hence, it is a great handicap to have business with the new consumers.

Connectivity Problems

M-Commerce is a latest technology i.e. (Commercial Activities + a Device + a software + Network). Whole commercial

transaction fully depends on the connectivity. If there is slow bandwidth, then it will hinder the communication between the

parties to the commercial transactions through M-Commerce.

High Service Price & Investment

Due to the connectivity problems and slow in the bandwidth and repeated trials with the available device, then one has to go far

the use of advanced hardware to faster the transmission-rate but the service cost will be high and accordingly the device should

also be invested at heavy rate.

Limited facility in the Key Board

Comparatively, the Mobiles will have less number of keys with limited space to operate and small size of font and screen, which

will normally consume more time. These limited facilities may discourage the mobile users.

Unsuitability to the Remote Place

The main purpose of the M-Commerce is the Real-Time usage, personalization of consumers, targeting the sales to the section of

the population, locating consumers etc. However, if a businessman establishes his unit in the remote place or if he wants to locate

a consumer in a remote place where the connectivity services are nil or poor, the purpose of the M-commerce will fail.





Feeling of Insecure

Generally, the storage capacity is less in the mobile all conversations between the parties of M-Commerce cannot be stored. This

is more particular in Global Business. So even after the completion of the M-Commerce transactions, there may be some feelings

of insecure until the performance from the both the sides is completed.

Unsuitable for Dispute Settlement

If any Dispute comes, the settlement in person is the only solution. However, in the M-Commerce, it is very difficult to settle the

grievances and disputes through the mobile. It is a real problem and seriousness will be more in case of the global business and

under such circumstances, normally the traders will slow down the speed of the M-Commerce Application and usage.

Authentication & Identity Problem

When the transactions are made through Mobile, the receiver of the message will have the problems of the identity, he has to

confirm before the performance of the transaction, the request, and order came from the right person without the feeling of

insecure. There are chances for the fraudulent actions.

SUGGESTIONS

The following are few suggestions to make M Commerce effective:

The business ventures transacting through Mobile Commerce are suggested to have a code / secret language / words

among them to avoid the fraudulent interference. This is absolutely essential in case of transactions at Global level

Awareness Programs about M- Commerce are to be organized in the Higher Educational Institutions particularly in the

Professional Institutes.

Regional Languages are to be introduced in the Mobile Services so that it will become popular among the rural masses.

After becoming the required quantum of popularization, then the importance of the Mobile Commerce in the Global

Business is to be stressed.

Legal provisions are to be made available to reduce the cybercrimes so that the parties to the M-Commerce will not have

insecure feeling at the time of business transaction both nationally and globally.

Separate Rules, Regulations and Other Provisions are to be constructed and followed for Authentication of subscriber’s

identification for the secured transactions through M Commerce.

A Special subject in Commerce Curriculum in the name of B. Com (T-commerce) and in M.Com (T-commerce) is to be

introduced with the syllabi of E Commerce and M Commerce.

The authorizes for the service providers must ensure that there will be no problems with respect to the connectivity.

Necessary arrangements and facilities are to be made so that even the Rural Masses can also use the M-Commerce

application.

A proper suitable Arbitration Machinery is to be organized to settle all the dispute arises at the time of implementing,

application of M-Commerce Transactions. This arrangement is to be made for the Global Traders also.

A Strong MIS is to be developed in every business organization with a view to implement the M-Commerce application.

A Training Program on the M-Commerce and its importance, advantages etc. is to be suitably designed for all the

employees at all levels in the existing originations. This training program must be made compulsory to all the

employees especially to the top management level.

CONCLUSION

The Commercial Transactions made the economic activity of Commerce from the B Commerce to M-Commerce. Role of M-

Commerce, though it is very low in our India, has started increasing. The range of devices that are enabled for mobile commerce

is growing, having expanded in recent years to include smart phones and tablet computers. The increasing adoption of electronic

commerce provided a strong foundation for mobile commerce, which is on a very strong growth trajectory for years to come.

Though Andaman and Nicobar Islands constitute a part of our Country, practically speaking, these islands are situated far away

from other Global Countries. The business transactions carried by the traders of Andaman and Nicobar islands with the traders of

the mainland of India is something more than a Global Business.

The Role of M-Commerce applications in the Island Mainland Business are very vital. Majority of the Traders and consumers get

their goods and services through the Mobile Commerce only. Once if the impediments are removed and suitable strategy is

framed in the light of the suggestion given above, it is strongly believed that the Economic Development with other political,

Social, Cultural, Technical and Educational development will be increased and hence the M-Commerce Application can

contribute a lot to the National Income of our Country in real sense.





REFERENCES

1. Rajavel, N. (1996, January 16-31). How to ensure faster the Growth in Andaman and Nicobar Islands. Madras:

Industrial Herald.

2. Rajavel, N. (2013, August). A Study on Accounting Practices by the Business Units in A & N islands. Journal EIRC

NEWS, Col 6 No. 07, 17-23. Kolkata: Institute of Cost Accountants of India.

3. Rajavel, N. (1998). Tourism in Andaman and Nicobar Islands. Delhi: Manas Publications

4. Rajavel, N. (2006). Planning for Growth & Development. Delhi: Kalpaz Publications.

5. Rajavel, N. (2007, October-December). A Study on Academic Freedom in the Quality of Higher Education. New

Frontier in Education (J), 40(4).

6. Whyte, W. F. (1959). Man and Organization. Homewood, III: Richard D. Irwin Inc.

7. Retrieved from https://webappseogeeks.wordpress.com/

8. Retrieved from http://www.investopedia.com/terms/m/mobile-commerce.asp

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POLICY FRAMEWORK TO DEVELOP FOOD PROCESSING INDUSTRY IN HARYANA

Dr. Manoj K. Sharma11 Muskan Nagi12

ABSTRACT

Food Processing Industries are of the major contribution to national income. At present, an estimated 2248 companies are

registered as food processing units, which are engaged in processing of food grains, fruits and vegetables. Among many states

in India, this paper focuses on Food Processing Industries of Haryana. The paper focuses on demographic, economic, and

infrastructure, which leads to Food Processing Industries in Haryana. The various variables such as employee skills,

technologies and job opportunities are studied. It also lays the fair idea about future investment. This is because about 75% of

population is depended on agriculture. Slowly and steadily, Food processing industries are becoming one of the major leading

industries of this state. There is no doubt that this sector is growing, but still it is lacking behind in the growing world market.

In addition, one of the reason could be improper implementations of polices or policies are not framed correctly.

KEYWORDS

Food Processing, Productivity, Haryana etc.

INTRODUCTION

Food processing is the process of transforming of raw ingredients into food, or of food into other forms. Food processing

industries takes clean, harvested crops, butchered animal products and uses these to produce long shelf-life food which is

attractive, and marketable. The food processed industries are divided into the following broad segments: Primary processed food -

which includes products such as fruits and vegetables, packed milk, unbranded edible oil, milled rice, flour, tea, coffee, pulses,

spices, and salt, sold in packed or non-packed forms. Value-added processed food - which includes products such as processed

fruits and vegetables, juices, jams, pickles, squashes, processed dairy products (ghee, paneer, cheese, and butter), processed

poultry, and processed marine products, confectionary, chocolates, and alcoholic beverages.

The state government has formulated the Government of Haryana Industrial and Investment Policy-2011. The new industrial

policy lays particular emphasis on further strengthening the base of the manufacturing sector besides promoting knowledge based

& high tech industries, efficient use of energy, conservation of resources and pragmatic environmental policies for sustainable

development. Development of infrastructure through Public-Private Partnerships is also one of the thrust areas. While there is no

separate policy for the Agro Processing sector, Agro-based, Food Processing and Allied Industries have been laid down as the

thrust areas in the Industrial Policy. Further, to facilitate capacity building and cater to the needs of skill development in the food-

processing sector, National Institute of Food Technology, Entrepreneurship and Management (NIFTEM), has been set up by the

Ministry of Food Processing, Government of India in Sonepat. The institute imparts training and offers courses in the field of food

technology and other management streams.

OVERVIEW OF INDIAN FOOD PROCESSING INDUSTRY

In the post-independence period, India witnessed rapid growth in food- processing sector specifically during 1980s. It followed

the first phase of the Green Revolution that had resulted in increased agricultural production and the need for its post-harvest

management. The importance of the sector was realized by the business community leading to diversification from grain trading

to processing. Initially it was, rice processing which was followed closely by wheat milling, paper and pulp industry, milk

processing sector, jute industry, sugarcane processing and oils extraction through solvent plants. In some areas like the solvent

extraction industry, the growth in installed processing capacity has been far higher than the supply of the raw materials. However,

in other areas like fruits and vegetable processing, the growth has not been encouraging due to poor demand for processed

products by the consumers. In such cases, the industry has also not been able to develop the demand adequately. The low levels of

processing are driven primarily by the food habits of the population. Fresh fruits and vegetables are preferred compared to

processed fruits and vegetables. Even after a strong agricultural production base, India’s food processing industry is still under

developed. The highest share of the processed food is in the dairy sector, where 35% of total produce is processed, of which only

15% is processed by the organized sector.

The processing level is around 2.2% in fruits and vegetables, 21% in meat and poultry products. Of the 2.2% processing in fruits

and vegetables only 48% is in organized sector remaining in unorganized sector. Food and food products are the biggest

consumption category in India, with spending on food accounting for nearly 21% of India’s GDP and with a market size of Rs.

9,050 billion. The share of food processing industry in GDP has gone up to Rs.44,93,743 crore in 2009-10 from Rs 32,54,216

11Professor, University Business School, Panjab University, Chandigarh, India, [email protected] 12Research Scholar, University Business School, Panjab University, Chandigarh, India, [email protected]







crore in 2005-06, with Compound Annual Growth Rate (CAGR) of 8.40%. CAGR for total manufacturing sector during the same

period has been 9.35 %.

Demographic Overview

Haryana ranks 20th in terms of area and 16th in terms of population when compared to other Indian states in the country. The

state has 21 administrative districts with union territory of Chandigarh as its capital, which is also administrative capital of the

state of Punjab. The state surrounds the national capital city, New Delhi, from three sides with around 40 per cent of the National

Capital Region (NCR) falling in Haryana.

Table-1


Economic Overview

Since 2005, the average annual growth rate of the state economy has been 9.3 percent. The state’s contribution to the country’s

GDP is around 3.5 percent. Agriculture contributes around 17 percent, industry 29percent and services the remaining 54 percent to

the state GDP. Key economic indicators are elaborated in the table below:

Table-2

Particulars Unit 2010-11 2011-2012 2012-2013

Gross State Domestic Product (GSDP) Rs. Crore

Constant(2004-05) Price 165960.36 179097.00 191820.76

Current Prices 265033.50 307605.61 353440.44

Economic Growth Rate as per GSDP Percent

Constant Prices 9.30 7.90 7.10

Per Capita Income Rs.

Constant Price 59140 62927 66410

Current Prices 95135 109064 123554


Infrastructure Overview

Roads: Total road length in the state is approx. 27000 km.

Railways: As of March 2011, Haryana had a railway-route length of 1,540 km. Kurukshetra, Rohtak, Jind, Hissar,

Ambala, Panipat, Gurgaon and Jakhal are some of the important railway stations. There is a railway workshop at

Jagadhari.

Airports: There is a domestic airport at Chandigarh and civil aerodromes at Pinjore, Karnal, Hissar, Bhiwani and

Narnaul. The Indira Gandhi International Airport at New Delhi is located close to Gurgaon and Faridabad.

Power: As per the economic survey of Haryana, 2012-13, the total installed generation capacity is 8728.36 MW and

total power available stood at 293744 MW.





VARIOUS FACILITIES AVAILABLE TO FOOD PROCESSING INDUSTRY IN HARYANA

Status and Incentives

There are no APEDA notified Agri Export Zones in the state. Food Parks at Rai (Sonepat) and Saha (Ambala) are being

developed and maintained by HSIIDC. HSAMB is, however, implementing various projects in the state. These include,

Development of Apple Market at Panchkula. Development of new mandis and mandi modernization plan, Construction of Agro

Malls at Panchkula, Rohtak, Karnal and Panipat and the one at Rohtak is nearing completion and Cold Chain, ripening chambers,

grading sorting and packaging facilities (with NHM assistance) in 1st phase in 11 locations of the state and cold chain

infrastructure (with NHM assistance) in four locations of the state.

The Government of Haryana has provided certain Specific Incentives for Food Processing Industries:

Interest Free Loan up to 75 percent of the tax paid on the sale of goods produced in such industrial units is provided

under the Haryana Value Added Tax Act, 2003 for a period of 5 years from the date of start of commercial production.

This would be repayable after a period of 5 years.

New industrial units established within the State of Haryana are exempt from payment of Electricity Duty for a period

of 5 years from the date of commercial production.

Change of Land Use (CLU) charges for food processing units are levied @ 50% of normal rates in respect of units

established in the ‘B’ and ‘C’ Category Blocks.

Agro-based / food processing units/enterprises established under certain defined categories are entitled to 50%

concession in the stamp duty in respect of the land purchased or taken on lease for the said purpose.

No market fee is charged on the vegetables and fruits grown in the State, whether under the contract farming

arrangement or otherwise, and consumed as raw material by the food processing industry located within the State of

Haryana.

Wines/Liquors/Brandy etc. made from 100% fruits and Barley produced in the State is exempt from the Excise Duty in

certain defined Category Blocks.

No market fee is charged on agriculture and horticulture produce used as raw material by Food Processing Industries

within the State except wheat, paddy, oil-seeds, guar, sunflower seed, until, toria, taramira and cotton.

In addition to the above, the state government recognizes the potential of Special Economic Zones (SEZ) and the

importance of micro and small industrial units. The Industrial Policy gives numerous incentives under both these heads.

Potential Future Investment

They are the Potential Areas for Investment in the food processing industries in Haryana.

Based on raw material availability in the state and as per Vision Document for the Food Processing Sector in the state of Haryana

2013, the following have been identified as high processing potential segments:

Baby Corn / Sweet Corn: Primary processed / canned baby corn, IQF sweet corn, canned/dried products.

Dairy: Pasteurized Milk, ghee, Paneer, butter, cheese, ice-cream, curd, flavored yoghurt.

Meat and Poultry: Raw; Canned, Dehydrated, Frozen, ready to eat processed products.

Wheat: Atta, Maida, Breads, Biscuits, Noodles, Pasta, Cakes etc.

Rice: Variants of milled rice (Polished rice, unpolished rice, puffed rice, pressed rice, rice flour, broken rice), bran oil,

wine, rice milk, starch, silica, husk-based power generation.

Guava: Juice, Beverage, Jam, jelly, nectar, Ayurveda medicines and pulp.

Aonla: Ayurveda medicines, murabba, powder, hair oil, dry aonla fruit, mouth freshener Candied fruit, pulp in juices.

Potato: Chips, stacks, vegetables (Ready to Eat), powder, starch, wine, alcohol, snacks frozen potatoes.

Bajra: Bakery products, snacks and savouries.

Guar gum: Powder (used mainly for industrial purposes).

Citrus Fruits: Primary processing; Secondary processing, juice, kinnow wine etc.

Tomatoes: Canned, Sauces, paste, puree, juice, soup etc.

Cauliflower: IQF, Dehydration, dry powder.

Aloe vera: Pulp, juice, Ayurveda medicines.

Mushroom: Canned, Dried mushrooms, mushrooms based snacks.

There is need to strengthen the role of government in the state of Haryana for development of food processing industry. The

foremost is to provide congenial business environment for promotion of business culture in a typical traditional, rural dominated

and agricultural oriented politicians dominating the state.





In the last couple of years due to proximity of State of Haryana to National Capital Region, there has been rapid growth of

business in few regions of the State. However, not growth has taken place in the rural Haryana, where the socio economic life has

not changed much. The rural economy is primarily agriculture based and the development of state is going to be primarily linked

to growth in agricultural sector. This in turn is linked to adequate income originating from rural economy. One of the very

potential area is to promote agriculture sector through promotion of agro / food based industries which have very high both

backward and forward linkages to the rural economy prosperity. This calls for proper supply of inputs to the industries based on

agriculture products. These include the inputs factors like trained and skilled manpower to manage the businesses and supply of

technology to the high technology based techniques of production.

In the last few years there has been tremendous increase in the availability of engineering, management colleges in the state of

Haryana as in others part of India. However, there has been skewed distribution in growth of traditional sectors like

electronics/computers, etc., and here also the quality of education is poor and there is not well-designed growth, which has led to

closure of many institutes in recent years. Many factors are responsible for it, but the government regulatory mechanism is poor

and lack of vision on the part of government and others stake holders are primarily responsible for not meeting the requirements

of emerging food processing industries in the state of Haryana. The entire education system in Haryana is still lacking behind to

meet the competitive world food Industries based on science and technology, innovative techniques, modern processes, skills

development and in the supply of trained manpower for food processing industries in particular. The skill gaps present in various

segments of the food processing industry has been immense and no proper guidance in the form of proper policy framework is

available in the state of Haryana. This has created a situation where there is a wide gap between skills needed and skill available.

This is particular mostly felt in the food/agro processing industries as the technology required is new and it requires lot of support

from State in the form of subsidies, training programs, and above all the help and support of government, as it has provided to the

spread of green revolution and surplus food grains. Now it is time, the government has to again initiate policies to help to convert

the surplus food products into storable and less perishable products in the form of processed food items. If India is to make its

presence in the world market, then there is an urgent need to bridge this gap of providing the science and technology support to

the processing industries on a priority basis. There is a huge gap in demand and supply market of trained professional in this

industry. Available literature does suggest that there is a huge demand for skilled workers at all the stages in food processing

industry. The demand for skilled human resource is continuously increasing, but there is greater demand in unorganized sector

rather than organized sector as the organized sector is very small in respect to unorganized sector. This calls for greater support for

crating skills in processing industries as unorganized sector is not capable of bearing the cost of training and development of skills

.This calls for comprehensive science and technology policy initiatives from the Government of Land for the development of food

processing industry .Some of the science and technology policy initiatives required are:

Most of the technologies are not directed towards poor farmers. This is because the cash requirements are high for off

farm inputs and they require more water. Due to these reasons, poor farmers have achieved lower yields from modern

technologies. These technologies also carry increased uncertainty and risks in poor farmer’s fields.

Some of the technologies developed for harsh climates are highly unreliable due to lack of research into development,

assessment and refinement.

Resources are lacking to adopt modern technology.

Poor access to agricultural information as policies measures first reach farmers through mass media and extension

agents. Poor entrepreneurs and unorganized business unit, who are of low socio economic status, rely on informal

sources for technology information and their knowledge about technology can be easily distorted. Poor knowledge

about technologies is an important constraint to adoption of new technologies. We have seen that in case of spread of

green revolution most of the adaptation of technologies was supported by government agencies.

Sometimes technology reaches the unorganized sectors at the declining stage of product life cycle.

The present business environment of privatization and globalization has affected all the countries with an aggressive market based

economy. The industrial sector is dominating and agriculture is being commercialized due to private sector investment. The

technologies are generated based on demand, which is tremendous in view of changing life styles, changing socio economic

environment in favor of food processing industries. However, we know these technologies are not within the reach of unorganized

businesses and small farmers and the old technologies are getting out dated, as the products are not of the right quality to compete

in the new global markets. This calls for well thought policy initiatives for development of science and technology policy

initiatives in the state of Haryana. The state need policy measures to sustainable development of rural areas, which is need of the

hour to stop the migration of people from rural areas. Through the adoption of skilled-based techniques in rural areas, we can at

least stop the push factor migration and can reverse it by promoting better employment opportunities in rural areas in form of self-

sustaining income generating businesses in form of food/agro processing industries.

The present business environment do stipulates that managers can create businesses and people with the Management Skills

sustainable businesses can be promoted and developed. However, this requires a lot of managerial skills development, and

promotion of management education at the grass root level. In the rural sector of Haryana, it quite traditional and this culture of

hierarchy occupation i.e. if father is farmer than son has to be a farmer needs to be broken. Similarly, there is need for

diversification of farming activities in nontraditional crops and new businesses. This Hierarchical occupational trend has to be

stopped and this is possible through improving the mindsets and imparting new skills.





Following are few factors which are key responsible for lacking of modern skills among the rural population and they are ,low

Per capita income, not high rate of literacy in rural areas, lack of politician support, lack of enthusiasm to grow, overall

government policies and so on. Most of the current rural and unorganized sectors problems can be solved to great extent by

promotion of agro/food processing businesses in the State, for which a well-coordinated science and technology policies is need of

the hour and skills development of rural area population is needed.

POLICY FRAMEWORK OF HARYANA

The state government has formulated the Government of Haryana Industrial and Investment Policy-2011. To facilitate capacity

building and cater to the needs of skill development in the food-processing sector, National Institute of Food Technology,

Entrepreneurship and Management (NIFTEM), has been set up by the Ministry of Food Processing, Government of India in

Sonepat. The institute imparts training and offers courses in the field of food technology and other management streams. This is

very good initiatives but it need top most priority from the government

The following are few measures, which can also play a very important role in promotion of food processing industries:

Establishing processing and value addition centers at strategic places in the rural areas / production areas for fruits,

vegetables, dairy, fishery and poultry in public-private-partnership (PPP) mode.

Establishing agro-processing parks / agro-processing complexes with multi-commodity processing units near big cities /

markets.

Establishing food quality testing and phyto-sanitary laboratories.

Helping farmers in marketing of their processed products (forward linkages) and Special program for skill development,

particularly farm women in primary and secondary processing in agriculture. Training in grading and packaging of

horticultural crops should be a priority.

Strengthening of research on climate smart agriculture.

Documenting and blending of traditional knowledge with modern science.

Investment on water conservation and diversion of excess rain/flood waters to water deficit areas.

Expansion and strengthening of existing insurance scheme to ensure benefits for all crops and animals.

Strengthening of weather forecasting and climate service system.

Facilities for surveillance and monitoring of disease outbreaks in crops and livestock.

Initiation of State Insurance Scheme for major agricultural enterprises, besides availing of provisions under centrally

sponsored scheme.

CONCLUSIONS

An optimistic outlook suggests a transition from fragmentation to a competitive growth scenario that can be led by an effective

framework of policies. This current outlook states that if changes to current policies are made and proper implementation is done

than Haryana can be one of the leading Food Processing Industry. There is a need to educate and change attitude of public towards

these industries. If progress is not made, then the consolidation and transformation scenarios are effectively ruled out. And this

means that the rate of growth of Food Processing Industries may continue to stagnate, leading to continued concerns among

policymakers and other stakeholders in the food policy discourse. In addition, if taken care can lead to sustainable agricultural

growth in the state. All efforts should be made for effective implementation of policies to ensure adequate sustainability and

growth. Hence, this will ensure the growth of food processing industry, which in turn will increase income, and prospects of rural

and unorganized sector of rural Haryana.

REFERENCES

1. ASSOCHAM (2009). Food Processing and Agribusiness. A report on Processed Food and Agribusiness:

Opportunities for investment in India. New Delhi, Mumbai, India. FICCI (2007)

2. (2011). Strategic Plan for Food Processing Industries in India. Government of India. Ministry of Food Processing

Industries.

3. (2010). Industries, Principal characteristics by major industry group for the year 2009-10 (Annual Survey).

Government of India. Ministry of Statistics and Programme Implementation. New Delhi: India.

4. (2009). Annual Survey of Industries, Principal. Government of India. Ministry of Statistics and Programme

Implementation.

5. (2008). National Sample Survey Organization, Unorganized manufacturing sector in India: Input, Output and Value

added, NSS 62nd round, July 2005-June 2006, Report No. 526(62/2.2/3). Government of India. New Delhi: Ministry

of Statistics and Programme Implementation.





6. (2007). National Sample Survey Organization, Operational characteristics of Unorganized manufacturing

enterprises in India, NSS 62nd round, July 2005-June 2006, Report No. 524(62/2.2/1). Government of India. New

Delhi: Ministry of Statistics and Programme Implementation.

7. (2011, December, 1-2). International Animal Industry Vision 2020. Government of India. Haryana. Karnal: National

Dairy Research Institute Future of Indian Dairy Industry.

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on meat processing plants)

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30. Retrieved from http://inskills.co.in/agri.php

http://nhb.gov.in/

http://agricoop.nic.in/

http://www.hsamb.gov.in/

http://www.haryanatax.com/

http://agriharyana.nic.in/

http://cewacor.nic.in/

http://fciweb.nic.in/

http://mofpi.nic.in/

http://censusindia.gov.in/

http://pashudhanharyana.gov.in/

http://cosamb.org/state_info/haryana.pdf

http://www.apeda.gov.in/apedawebsite/Announcements/B_Approved_Indian_Meat_ProcessingPlants.pdf

http://omicsonline.org/food-processing-industry-in-india-s-and-t-capability-skills-and-employment-op

http://103.28.141.76/indiafoodprocessing/Portals/0/pdf/state_profiles/Haryana%20State%20Profile.pdf

http://foodprocessingindia.co.in/index.php?option=com_content&view=article&id=64&Itemid=...

http://inskills.co.in/agri.php





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32. Retrieved from http://knowindia.gov.in/knowindia/state_uts.php?id=9

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37. Retrieved from http://foodprocessingindia.co.in/index.php?option=com_content&view=article&id=132&Itemid...

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THE OIL AND GAS HUB, DESARU TOURISM AND LAND SUPPLY CONSTRAINTS

IN PENGERANG, JOHOR, MALAYSIA

Dr. Ismail Omar13

ABSTRACT

With the establishment of oil and gas hub, the government envisages an economic growth within Pengerang areas in Johor. In

addition, Desaru areas, which are located adjacent to Pengerang, will be positively affected for development. Unfortunately,

there are land supply constraints which has specific attributes in the rate of development that includes government planning

and environmental regulations, physical constraints & infrastructure, landownership, agent’s behavior as well as the socio

economic. This paper examines the combinations of the factors that relate to the formation of land supply constraints in

competing land use options within the oil and gas hub in Pengerang. There are currently vast tracts of idle land in Desaru, but

the government plans on tourism and oil, gas development has yet to be completed, and hence uncertainty remains. Data were

gathered using interviews with landowners to examine why there are still huge numbers of land plots yet to be developed,

though the Desaru areas is well-known for its tourist attractions and development of Pengerang oil and gas hub. Analysis had

been undertaken using qualitative techniques on respondents using coding, either direct or indirect quotations. Landowner

respondents were taken randomly to represent predetermined zones and data has been examined narratively and presented in

the form of charts, histogram and tables. One of the results shows that landowners were unwilling to be involved the

redevelopment because of the landownership constraints, and their perceptions that development is the government’s

responsibilities.

KEYWORDS

Oil and Gas Hub, Land Supply Constraints, Pengerang etc.

INTRODUCTION & BACKGROUND

The Economic Transformation Programs (ETP) has been introduced in Malaysia to sustain the economic growth in the country. In

this context, the establishment of oil and gas hub in Pengerang, Johor in 2011 with the capital of about RM60 billion was to

provide socio-economic growth of the people and to be a global competitive market in the region (Preliminary Report, SEIA

Studies UTM / Kejora, 2014). With the economic agenda, the growth areas would be affected by the changes in socio-economic

activities therein. The growth area for the oil and gas hub is consisting of about 22,100 acres of land, which have been acquired

for the construction of 19 logistics of oil and gas refineries (Interim Report, SEIA Studies UTM / Kejora, 2015). About 2,000

families will be transferred to the new settlement areas nearby with payment of adequate compensation to them (Ismail et al.

2014). Well-known petro-chemical firms including Dow Chemical, British Petroleum, Shell, BASF, Eastman Chemicals, Toray,

Mitsubishi, Idemitsu, Kaneka, Dairen and Honam were looking forward to locate their businesses in Malaysia (Brandt, 2012).

Based on increasing potential for oil and gas in China, India and South East Asia, Dialog and Petronas were investing a huge

amount of capital in Pengerang, which will have a greater impact than Rotterdam in Holland (Jalil, 2012).

There will be huge positive and negative socioeconomic impacts from the oil and gas hub in Pengerang. Largely, taxes and

royalties paid by firms will benefit and have positive impacts on the macro economy. Oil and gas export is expected to generate

about RM600 million to the manufacturing sector in the country and hence enhancing the job creation and elevating the poverty in

the country. Moreover, the increase in employment with expected additional of about 45,000 will activate the housing, education,

medical, infrastructures, energy, water supply and businesses (Interim Report SEIA Studies UTM/Kejora, 2015). This will also

affect the psychological, cultural values and well-being of the local residents. All these socioeconomic impacts will be thoroughly

studied in this research.

LAND SUPPLY CONSTRAINTS

With the pressure from the oil and gas hub to acquire and provide land for the anticipated increased number of population within

Pengerang areas, the availability of developable land within the vicinity is expected to be higher in demand by developers and

industrialists. The expected level of demand is well-supported by the newly constructed Senai-Highway Desaru and the bridge

crossing Sungai Johor in Johor Lama (Preliminary Report SEIA Studies UTM/Kejora, 2014). Moreover, the property market in

the Desaru-Pengerang areas was well supported by big projects within the Desaru-Pengerang including golf resort, commercial

projects and residential development (Interim Report SEIA Studies UTM / Kejora, 2015). Unfortunately, a large amount of

potentially productive land and land waiting to be developed is being constrained for development and hence left idle. This is

portrayed by fallow fields; brushy pastures, abandoned farms, and some heavily eroded lands have never been cleared for a better

13Associate Professor, Department of Real Estate, Faculty of Geoinformation and Real Estate, Universiti Teknologi Malaysia,

[email protected]






usage likewise lies virtually idle while much of these lands should be developed eventually to reach its highest and best potential.

Most of the idle lands in Pengerang are under government future use land, Malay Reservation and religious waqf lands, which are

small in size and inferior in location.

The challenge facing the future availability of land is in the need to ensure adequate supply to meet demand from population.

Because of their chronic non-self-sufficiency, their demand is growing. Amidst forecasts of its supply scarcity, which is now

becoming a local developers’ concern, focusing attention on the land supply constraints is an absolute logical point for examining

the cause of its scarcity. Thus, the aim of this study is to determine the major constraints behind land supply that has always been

of great interest to policy makers. The constraints addressed are government planning regulations (Dowall, 1992), land owner

behavior (Satsangi et al. 2001), multiple landownership (Adams, et al. 2002), physical constraints of the land (Bertaud, 1997),

and finance and valuation constraints (Ismail et al, 2010).

Planning & Environmental Regulations

Governments commonly have multiple planning objectives, including efficiency, equity and social dimensions. The different

approaches of land use by the government reflect many variables, including planning systems, institutional structures, socio-

cultural characteristics, population pressures and environmental priorities. Dowall (1995) mentioned that the frequently mentioned

planning variables by the government include zoning, land use regulations and green-belt policies. Land use planning has

functions to allocate a certain amount of lands for a particular development, to control the location of development and to justify

the types of development in different areas (Popetan in Hui, 2002).

The broad objective of the planning regulations is to guide the development for a specific time and efficiently fulfill the objectives

of government. Tight state control over land was made by the country's dependence on irrigation and the resulting need to strictly

regulate land uses. However sometimes planning provisions tend to be static, and fail to consider the consequences of the

changing economic demand for development. Whilst Gerald in Hui & Ho (2004) stated that, the government planning system

restricts land supply in four major ways: (1) restricting the total quantity of housing land made available; (2) restricting the

location of land that is made available; (3) restricting the way that the available land is developed; and (4) changing the timing of

development.

Physical Constraints & Infrastructure

Not all-vacant land is developable. It may be constrained either partially or absolutely, by a combination of governmental and

private industry factors related to environmental conditions. The physical conditions of land for example the type of soil, its

drainage, steepness of slope, are all important factors that influence how difficult it is to determine its potential uses are most

appropriate, and to the extent that redevelopment is exceedingly costly, the local scarcity of developable land imposes a binding

long-term supply constraint on a local land market.

Land is not only homogeneous, they are also extraordinarily diverse in both their physical character and social context, where

each parcel is unique, having a particular set of locational, physical, and neighborhood variables combine to form characteristics

of vacant land, each, which represent different opportunities and limitations for future development. After all, land is a finite

resource; it can be changed, developed, or eroded, but only in exceptional circumstances created. Moreover, the capacity of

associated infrastructure is designed according to the target population. In rural areas, development potential is also severely

constrained by the lack of infrastructure and amenities. Thus, it is impossible to increase land supply overnight because the supply

of developable land is subject to a high degree of planning control.

Landownership

The ownership of a land is very important when considering reclamation or development. Many idle lands are owned by absentee

landlords or held by land speculators for future development and investment. There are several specific aspects of landownership

that may affect land supply, which include (1) diverse backgrounds, (2) rationales, (3) levels of wealth and interests, ranging from

private enjoyment to profit maximization. However, community-based and some non-for-profit landowners will generally be

easier to convince of the need for better usage. Ismail et al. (2010) stated that the landownership constraint comes from the

landowners who are reluctant to respond uniformly to market mechanisms, who are keeping the lands because they are looking for

a better price in the future or who are keeping the lands due to sentimental value towards the lands. Updated land registers and

databases are crucial to secure property rights and promote land exchange. In some countries, many current owners cannot be

found in the land database. Landownership registration that is poorly maintained, missing or incomplete records, absence of or

unclear boundaries, unknown owners, and unsettled inheritance claims within families where there is a large number of co-owners

per a plot of land, all raise the cost of land withdrawal thus constraining the land to be able to be marketed.

Landownership constraints provide direct impacts on the land and property market in terms of increasing land price, which

subsequently push the price of developable lands higher in the market (Ismail et al. 2010). Multiple landownership in turn

increases the costs of obtaining agreement among the owners and, hence reduces the willingness of individual owners to put effort





into development. Although the benefit of the uses of the land is quite valuable, multiple ownership discourages uses since it is

more difficult to monitor the inputs and outputs by owners (Ismail et al. 2010). The different tenure types and multiple ownership

over land, as mentioned above, results in a complex delivery system of urban land into the market.

Agent’s Behavior

Actors in the land market are diverse and have divergent objectives, expectations, and strategies where in some cases, only a few

buyers and sellers may participate in particular land markets, and an individual land sellers or buyer can greatly influence market

outcomes (Dowall, 1995). The attitudes of landowners are seen by some researchers as influencing the supply of land. Ismail et al.

(2010) and Ismail and Fauziah (2014) stated that passive land owner who take no particular steps to develop land is one of the

major issues affecting land development process and some are willing to participate but only on restricted terms and conditions,

such as by offering leasehold not freehold. While Adams et al. (2002) defines active landowners as those who develop their own

land, enter into joint venture development or make their land available for others to develop, contends that such owners may well

try to overcome site constraints to make land more marketable or suitable for development.

Some landowners were reluctant to make land available for the market until all other sites had been developed (Satsangi et al.

2001). The land problem in the Philippines is not due to scarcity but to the refusal to sell. While much of the potential urban land

in cities of the Philippines lies frozen in the hands of owners who have no present intention of developing it. Passive landowners

may respond, or fail to respond, to offers from potential developers, but otherwise they retain land without development or left it

completely idle (Adams et al. 2002). Ismail et al. (2010) states that land value constraint emerges when the landowner and

buyer/developer have different estimation prices of the land. Obviously, the aim of any developer is to buy a site for less than it is

worth for development and it is speculated that they may hold land as inventory for the purpose of reducing housing supply, as is

evident from the sizes of their land banks (Lai & Wang, 1999). Holding land and leaving it virtually idle in a constrained market

will provide greater market power in the future and ability to set prices. This implies that in a general sense, an increase in market

power among developer’s results in a decrease in the pace of development, and a consequent reduction in aggregate land generates

benefits. Land is generally only held idle for two reasons, (1) Land banking typically by large investors seeking long-term

non‐taxable capital gain, or to obtain a long-term increase in land value arising from future rezoning and (2) Temporary holding of

land, that is more common due to market inefficiencies and scarcity of land.

Socioeconomic

A large segment of the urban population in developing countries does not have access to formal finance. Even with government

subsidies, the cost of a plot or a unit is beyond the reach of the target group. If finance is available, the interest rate is too high and

only extended to customers working in the formal sector. Most formal sector financing systems require loan security and thus the

land tenure system plays a crucial role. Lack of adequate funding for the public sector to develop land also delays the supply of

land in the market.

THE CASE STUDY: EMPIRICAL DATA AND ANALYSIS

Data Analysis on Land Availability

Based on literature reviewed in Section 2.0 above, there are elements that constrain the availability of land in the study area

(Refer Appendix A) including planning and environmental regulations, physical and infrastructures, landownership, agents’

behavior/ attitudes and socioeconomic. All of these elements that contribute to the land supply constraints and must be solved to

encourage the land supply and the land development in this area. From the surveys, it has been shown that there are likely

negative (30 per cent) and positive impacts (70 per cent) of the oil and gas hub on the life of the population. The main positive

elements are economic growth and development (48.57 per cent), employment opportunity (11.43 per cent) and increase in

property values (2.86 per cent) whereas the main negative implications are pollution (14.29 per cent), disturbances (8.57 per cent)

and others (5.72 per cent). The positive impacts are on individuals (42.2 per cent), family (56 per cent), neighbourhood (30.7 per

cent) and the State of Johor as a whole (44.5 percent). As comparison the main negative impacts on individuals (57.8 per cent),

family (44 per cent), neighbourhood (69.3 percent) and the State of Johor (55.5 per cent).

Figure-1: Socioeconomic Impacts


0

100

House Price PublicTransport

Land Values Education

Positive

Negative









Based on interview with landowners selected as respondents, discussion on elements of land supply constraints are elaborated as

follows:

Planning and Environmental Regulation

Table-1: Planning Constraints

Categories of Landowners Planning Constraints

YES NO

Landowners of undeveloped sited A1, A13, A31, A33, A34, A35, A37,

A5, A6, A7, A8, A10, A11, A12,

A20, A26, A39

A27, A28, A14, A15, A24, A36,

Landowners of developed (and

applied planning permissions) site

A2, A4, A23, A25, A30 A3, A9, A16, A17, A18, A19,

A21, A22, A29, A32


Table-1 shows the nature of planning and environmental regulation of sample sites. Most of the landowners did not agree with

the local authorities on their planning and development of oil and gas industry around the Desaru area. They believe that the

industry is disrupting the smooth existing tourism industry. However, Respondent 19 agrees with the oil and gas planning by

mentioning: “The local planning authority is a measure to enhance the potential development of land in the Desaru area by

providing employment opportunities, and the entry of outsiders into the area” (Landowner no 19, 2011).

In addition, respondents 21, mentioned that “The planning of oil and gas industry is very good to the land but from the social

point of impact, the youngsters are not keen to pursue the opportunity of working with the oil and gas industry but are rather

willing to work with the Sime Darby and other opportunities”. However, Respondent 35 described, “The development plan

suggested by local authorities is to develop tourism for foreign visitors, but does not bring any benefit to the local community”.

Contradicting with this, respondent 15 with his opinion “plans to bring oil and gas industry in the study area could attract more

tourists and ferry transport can be developed”.

Therefore, improvement to the planning provision needs be implemented by the local authority with the involvement of the

professionals from the oil and gas industry to ensure the oil and gas industry development in the area be more vibrant and would

attract more tourists. There are also chances of a huge number of new labor arrivals, housing development, professional site visits

that will increase the hotel occupancy as well as increasing the activity along the coastal line.

0

20

40

60

80

Pollution Safety Health Social Cost of Living

Agrred

Disagreed

0

20

40

60

80

100

1st Qtr

Business

Manufacturing

Investment

Labour





Physical and Infrastructures

In preparing the planning proposal, the physical attributes of the land that should be considered become the main factors such as

the infrastructure and physical nature of land.

Table-2: Physical and Infrastructure Constraints

Categories of Landowners Physical and Infrastructures

YES NO

Landowners of undeveloped sited B1, B13, B31, B33, B34, B35, B37, B5,

B6, B7, B8, B10, B11, B12, B20, B26, B39

B27, B28, B14, B15,B24,B36,

Landowners of developed (and

applied planning permissions) site

B2, B4, B23, B25, B30 B3, B9, B16, B17, B18, B19,

B21, B22, B29, B32


The landowner is very close to the physical and infrastructure problems. Landowners would have to identify the weaknesses and

the vulnerabilities of land physical infrastructures that prevent the supply of land in the study area. Among the infrastructure that

is, still a burden for them is the road structure as reported by respondents 1, 6, 7, 11, 32, 34, 36, 38, 39, 40, 41, 42.

Meanwhile, Respondent 2 said, “Uneven road gave a negative impact on the development of research in the area of land”. Social

amenities and the public necessity should be addressed in greater depth. For example respondents 6 stated that, “Kindergartens,

clinics, and multi-purpose halls should be added to the new development by the government”. This statement is also agreed by

the respondents 4, 5, 13, 15, 18, 31. In addition, respondents are optimistic to the necessity of shopping centers and places of

regular sales in the Desaru area as suggested by Respondent 30. In fact, 26 respondents stated, “facilities such as street lights &

signboards should be addressed because these facilities show the commitment of the local authority to prepare the Desaru area

towards a better tourism place”.

Landownership

Table-3: Landownership Constraints

Number of Respondents Landownership

C1, C2, C3, C4, C5, C8, C11, C13, C14, C15, C16, C17, C18,

C19, C20, C21, C22, C23, C24, C25, C26, C27, C28, C29, C30,

C32, C33, C36, C37, C40.

Owner Occupy/trading

NIL Wholly Rented

C31 Vacant

C5, C6, C7, C9, C10, C12, C34, C35, C38, C39. Partly Occupied and rented


The empirical study shows that the majorities of landowners possesses and occupy their lands. The table above shows more than

70% of the landowners have a high potential to develop their underutilized land. Although knowing the fact that their land is

valuable and able to generate profitable income, they were satisfied owning the land for residential usage. Ismail et al. (2010)

asserted that landownership constraints provide direct impacts on the land and property market in terms of increasing land price,

which subsequently push the price of developable lands higher in the market an opportunity and potential to be known by the

landowner.

Agent Behavior / Attitude of Land Owner

Table-4: Land Owner Attitude

No No of Respondents Attitudes Final / Current

Condition

1 D1, D13, D27, D28, D31, D33, D34, D35, D37. Not intend to sell / Not intend to develop Undeveloped

2 NIL Intend to sell (Has not been sold) Undeveloped

3 NIL Intend to sell (Has not been sold)

/ Intend to develop

Undeveloped

4 D5, D6, D7, D8, D10, D11, D12, D14, D15, D20,

D24, D26, D36, D39

Not intend to sell / Intend to develop

(Has not proposed proposal)

Undeveloped

5 D2, D3, D4, D9, D16, D17, D18, D19, D21, D22,

D23, D25, D29, D30, D32, D38.

Not intend to sell / Intend to develop (Has

obtained approval and / or have developed)

Developed

6 NIL Intend to sell (Has been sold) Sold






Passive landowners are those who decide not to do anything and do not have any intention to develop their land. This attitude and

the supporting argument have caused the landowners to be passive, becoming reluctant to respond to any development initiatives.

According to Adams et al. (2002), passive landownership is landowners’ behavior that causes land supply constraint.

Respondent’s number 1, 13, 27, 28, 31, 33, 34, 35 and 37 preferred to not intend to sell and did not intend to develop. This

situation can contribute to land supply constraints. Although, for the landowner who did not intend to sell and did intend to

develop but the land was still undeveloped it should be considered. This figure clearly shows the case study area still has not

developed the land more than that has been developed. 23 of the total respondents indicated the nature of the passive owners of

idle land and encouraged the existence of a limited land supply in market.

Socio Economic (Financial and Age)

The ability of age might prevent the financial ability of landowners. Landowner’s social experience clearly shows that the

limitation of age and capital constraints of the land is not cultivated (Azima Abdul Manaf, 2007). Thus, the socio economic

factors that constraint the supply of this land should be analyzed as follows:

Financial problem is the next factor that respondents often mentioned when they were asked about the factor that hindered the

development of the land. The survey shows that about 80 per cent of the population is living with income of less than RM 2,000

per month. Based on the interview, 12 samples indicated that the reason why they did not particularly develop the land is because

that they did not have enough money (Respondents no, 13, 15, 18, 19, 22, 23, 24, 27, 31, 36, 40). In this case, it seems that

landowners positioned themselves as the developer since financial problems generally are encountered by developers who handle

the physical works (Cadman and Topping, 1995). In other words, affordability of landowners in Desaru area to self- development

of their lands is in fact still low.

The landowner’s perception about development is shown by the argument that development responsibility is the government

task. Landowners of 3, 5, 6, 7, 8, 12, 17, 20, 22, 23, 24, 26 are those who agreed with this argument. Only landowners of 14, 16,

18, 19, 21 did not depend on the governments support. Landowners depending on the governments support could contribute to

land supply constraints. There is a need to promote the awareness to the landlord not to depend too much on the government’s

assistance alone, but there are many other alternatives of development such as sharing and smart partnership, collaboration or

joint ventures.

CONCLUSION

This study mainly focuses on the land supply constraints and as per discussed in the literature summary and in the empirical

evidence, it shows that there are various elements that constraints the supply of land. The national and local laws relating to

forms of planning and environmental regulations, physical constraints & infrastructure, landownership, agent’s behavior as well

as the socioeconomics can all affect the volume of land available in the market. From what has been analyzed from selected

respondent’s landowners, the elements that constraints land supply has direct and indirect impact on the supply of lands for

development. The issue with the landowners who refused to be involved in any redevelopment, restricted access to any funds or

financial source, limited knowledge on land development, land banking and multiple landownership’s has contributed to

landowner refusal to sell or participate in the redevelopment. They were satisfied holding the land virtually idle without trying to

gain any profit from it.

The government should also reform additional funded programs or broaden the financing base and repayment practices for

infrastructure provision to restore affordability and intergenerational equity to help the party who is interested in developing idle

lands. Appropriate sustainable development policies and resource management measures should also be taken into account in

order to solve land issues. It is, however, beyond question that the land management policies by state governments have been a

contributor to the land supply constraints. Solutions to restoring the supply of land in the open market will take a considerable

period and involve actions at federal, state and local government level and the landowner itself. However, this issue must be

addressed in earnest to avoid these land supply constraints continuing almost unabated.

REFERENCES

1. Adams D., Disberry A., Hutchison, N., & Munjoma, T. (2002). Vacant urban land exploring ownership strategies and

actions. Town Planning Review, 73(4), 395-441.

2. Bertaud, A. (1997). Measuring Constraints on Land Supply: The Case of Hong Kong. World Bank Processed.

3. Dowall, D. (1992, Fall). Benefits of minimal land-use regulations in developing countries. Cato Journal, 12(2), 413-

423.

4. Hui E., Lam M., & Ho, V. (2004). Urban Land Use Policy and Patterns in Hong Kong: An Empirical Analysis with

Findings. HKS Journal. The Hong Kong Polytechnic University: Department of Building and Real Estate.





5. (2014). Interim Report SEIA Studies UTM/Kejora (Unpublished).

6. Ismail, Omar, & Fauziah, Raji. (2014). Land supply constraints – the way in which it affects redevelopment of

indigenous land in Kuala Lumpur. Asian Journal of Business and Social Sciences, 1.

7. Ismail, Omar. (et al.). (2014). Pengambilan Tanah – Isu dan Amalan. Pustaka Firdausi, Johor Bahru.

8. Ismail, Omar, Djurjani, W., & Priyono, N. D. (2010). The role of land rights in urban heritage management – the

explanatory power of institutional economics analysis in the reconstruction of cultural heritage of kotagede yogyakarta,

Indonesia is post-earthquake. Journal of Theoretical and Empirical Researches in Urban Management, 4(1), 60-75.

Romania: Bucharest.

9. Omar, Ismail, Djurjani, W., & Priyono, N. D. (2010). Transaction cost and landownership constraints in the supply of

brown field sites In Kuala Lumpur. Pacific Rim Property Research Journal, 16(1).

10. Jalil, Hamid. (2012, September 16). Pengerang Rides on Oil and Gas Boom. New Straits Times.

11. Lai, N., & Wang, K. (1999). Land supply restrictions, developer strategies and housing policies: The case in Hong

Kong. International Real Estate Review, 2(1), 143–159.

12. (2015). Preliminary Report SEIA Studies UTM/Kejora (Unpublished).

13. Satsangi, M., Higgins, M., Pawson. H., Rosenburg, H., Hague, H., Bramley, G., & Storey, C. (2001). Factors affecting

land supply for affordable housing in rural areas. School of Planning and Housing Edinburgh College of Art/Heriot-

Watt University Scottish Executive Central Research Unit.

14. Retrieved from http://www.slideshare.net/klibel/klibel5-econ-4

15. Retrieved from http://eprints.utm.my/21017/

16. Retrieved from http://umacweb1.umac.mo/fba/irer/papers/past/vol2_pdf/143-159hkland.pdf

APENDIX

A: Pengerang and Desaru Areas


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MNREGS AND ITS IMPACT ON RURAL EMPLOYMENT IN HARYANA:

ISSUES & CHALLENGES WITH SPECIAL REFERENCE TO MAHENDERGARH DISTRICT

Dr. Dhiresh Kulshrestha14

ABSTRACT

Mahatma Gandhi National Rural Employment Guarantee Scheme a central sponsored wage employment scheme, aims to

providing livelihood security to the rural poor of the India. The MGNREGA was implemented in 200 districts; in the first

phase, with effect from February 2, 2006 and extended, subsequently to additional 113 districts and 17 districts with effect

from April 1st 2007 and May 15th 2007, respectively. The remaining districts were included under the Act with effect from

April 1st 2008. The Act provides a legal guarantee of 100 days’ work in a financial year (1st April- 31st March) to every rural

household whose adult members are willing to do ‘unskilled manual work at a statuary minimum wage rate (Eleventh five

Year Plan, Vol. 3; 86).’

Focus of the Study This study focuses on the various aspects of the MNREGS as following:

To study the role of MNREGS in employment creation in Mahendergarh district.

To analyze the women participation under MNREGS in Mahendergarh district.

To study the role of MNREGS in rural development of Mahendergarh district.

To discuss the Future Issues and Challenges in Haryana state.

This paper also discuss about the impact of MNREGS on Rural Development in Haryana state in the context of Employment

Creation, Women participation as employment and Poverty eradication. It also highlights the various issues and challenges of

MNREGS in implementation to this scheme to develop the rural sector factors.

KEYWORDS

NREGS, MNREGS, Employment, Rural Development, Poverty Eradication etc.

INTRODUCTION

MNREGS in Haryana State

MNREGS was launched by government of India in all Gram Panchayats of districts Mahendergarh and Sirsa on 2nd Feb, 2006 and

this scheme was extended in two more districts namely Ambala and Mewat on 1st April, 2007. The remaining districts of the state

have been covered under the scheme on 1stApril, 2008. The Mahatma Gandhi National Employment Rural Guarantee Scheme is

the 1st tangible commitment to the poor. The scheme aims act-providing employment as sources of income by ensuring their

dignity. Thus it was considered a unique scheme, which provides them right to work, enshrined in the constitution under directive

principles of the state policy. In this sense, the scheme was supposed to be the unique scheme after independence has it provides

employment to every rural household in financial year.

Cost Sharing

The Central and State Governments shall provide financial assistance in the ratio 90:10 respectively.

Wages

Under the scheme minimum wages of Rs. 214/- per day notified by the Ministry of Rural Development, Govt. of India on 1st

April, 2013 are being paid equal to men and women workers. The payment of wages is being made through saving Bank/Post

Offices accounts of workers on weekly or fortnight basis. Before 2013-2014 financial year wage rate of the scheme Rs. 150/-.

Unemployment Allowance

Unemployment allowance shall be payable if employment is not provided within 15 days of the receipt of the application. The rate

of employment allowance shall be one fourth of the wage rate for the first thirty days and not less than one-half of the wage rates

for the remaining period.

14 Associate Professor & Head, Department of Economics, Central University of Haryana, Haryana, India,

[email protected]






LIMITATION OF STUDY

The study is mainly based on secondary data to check the “Impact of MNREGS in Rural Employment and Poverty Eradication in

Haryana (With special reference to Mahendergarh District)”. There are total eight blocks AteliNagal, Kanina, Nagal Chaudhary,

Mahendergarh, Narnaul, Nizampur, Satnali, and Sihma in Mahendergarh district. However, we have only five blocks include in

the study. Satnali, Sihma, and Nizampur these blocks launched in 2013. Therefore, data is not available in these blocks. The

limitation of the period of the study is 2010-11 to 2012-13.


Data Description

This research study is conducted based on secondary data. The study used the last three years data such as gender wise

participation, cast wise employed person, age wise registered and employed person, number of registered person, job cards issue,

employment demanded, employment offered, rural connectivity, land development, micro irrigation, traditional water bodies,

water conversation and water harvesting, flood control, drought proofing, provision of wage rate, registered family and person,

available fund and expenditure fund, complete work and incomplete work, etc. The data divided into three financial years viz.

2010-11, 2011-12 and 2012-13. The secondary data on selected variables have been collected from Ministry of Rural

Development, Department of Rural Development Agencies in Mahendergarh District, site of Haryana Rural Development, etc.

Methods of Analysis

This study employed the OLS (Ordinary Least Square) method used on selected variables such as gender wise participation, cast

wise employed person, no. of registered person, number of job card issue, employment demanded and employment offered and

work projection in last three years of MNREGS in Mahendergarh district. The simple regression model has been employed to

analyze the impact of female participation on employment creation of MNREGS.


Prasad (2012) focused on performance of Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS). He

found that status of MNREGS in financial year 2011-12, 3.77 crore households were provided employment and 120.88 crore

person days employment were generated and women participation in status of MNREGS was greater than other forms. He

suggested that these guidelines have been formulated to facilitate the design and implementation of Rural Employment Guarantee

Schemes. They should be interpreted as a board operational framework, around which further provisions may be built, taking into

account the state’s economic, social and institutional context. It is not only giving rural livelihoods but also involving them in

other non-agriculture work. This has helped in handing disguised workers. Employment in other non-agriculture works will also

improve the rural infrastructure i.e. rural assets building. It will ultimately lead to sustainable development.

Das (2012) examined India’s Mahatma Gandhi National Rural Employment Guarantee Act Its impact and women’s participation.

He highlighted that the MNREGA has positive impact on employment pattern of women. Women have benefited both as

individually and community, women are individually benefited because they are able to earn independently, spend some money

for their own needs, contribute in family expenditure etc. The gained benefits of women as community can be understood by

increased presence in the gram Sabah, increasing number of women in speaking out in the meeting; increasing capacity of

interaction etc., he suggested that NREGS can play a substantial role in economically empowering women and self-esteem.

MNREGS play an active role for women empowering increase in the implementation of the scheme, through gram Sabah/ social

audit, participatory planning and other activities.

Tasgaonkar (2012) highlighted the people’s experiences regarding the NREGA in rural Vidarbha Region of Maharashtra. He

found that the survey data shows that the 47.1% households registered for job cards, 71.6% households received job cards (among

applied), 33.7% households received job cards (among all HHs), 4.9% households received work, percentage of female workers

among all workers, mean days of work by man workers 47.7%, even the percent of received work under NREGA by religion and

cast wise very less. In few villages, the job card was kept in the Gram Panchayat cupboard but it was not distribution to actual

applicant in few cases the Gram Panchayat officer asked for the money for the registration under NREGA. He also found that the

lobby of big farmer is not in the favor of the NREGA work, they have fear loss of labour power. In few villages, the work was

carryout through contractor and even in some cases, the JCB machines were used for the NREGS work, which is totally

contravention of the NREGS. He urged that interest of researchers and other people, opens up framework of NREGS.

Garje (2012) examined the impact of NREGS wages on poverty, agriculture sector, non-agriculture sector and food inflation. He

found that recently media was focusing on increasing food inflation in India and one of the reason said to be NREGS wages and

resulting into overall increase of wages labour working in unorganized sector like agriculture sector, non-agriculture rural sector

and in unorganized sector in urban India like construction activities. Nevertheless, most of laborers have yellow ration cards.

Availability of PDS, food grains should not increase the prices of these food grains, even though logic of increased NREGA





income has increased purchasing power and food consumption of the laborers. It is also said that NRGS work is creating shortage

of unskilled labors in unorganized sector. However, data shows that there is more unemployment in unorganized unskilled

workers in India. Moreover, average 40-50 days of NREGS work has been provided in off agriculture season of March to May

instead of 100 days guarantee of work. Most of the palaces NREGA wages were delayed almost all palaces by more than 15 days.

Rural worker were shying away from NREGS due to delayed and lower paid. It is also said that NREGS work unsuccessful.

NREGS wages has affected the agriculture and market wage retain the area where the NREG scheme had been implemented

effectively. He suggested that high WAGES IN RURAL India would help to reduce rural poverty and distress migration.

Azam (2012) revealed the impact of Indian Job Guarantee Scheme on labour market in India. He highlighted that there has been a

significant increase in the public works participation in NREGS district compared to the non-NREGS districts. Second, NREGS

has a positive impact on labour force participation, Post 2004-05; there has been a downward trend in labour force participation in

rural India. Third, NREGS has a positive impact on average wages of casual workers. The wage for female workers increased 8%

more in NREGS districts compared to the non-NREGS districts. He recommended that NREGS has only increased the wages of

female workers and NREGS helped in reducing gender wage gap in casual works. This positive impact may have longer-term

beneficial effects on social and economic dynamic in rural India.

Poonia (2012) studied the impact and women participation in MNREGS. She found that NREGS led to stimulated local

development, if the management and delivery are good, and that women weak position in the labour market has been greatly

helped. Since the early 1990’s, the better growth performance, as well as stronger political commitment, has led to many more

social protection programs being started. Among these, the NREGS stands out for the fact that it is demand drive had greater

performance than other schemes .Covers the whole country, and has the potential both to provide as minimum income sand

stimulated local development. Public policy and public work in India have generally tried to include women as a percentage of

beneficiaries, but have not paid enough attention to gender sensitive design.

DATA ANALYSIS

To examine the first objective of the study the gender wise participation in MNREGS in five blocks of Mahendergarh district has

been given below in absolute term and its estimates:

Table-1: Gender wise Participation of Persons in MNREGS in Mahendergarh District

Financial Year 2010 - 2011 to 2012-2013

S. No. Block Name Gender Name 2010-11 2011- 12 2012-13

1 Ateli Nangal

Female 1890 1908 2355

Male 10734 10548 11576

Total 12624 12456 13931

2 Kanina

Female 5250 5865 6454

Men 14260 15154 16023

Total 19510 21019 22477

3 Mahendergarh

Female 5625 5930 6940

Male 14164 14498 16116

Total 19789 20428 23056

4 N. Chaudhary

Female 6732 7532 7928

Male 13327 14559 222304

Total 20059 22091 230232

5 Narnaul

Female 4488 4924 5102

Male 3301 14526 15014

Total 7789 19450 20116

Sources: Ministry of Rural Development in India

Table-1.1: Growth Rate Analysis on Gender Participation of MNREGA in Mahendergarh District

S. No. Block Name Gender Name Intercept Value

(P-value)

Coefficient Value

(p-value) R-square

1 Ateli Nangal

Female 7.4008

(0.0107)

0.109

(0.309) 0.782

Male 9.225

(0.0047)

0.0377

(0.446) 0.58

Total 9.373

(0.005)

0.0492

(0.403) 0.64





2 Kanina

Female 8.46526

(0.007)

0.103

(0.0268)* 0.99

Male 9.5071

(0.002)

0.0582

(0.0159)* 0.999

Total 9.809

(0.0003)

0.0707

(0.019)* 0.999

3 Mahendergarh

Female 8.512

(0.0048)

0.1050

(0.177) 0.923

Male 9.480

(0.0034)

0.064

(0.224) 0.880

Total 9.801

(0.003)

0.076 4

(0.207) 0.897

4 N. Chaudhary

Female 8.7430

(0.002)

0.081 4

(0.135) 0.955

Male 7.650

(0.134)

1.407

(0.315) 0.773

Total 8.311658

(0.106)

1.220

(0.311) 0.779

5 Narnaul

Female 8.354

(0.0002)

0.064

(0.160) 0.937

Male 7.586

(0.075)

0.757

(0.321) 0.766

Total 8.632

(0.040)

0.474

(0.314) 0.776


Note: *One percent level of Significance

The tables show that in the case of Ateli Nangal Block, the female participation has insignificantly grown by 11percent with year

(in the absolute figure, from 1890 in 2010-2011 to 2355 in 2012-2013, i.e. adding 465 more female workers) where R2 was 78

percent. In the case of male participation has insignificantly increased by 3.8 percent with year (in the absolute figures it has

increased from 10734 in 2010-2011 to 11576 in 2012-2013, i. e. including 842 additional male workers) where R2 was 58 percent.

In the case of total male and female participation, it has insignificantly grown by 4.9% percent in years (in absolute figure it has

grown from 12624 in 2010-2011 to 13931 in 2012-2013, i.e. adding 1307 new male and female workers) where R2 was 65

percent.

In Kanina block, female participation has significant grown by 10.3 per cent (at 2.7 per cent level of significance) with year (in the

absolute data it has grown from 5250 in 210-2011 to 6454 in 21012-2013, i. e. adding from 1204 female) where R2 was 99 per

cent. In the case of male participation has significantly increased by 0.058 (at 1.6 per cent level of significance) in years (in

absolute figures it has grown from 14260 in 2010-2011 to 16023 in 2012-2013, i. e. adding from 1763 male) where R2 was 99 per

cent. In the case of total male and female it has significantly grown by 0.070 (at 1.9 percent level of significance) with year where

was R-square was 0.99. In absolute figure, it has grown from 19510 in 2010-11 to 22477 in 2012-2013, i. e. adding from 2967

total male and female.

In Mahendergarh block, female participation has insignificantly increased by 10 per cent with year where R2 was 92 per cent. In

absolute data, it has increased from 5625 in 2010-2011 to 6940 in 2012-2013, i. e. adding from 1315 female. In the case of male

participation has insignificantly increased by 64 per cent in year where R2 was 88 per cent. In absolute figure, it has increased

from 14164 in 210-2011 to 16116 in 2012-2013, i. e. adding from 1952 male. In the case of total male and female participation

has insignificantly increased by 7.6 with the year where R-square was 89 per cent. In absolute figure, it has grown from 19789 in

2010-2011 to 23056 in 20122013, i. e adding from 3267 total male and female.

In Nagal Chaudhary block, female participation has insignificantly increased by 0.081 with year where R-square was 0.95. In

absolute data, it has increased from 16732 in n2010-2011 to 7928 in 2012-2013, i. e. adding from 1196 female. In the case of male

participation has insignificantly increased by 1.40 with year where R-square was 0.77. In absolute figure, it has increased from

13327 in 2010-2011 to 222304 in 2012-2013, i.e. adding from 208977 male. In the case of total male and female has

insignificantly grown by 1.22 with year where R-square was 0.78. In absolute figure, it has grown from 20059 in 2010-2011 to

230232 in 2012-2013, i.e. adding from 210173 total male and female.

In Narnaul block female participation has insignificantly increased by 0.64 with year where R-square was 0.94. In absolute figure,

it has grown from 4488 in 2010-2011 to 5102 in 2012-2013, i.e. adding from 614 female. In the case of male participation has

insignificantly grown by 0.75 with year where R-square was 0.77. In absolute figure, it has grown from 3301 in 2010-2011 to

15014 in 2012-2013, i.e. adding from 11713 male. In the case of total male and female has insignificantly increased by 0.47 with





year where R-square was 0.78. In absolute figure, it has grown from 7789 in 2010-2011 to 20116 in 2012-2013, i. e. adding from

12327. A comparison look on the tables show that the number of female participation has been insignificantly increased in

Mahendergarh block while other blocks the number of female participation has insignificantly increased. Only one blocks

(Kanina), where the participation in MNREGS as well as female participation has significantly increased.

Table-2: The Employment by MNREGS in Mahendergarh District (Financial Year 2010-2011 to 2012-2013)

S. No. HH/PER. 2010-11 2011-12 2012-13

1 Number of Reg.

Person

HHs 61365 65362 66048

Per. 90344 98183 99152

2 Job Card Issue 61358 65449 65987

3 Employment

Demanded

HHs 22537 19476 17270

Per. 30351 25247 22759

4 Employment

Offered

HHs 23213 19476 17270

Per. 28694 25250 22765


Table-2.1: Growth Rate Analysis on Employment Generated of MNREGS

S. No. HHs/Per. Intercept Value

(P-value)

Coefficient Value

(P-value)

R-Square

1 Number of Reg.

Person

HHs 10.996

(0.0019)

0.036771

(0.2495)

0.8540

Per 11.3771

(0.002561)

0.046515

(0.272077)

0.828202

2 Job Card Issue 10.99751

(0.002035)

0.036366

(0.267809)

0.83323

3 Employment

Demanded

HHs 10.15171

(0.001008)

-0.13309*

(0.035537)

0.996887

PER. 10.45112

(0.003053)

-0.14393

(0.101749)

0.974672

4 Employment

Offered

HHs 10.19112

(0.002155)

-0.14787*

(0.068484)

0.988472

Per. 10.37613

(0.000928)

-0.11573*

(0.038477)

0.996352



The number of registered households has been insignificantly grown by 3.7 per cent with year where R2 was 86 per cent. In

absolute figure, it has grown from 61365 in 2010-2011 to 66048 in 2012-2013, i.e. adding 4683 households. In the case of

registered person has insignificantly grown by 4.7 per cent in year where R2 was 83 per cent. In absolute figure, it has grown from

90344 in 2010-2011 to 99152 in 2012-2013, i.e. adding 8808 person.

In the case of job card, issue has insignificantly grown by 3.6 per cent in year where R2 was 83 per cent. In absolute data, it has

grown from 61358 in 2010-2011 to 65987 in 2012-2013, i. e. adding 4629 number of job card issue.

In the case of employment demanded, number of households has significantly decline by -1.3(at 3.6% level of significant) percent

with years where R2 was 99 per cent. In absolute data, it has decline from 22537 in 2010-2011 to 17270 in 2012-2013, i. e. decline

from 5267 households. Number of person in employment demanded has insignificantly decline by -1.4 percent in years where R2

was 99 per cent. In absolute value, it has decline from 30351 in 2010-2011 to 22759 in 2012-2013, i. e. decline from 7592 person.

In the case of employment offered, number of households has significantly decline by -1.4 per cent (at 6.8% level of significant)

in years where R2 was 99 per cent. In absolute figures, it has decline from 23213 in 2010-2011 to 17270 in 2012-2013, i. e.

decline from 5943 households. In the case of number of person in employment offered has significantly decreased by -1.1 per cent

(at 3.8% level of significant) in years where R2 was 99 per cent. In absolute value, it has decline from 28694 in 2010-2011 to

22765 in 2012-2013, i. e. decline from 5929 person.

A comparison look on the table shows that the number of registered households has increased while demand for employment and

offered employment has declined. This fall is more prominent in offered employment.





Table-3: Cast wise Employed Persons in MNREGS in District Mahendergarh

Financial Year 2010-11 TO 2012-13

S. No. CAST 2010-11 2011-12 2012-13

1 SC 26480 26577 26577

2 ST 293 293 293

3 OTHERS 63004 68494 68494

4 TOTAL 89777 95364 95364

5 WOMEN 33985 26159 26159


Table-3.1: Growth Rate Analysis on Cast wise Employed Person of MNREGS

S. No. CAST Intercept Value

(P-Value)

Coefficient Value

(P-Value)

R-Square

1 SC 10.15502

(0.001493)

0.022756

(0.287266)

0.809835

2 ST 5.680173

(---)

0

(---)

1

3 OTHERS 10.96434

(0.000167)

0.08585*

(0.009855)

0.99976

4 TOTAL 11.34003

(0.000246)

0.063881*

(0.02018)

0.998996

5 WOMEN 10.45728

(0.013558)

-0.08314

(0.568008)

0.393984



These both tables show that the number of employed person in SC candidates has been insignificantly grown by 2.2 per cent with

year where R 2 was 81 percent. In absolute data, it has grown from 26480 in 2010-2011 to 27713 in 2012-2013, i.e. adding from

1233 SC employed person.

In ST, employed person participation has not progressed in this scheme. In number of others cast, employed persons have

significantly grown by 8.5 per cent (at 0.9 % level of significant) where R2 was 99 per cent. In absolute data, it has grown from

63004 in 2010-2011 to 74806 in 2012-2013, i.e. adding from 11802 other cast employed person.

Total number of person in caste has significantly grown by 6.3 (at 2 % level of significant) with years where R2 was 99 per cent.

In absolute data, it has grown from 89777 in 2010-2011 to 102812 in 2012-2013, i. e. adding from 13025 totals.

Table-4: Progress Report of MNREGS in District Mahendergarh and Haryana State

Financial Year 2012-13

Haryana State Mahendergarh

Employment provided to Households (In Lakh) 1.56823 0.17218

Person days (In Lakh)

Total 37.17 7.51

SCs 20 (53.81%) 1.52 (20.28%)

STs 0 (0%) 0 (0%)

Women 15.96 (42.93%) 2.16 (28.81%)

Others 17.17 (46.18%) 5.99 (79.72%)

Total work taken up 14006 1199

Work Complete 1012 83

Work in Progress 12994 1116


The table shows that under the Mahatma Gandhi National Rural Employment Guarantee Scheme, employment provided to

households 1.56823 lakh in Haryana and 0.17218 lakh in Mahendergarh district. In the case of person days, total person is 37.17

lakh employed in Haryana and 7.51 lakh in Mahendergarh district. In SCs person employed in Haryana 53.81 per cent and 20.28

per cent in Mahendergarh district, STs person employed is 0 per cent in both state, women employed 42.93 percent in Haryana

and 28.81 percent in Mahendergarh district and other person employed 46.18 per cent in Haryana and 79.72 percent in

Mahendergarh district. Total work is taken up 14006 types of work in Haryana and 1199 types of work in Mahendergarh district.





Complete work in the scheme 1012 types of work in Haryana and 83 types of work in Mahendergarh. Work progress in these

scheme 12994 types of work in Haryana and 1116 types of work in Mahendergarh district.

Table-5: Available Fund and Expenditure Fund in MNREGS District Mahendergarh

Year Available Fund

(In Lakh)

Expenditure Fund

(In Lakh)

2010-11 2635.25 2623.22

2011-12 2911.27 2675.22

2012-13 2366.61 2349.27

Sources: www.drda.com

The available fund and expenditure fund in MNREGS of Mahendergarh district has been presented in the table-5. The table shows

that available fund 2911.27 lakh was high in 2011-12 but 2366.61 lakh was low in 2012-13. In the case of expenditure, fund

2675.22 lakh was high in 2011-12 but 2349.27 lakh was low in 2012-13.

Table-6: Complete Work and Incomplete Work under MNREGS in Mahendergarh District

Year Total Work Complete Work Incomplete Work

2010-11 1134 1086 48

2011-12 1311 1223 88

2012-13 1181 635 546

Sources: www.drda.com

The preset table shows that complete work and incomplete work in MNREGS of Mahendergarh district. The number of total work

1311 was high in 2011-12 and 1181 number of total work is low in 2012-13. In the case of number of complete work, 1223 in

2011-12 was high but 635 complete works in 2012-13 is lower than other year. In the case of number of in incomplete work 546

in 2012-13 is high but best performance in 2010-11 numbers of incomplete works only 48.

FINDINGS, SUGGESTIONS AFTER THE STUDY

Findings

The gender wise participation in MNREGS of Mahendergarh district, the study concludes that the number of employed

persons in MNREGS has insignificantly increased in all blocks those while statistically significantly increased in

Kanina block. Due to public awareness programmes done by gram Panchayats in Kanina people being informed about

the scheme. This increase is more prominent in Ateli Nagal that is followed by Mahendergarh, Kanina, Nagal

Chaudhary and Narnaul.

Regarding the number of registered person insignificantly increased rather than number of registered households.

Regarding the number of job card issue insignificantly increased with the year 2010-11 to 2012-13.

The study conclude that the case of number of employed demanded person insignificantly decline with year 2010-11 to

2012-13 but households employed demanded significantly decline with year 2010-11 to 2012-13.

Regarding the employment offered, number of households employed has significantly decline with year 2010-11 to

2012-13 but employment offered in person has significantly decline with the year 2010-11 to 2012-13. Because

employment was offered to those people who were taking initiatives themselves.

Regarding the caste wise employed person, the number of employed in other persons and total persons have

significantly increased. Because population of other persons in District Mahendergarh in more than 83 percent. Total

number of SC employed person has insignificantly increased but ST employed person is constant.

Regarding the wage rate of MNREGS, wage rate increased in 2013-14 but this is more appeared in 2013-14 that is

followed by 2012-13,2011-12,2010-11,2009-10, and in 2008-09.

Regarding the registered family and available work per person, registered family is increase but per person participation

for available work is decline in 2010-11 to 2012-13.





Regarding the available fund and expenditure, available fund is increased in 2011-12 but declined in 2012-13. In the

case of expenditure fund is increased in 2011-12 but declined in 2012-13.

Regarding the total work, complete work, incomplete work, in the case of total works 1311 number of works included in

2011-12. In the case of complete work 1223 number of works completed in 2011-12 but in the case of incomplete work

546 numbers of incomplete works in 2012-13 and only 48 numbers of incomplete works in 2010-11 identified.

Some Suggestions for the Better Implementation of MNREGS:

All the programs under MNREGS must be well planned well ahead of time with a definite period for complementation.

Employment may be extended to more than 100 days.

Wage rate should have parity with outside rate and ongoing price hike, which would reduce the migration of labour

from village to nearby township.

More transparency is needed about the sanctioned work and financial involvement therein. Because the corruption is

increasing in this scheme at ground level.

All natural water bodies and forest areas should be brought under MNREGS programs to make it as income generating

units.

All the programs under MNREGS must have definite dimension to lead the rural masses to a better economic standing.

CONCLUSION

This paper also discuss about the purpose of the MNREGS is to eradicate the poverty through generation of the employment and

development of rural sector of the country. Due to the political corruption, this purpose is not providing in the proper direction as

such mentioned in the title of the paper. It is not playing the right role to eradicate the poverty from the part of the rural India.

This study is based on the secondary data, which has been collected from the authentic sources. The paper also discusses the

participation of women for employment through MNREGS in Mahendergarh district. It is found that the participation of women is

less than men labour. It should be improve the implementation of the scheme for better result as per the various suggestions are

given.

REFERENCES

1. Poonia, J. (2012). Critical Study of MNREGA: Impact and Women’s Participation. International Journals of Human

Development and Management Sciences, 1(1). ISSO: 2250-8714.

2. Das, D. (2012). Examining India’s Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA): Its

Impact and Women’s Participation. International Journals and Research in management, 6(2), ISSN: 2249-5908.

Retrieved from http://www.rspublication.com/ijrm/ijrm_index.htm

3. Gupta, D., & Patidar, B. (2012). Mgnrega – issues And Challenges. Golden Research Thought, 2(3). ISSN: 2231-5063.

4. Das, M. (et. al.). (2012). Impact of workfare Programmes on Quality of Life: A Case Study of National Rural

Employment Guarantee Act in India.

5. Prasad, K. V. S. (2012). Performance of Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA): An

Overview. IJMBS, 2(4). Retrieved from www.ijmbs.com

6. Shah, M. (2004). NREGA: A Historic Opportunity, Economic and Political Weekly. Retrieved from www.epwcom.

7. Bhatti, B. (2012). Aadhar – Enabled Payments for NREGA Workers, 49. Retrieved from www.epwcom.

8. Jha, R. (et. al.). (2008). Capture of Anti-Poverty Programs: An Analysis of the National Rural Employment

Guarantee program in India (ASARC WP 2008/07).

9. Sudarshan, R. M. (2011). India’s national Rural Employment Guarantee Act: Women’s Participation and impacts in

Himachal Pradesh, Kerala and Rajasthan (CSP Research Report 06).

http://www.rspublication.com/ijrm/ijrm_index.htm

http://www.ijmbs.com/

http://www.epwcom/

http://www.epwcom/





10. Dasgupta, S., & Sudarshan, R. M. (2011). Issues in labour market inequality and women’s participation in India’s

National Rural Employment Guarantee programme (Working Paper No. 98).

11. Agarwal, R. K. (2012). Implementation of the NREGA in Uttar Pradesh. VSRD-IJBMR, 2(6). Retrieved from

www.vsrdiournals.com

12. Mukherjee, D., & Sinha, U. B. (2011). Understanding NREGA: A simple theory and some facts (Working Paper No.

196).

13. Retrieved from http://nrega.nic.in/form.pdf

14. Retrieved from http://en.wikipedia.org/wiki/Mahatma_Gandhi_National_Rural_Employment_Guarantee_Act

15. Retrieved from http://www.slideshare.net/shivrajsinghnegi/nrega-the-scheme-and-its-current-status

16. Retrieved from

http://nrega.nic.in/netnrega/WriteReaddata/Circulars/Guideliness_Research_Studies_under_MGNREGA.pdf

17. Retrieved from http://drdafaridabad.gov.in/interest.htm

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http://www.vsrdiournals.com/

http://nrega.nic.in/form.pdf

http://en.wikipedia.org/wiki/Mahatma_Gandhi_National_Rural_Employment_Guarantee_Act

http://www.slideshare.net/shivrajsinghnegi/nrega-the-scheme-and-its-current-status

http://nrega.nic.in/netnrega/WriteReaddata/Circulars/Guideliness_Research_Studies_under_MGNREGA.pdf

http://drdafaridabad.gov.in/interest.htm





MANAGEMENT OF WORKING CAPITAL IN AUTOMOTIVE INDUSTRY

Dr. Sachin Chavan15

ABSTRACT

Working capital management involves managing the relationship between a firm’s short-term assets and its short-term

liabilities. The goal of Working Capital Management is to ensure that the firm is able to continue its operations and that it has

sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses. To understand the

importance of working capital the paper talks about the current profiles of both Tata Motors and Mahindra & Mahindra.

KEYWORDS

Short Term Capital Management, Gross Working Capital, Net Working Capital, Automotive Industry, Current Asset,

Current Liabilities etc.

INTRODUCTION

India is the most preferred destination for automobile industry today. Indian automotive industry is one of the largest in the world

and one of the fastest growing globally. It has emerged as a ‘sunrise sector’ in our economy within 15 years of its liberalization.

India manufactures over 11 million 2 and 4-wheeled vehicles and exports about 1.5 million every year1. It is the world's 2nd largest

manufacturer of motorcycles and 11th largest manufacturer of passenger car and 13th in commercial vehicles2. Several Indian

automobile manufacturers such as Tata Motors, Maruti Suzuki, Mahindra and Mahindra have spread their operations in the

international market.

The industry also includes a large number of small and medium auto components enterprises. These enterprises play a vital role in

the growth of economy. According to the national Auto industry policy for 2006-2016, India’s GDP is expected to grow to almost

US$ 1400 billion in 2016 and in this GDP, the auto component industry is expected to contribute to almost US$ 150 by then. As

per this policy, the GDP of India will have a contribution of around 10% from the automotive industry. This shows that industry

has strong outlook and one can foresee enormous growth opportunities lying ahead. Therefore, the paper studies the two major

giants of the Indian automobile industry. It tries to establish the role of working capital in company's performance.

Working capital management involves managing the relationship between a firm’s short-term assets and its short-term liabilities.

The goal of Working Capital Management is to ensure that the firm is able to continue its operations and that it has sufficient cash

flow to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves

managing inventories, accounts receivable and payable, and cash. The management of the working capital is equally important as

the management of long-term financial investment. Every running business needs working capital. Even a business which is fully

equipped with all types of fixed assets required is bound to collapse without (i) adequate supply of raw materials for processing;

(ii) cash to pay for wages, power and other costs; (iii) creating a stock of finished goods to feed the market demand regularly; and,

(iv) the ability to grant credit to its customers. Working capital is thus like the lifeblood of a business. The business will not be

able to carry on day-to-day activities without the availability of adequate working capital.

To understand the importance of working capital the paper talks about the current profiles of both Tata Motors and Mahindra &

Mahindra.

Tata Motors Limited: The Company was established in 1945 and the new venture by the name was functional from 1954. More

than 5.9 million Tata vehicles play on Indian roads. Over the years, Tata Motors’ has evolved from a truck manufacturer to

becoming India’s only fully integrated automobile manufacturer with a product range designed to meet India’s transportation

needs. Tata has given wide variety of brands such as Nano, Indica, Indica Vista, Indigo, Indigo Manza, Indigo CS, Sumo, Safari,

Xenon, and Aria.

Mahindra & Mahindra Limited (M&M): The origins of Mahindra Group can be traced back to October 2, 1945. Mahindra

Group is the market leader in utility vehicles in India since beginning and one of the leading tractor brands in the world. M&M's

automotive division makes a wide range of vehicles including utility vehicles, light commercial vehicles and three wheelers. It

offers over 20 models. Some of the famous automobile brands of Mahindra are Scorpio, Xylo, Axe, Major and Bolero.

_______________________________ 1www.economictimes.indiatimes.com 2www.dhi.nic.in/draft_automotive_mission_plan

15Associate Professor, Dnyanganaga College of Engineering & Research, Maharashtra, India, [email protected]

http://www.economictimes.indiatimes.com/

http://www.dhi.nic.in/draft_automotive_mission_plan






The companies are having good profile and are truly giants of auto motives. The question is which is better managed in terms of

capital and short-term liabilities? To answer the question let me formulate a few objectives.

OBJECTIVES OF STUDY

The study is divided into two parts:

Study the structure of working capital including its composition for the above two companies.

Study Working Capital Management of small and medium scale automobile industries.


The companies Tata Motors Ltd and M&M Ltd have been selected based on their dominance in automobile sector. The research

methodology employed qualitative and quantitative analysis of the financial statements. These statements were extracted from

annual reports of Tata Motors Ltd. and M&M Ltd from the year 2005 to 2010. Analysis of the company’s financial statement has

been carried out in order to verify my findings. For analysis, both financial and statistical techniques were applied. Data of small

and medium scale automobile industries is collected through personal interview of related persons.

ANALYSIS AND DISCUSSION

Method of analysis is Comparative Analysis of working capital management of M&M & Tata Motors. Analysis is divided in

three parts as:

Size-wise analysis including discussion on composition of Working Capital,

Ratio analysis related to working Capital, and

T-test analysis.

Size Wize Analysis (Including discussion on composition of Working Capital)3:

It includes the study of working capital structure of both M&M & Tata Motors. The concept of gross working capital and net

working capital is used through the study. Working capital comprises of inventories, debtors, cash and bank, loans and advances,

other assets and current liabilities.

Working Capital

The gross working capital of M&M showed an increasing trend every year except in 2011. It increased to 3747.73 crore in the

year 2010 from 2299.49 crore in 2008. Declined in 2011 by 92.36 crore and again increased to 5062.93 and 6042.39 in 2012 and

2013 respectively. Whereas net working capital showed increasing trend until 2010 (i.e. from 539.79 crore to 1082.08 crore) and

thereafter declined to 404.36 and 265.17 crore in 2008 and 2009 respectively. Again increased in 2013 to 845.85 crore. On an

average it stood at 641.02 crore with standard deviation 273.44 and a high coefficient of variation of 42.66%. In case of Tata

Motors, the gross working capital showed an increasing trend every year. It increased from 7086.03 crore to 11537.98 crore in six

years. Whereas net working capital showed increasing trend until 2010 (i.e. from 545.36 crore to 2784.05 crore) and thereafter

showed negative trend in next three years. It was -272.85 crore in 2011, which increased to -5834.64 crore in 2013. On an average

it stood at -1368.77 crore with standard deviation 1732.74 and a very high coefficient of variation of 759.55%.

Inventories: For M&M Ltd. the inventories increased from 759.97 crores in 2008 to 878.88 crore in 2009. In 2011 increased to

1084.11 crores with slight decrease in 2010. In 2012 declined by 23.44 crores and again increased to 1188.78 crores in 2013. On

an average inventories stood at 975.14 crores with standard deviation, 147.06 and a low variation rate of 15.08%. Inventories were

26.43% of GWC on an average. In case of Tata Motors Ltd., the inventories increased from 1601.36 crores in 2008 to 2500.95

crore in 2010. They decreased to 2421.83 and 2229.81 crores in 2011 & 2012 respectively. In 2013, they rose to 2935.59 crores.

On an average inventories stood at 2283.63 crores with standard deviation, 415.04 and a low variation rate of 18.17%. Inventories

were 23.23% of GWC on an average.

Debtors: Debtors of M&M Ltd. showed increasing trend every year. It increased from 511.52 crores in 2005 to 1258.08 crores in

2013. On an average, it stood at 859.44 crores with standard deviation 261.2. Variation rate is slightly high i.e. 30.39%. They

comprised 22.16% of GWC. In case of Tata Motors Ltd., also Debtors showed increasing trend every year except in 2009. It was

798.58 crores in 2008, which declined to 715.78 in 2009. Thereafter it increased to 2391.92 crores in 2013. On an average, it

stood at 1170.73 crores with standard deviation 575.97 and a high variation rate of 49.20%. They covered only 11.73% of GWC.

________________________________ 3Please Refer to Table 1 & 2 at the end of the paper.





Cash and Bank: For M&M Ltd. it increased from 623.98 crores in 2008 to 1326.07 crore in 2010. In 2011, it decreased to 861.23

crores and again climbed up to 1743.23 crores in 2013. The average amounted to 1143.21 crores with standard deviation 427.98

indicating high variation rate of 37.44%. They form 28.74% portion of GWC. Cash and Bank balance in case of Tata Motors Ltd.

was 2008.04 crores, which came down in next two years. It was 1119.43 and 826.76 crores in 2009 and 2010 respectively. In

20011 increased from 826.76 crores to 2397.31 crores. Decreased to 1141.82 crores in 2012 and again increased to 1753.26 crores

in 2013. On an average amounted to 1540.60 crores with standard deviation 553.9 indicating high variation rate of 35.95%. It

occupied 16.33% portion of GWC.

Loans and Advances: From 2005 to 2007, it has shown rising trend. In 2008 it was 401.88 crore which increased to 839.42 Cr. in

2010. It reduced to 691.88 Cr in 2011. It rose to 1382.62 Cr. and 1801.43 Cr in 2012 and 2013 respectively. Ordinarily it stood at

938.08 crores with standard deviation 497.17 and very high variation rate of 53%. On an average, it covered 22.41% of GWC.

Tata motors has shown fluctuating trend. In 2008 it was 2674.93 crore which increased to 6396.22 crores in 2010. It reduced to

4433.05 crores in 2011. It rose to 4962.99 crores and declined by 505.89 crores in 2009 and 2013 respectively. Ordinarily it stood

at 4788.67 crores with standard deviation 1180.21 and variation rate of 24.65%. On an average, it covered major portion i.e.

48.68% of GWC.

Other Current Assets: These constitute very small portion of GWC of both the companies with very high variation rate.

Current Liabilities: Current liabilities of M&M Ltd. showed an increasing trend. It continuously increased from 1759.7 crores in

2008 to 5196.54 crores in 2013. They represented an average of 3287.27 crores with variation rate of 39.61%. Same in the case of

Tata Motors Ltd. Current liabilities have shown increasing trend throughout the study period. It was 6540.67 crore in 2008, which

increased to 17372.59 crores in 2013. They illustrated average of Rs.10015.03. Coefficient of variation rate is 36.62%.

Ratio Analysis

The various ratios used for the study include Current Ratio (CR), Quick Ratio (QR), Absolute Cash Ratio (ACR), Working

Capital Turnover Ratio (WCTR), Inventory Turnover Ratio (ITR), Debtors Turnover Ratio (DTR), Cash Turnover Ratio (CTR),

Inventory Conversion Period (ICP) and Debtors Collection Period (DCP). All turnover ratios are calculated in relation to net sales.

Mahindra & Mahindra Ltd.: CR was in between 1.06:1 to 1.41:1 over the period of study with an average of1.24, which is

below standard ratio of 2:1. QR was 0.25:1 to 1.23:1 throughout the period with an average ratio of 0.68:1, which is below

standard ratio of 1:1. ACR was below standard norm with a mean ratio of 0.36:1. Least WCTR was 8.88:1 and highest was

47.70:1 with an average ratio of 21.33:1. ITR decreased from 19 times to 17 times in 2009. Thereafter it increased to 29 times in

2013 giving a mean of 20.10 times. ICP increased from 27 days to 30 days in 2006. In 2010, it was 28 days, which rose to 29 days

in 2011 and again declined to 26 days and 19 days in 2012 and 2013 respectively. Average ICP was 26 days. DTR was 13, 13, 14

times in 2008, 2009 and 2010 respectively. It declined to 11 times in 2011 and again reached to 14 times in 2013 depicting

average DTR of 12.70 times. DCP was same for 2008 and 2009 i.e. 29 days. It declined to 27 days in 2007 and again climbed up

to 34 days with diminishing trend in subsequent two years. It stood at average of 29 days. CTR was fluctuating throughout the

period and gave an average of 10 times.

Tata Motors Ltd.: CR was below standard ratio of 2:1 over the period of study with an average of1.05:1. It started with 1.08:1

rose to 1.36:1 and fell down to 0.66:1 in 2010. QR was 0.50:1 to 1.08:1 throughout the period with an average ratio of 0.82:1,

which is below standard ratio of 1:1. ACR was in between 0.10:1 and 0.31:1 giving mean ratio of 0.17:1, which is very less than

the standard norm of 0.50:1. WCTR placed from (105.30):1 to 32.25:1 showing an average ratio of (13.94):1. ITR decreased from

24 times to 21 times in 2011. It remained same in 2012 and increased to 25 times in 2013. On an average, it stood at 22.57 times.

ICP increased from 22 days to 25 days in 2008. In 2012 and 2013, it fell down to 24 and 21 days respectively. Mean ICP was

23.57 days. DTR rose to 35 times in 2010 from 22 times in 2008 and then declined continuously to 15 times in 2013. Average

DTR was of 25 times. DCP was 17 days in 2008, which reduced to 10 days in 2010. It climbed up to 25 days in 2013. It averaged

at 16 days. CTR increased to 33 times in 2010 from 9 times. Then it showed fluctuating trend in last 3 years and offered an

average of 19.23 times.

T-test Analysis4:

T-test was performed at 5% significance level to check whether significant difference exist in the working capital of both the

companies. Result showed that there is no significant difference between two.

________________________________ 3Please Refer to Table 3 & 4 at the end of the paper.





FINDINGS AND CONCLUSIONS

It was observed that M&M Ltd has shown good liquidity position as it has revealed positive and adequate net working capital

compare to Tata Motors5. Result showed by Tata Motors was positive in first three years but from 2011 to 2013, it has revealed

increasingly negative working capital. It portrayed very high variation rate of (759) due to high amount of negative working

capital in one year and positive in one year. It requires urgent action to be taken for improvement as it illustrated poor liquidity

position.

Composition of current assets disclosed that investment of M&M ltd. in inventories, debtors, Loans and advances and cash and

bank is near about same ranging from 22.41% to 28.74%. It showed that they have managed composition of current assets

properly. However, Tata Motors have invested huge fund i.e. 48.68% of current assets in loans and advances. While investment in

debtors is comparatively low. Proportion of cash and bank balance is only 16.33%.

The analysis of current liabilities of M&M showed lower amounts than total current assets resulting positive net working capital

every year. In case of Tata Motors amount of current liabilities for first three years was in control but in next three years it

exceeded the limit of total current assets representing negative trend in net working capital.

On an average Current ratio, Quick ratio and Absolute cash ratio of both the companies was below standard of 2:1, 1:1 and 0.50:1

respectively. When compared with each other result disclosed that liquidity position of M&M is better. M&M revealed good

working capital turnover ratio as it has revealed positive working capital every year. However in case of Tata Motors due to

negative working capital, average working capital turnover ratio showed bad results.

Cash turnover ratio of Tata Motors was comparatively higher than Mahindra & Mahindra.

Debtor’s turnover ratio for Mahindra & Mahindra is 12.70 times and debtors get converted into cash after 29 days whereas for

Tata Motors debtors’ turnover was near about double i.e. 24.65 times and period required for conversion was only 16 days. Result

showed that compare to M&M Tata Motors could raise cash easily from debtors in shorter period.

Inventory turnover ratio of both the companies was high with high conversion period. It indicated that both the companies are

managing their inventories efficiently.

After this comparative study it may be concluded that though Tata Motors is still leader in the market as far as management of

working capital is concerned, Mahindra and Mahindra has performed better.

In case of SMIs: Investigation revealed that Tata Motors, M&M, Bajaj Auto, DANA India and Spicer these are the major clients

for them. For 50% of the SMIs under study raw material is supplied by the client as and when required. Therefore, no problem of

inventory arises for them. Few SMIs they follow just in time technique. Whereas, few were not aware about it and impact of poor

inventory management. Regarding debtors again their suppliers are their clients so no major problem for few but for remaining

50% they sometimes face the problem in collection. Overall SMIs study showed that though few companies are managing

working capital properly few are not aware of it. Due to which they are facing problems to raise funds from banks, to avail credit

facilities from suppliers, etc.

SUGGESTIONS

Though working capital structure of M&M has shown better results, it has to take steps to improve its liquidity position to meet

the future growth requirements in global market. In case of Tata Motors, huge fund of gross working capital is captured by loans

and advances which indicates that now they have to take more efforts for recovery of the same. Exceeding amount of current

liabilities demonstrate that part of fixed assets are financed from short-term sources. Company has to focus on liquidity problem

and increase efficiency in utilization of fixed assets.

They have already taken benefit of its goodwill in the market for last three years now it is time to take corrective action and

improve liquidity position to sustain its present status. In case of SMIs, they have to understand the importance of working capital

mainly inventory and debtor’s management for early growth.

According to Automotive Mission Plan 2006-2016 next few years will be the crucial period for growth of Indian automotive

industry in global stage. All large as well as small and medium scale industries have to manage their working capital efficiently

and effectively to scale newer heights in years to come.

________________________________ 4Please refer to the conclusion after the tables for t-test 5Please refer to Net working Capital comparison Table 5





APPENDIX

Table-1: Working Capital Structure: Mahindra and Mahindra Limited

(Rs. In Crores)

Year 2013 2012 2011 2010 2009 2008 Total Mean S.D. C.V.

Current Assets,

Loans &Inventories 1188.78 1060.67 1084.11 878.41 878.88 759.97 5850.82 975.14 147.06 15.08

% GWC 19.67 20.95 29.66 23.44 31.82 33.05 26.43

Sundry Debtors 1258.08 1043.65 1004.88 700.52 637.96 511.52 5156.61 859.44 261.2 30.39

% GWC 20.82 20.61 27.49 18.69 23.10 22.24 22.16

Cash & Bank

Balances 1743.23 1574.43 861.23 1326.07 730.31 623.98 6859.25 1,143.21 427.98 37.44

% GWC 28.85 31.10 23.56 35.38 26.44 27.14 28.74

Loans & Advances 1801.43 1382.62 691.88 839.42 511.23 401.88 5628.46 938.08 497.17 53.00

% GWC 29.81 27.31 18.93 22.40 18.51 17.48 22.41

Other Current Assets 50.87 1.56 13.27 3.31 3.46 2.14 74.61 12.44 17.64 141.86

% GWC 0.84 0.03 0.36 0.09 0.13 0.09 0.26

Gross Working

Capital (GWC) 6042.39 5062.93 3655.37 3747.73 2761.84 2299.49 23569.75 3,928.29 1283.1 32.66

Current Liabilities

and Provisions 5196.54 4797.76 3251.01 2665.65 2052.98 1759.7 19723.64 3,287.27 1302.02 39.61

Net Working

Capital (NWC) 845.85 265.17 404.36 1082.08 708.86 539.79 3846.11 641.02 273.44 42.66

Sources: Prowess, CMIE Database

Table-2: Working Capital Structure: Tata Motors Limited

(Rs. In Crores)

Year 2013 2012 2011 2010 2009 2008 Total Mean S.D. C.V

Current Assets,

Loans &Inventories 2935.59 2229.81 2421.83 2500.95 2012.24 1601.36 13701.78 2,283.63 415.04 18.17

% GWC 25.44 23.37 23.32 23.79 20.83 22.60 23.23

Sundry Debtors 2391.92 1205.52 1130.73 782.18 715.78 798.58 7024.71 1,170.79 575.97 49.20

% GWC 20.73 12.64 10.89 7.44 7.41 11.27 11.73

Cash & Bank

Balances 1753.26 1141.82 2397.31 826.76 1119.43 2005.04 9243.62 1,540.60 553.9 35.95

% GWC 15.20 11.97 23.09 7.86 11.59 28.30 16.33

Loans & Advances 4457.1 4962.99 4433.05 6396.22 5807.7 2674.93 28731.99 4,788.67 1180.21 24.65

% GWC 38.63 52.02 42.69 60.85 60.11 37.75 48.68

Other Current Assets 0.11 0.11 0.86 5.94 6.16 6.12 19.3 3.22 2.87 89.22

% GWC 0.00 0.00 0.01 0.06 0.06 0.09 0.04

Gross Working

Capital (GWC) 11537.98 9540.25 10383.78 10512.05 9661.31 7086.03 58721.4 9,786.90 1373.54 14.03

Current Liabilities

and Provisions 17372.59 10676.92 10656.63 7728 7115.36 6540.67 60090.17 10,015.03 3667.27 36.62

Net Working

Capital (NWC) 5834.61 1136.67 272.85 2784.05 2545.95 545.36 1368.77 228.13 1732.74 759.55


Tables of Ratio

Table-3: Working capital Ratios of Mahindra and Mahindra Limited

(Rs. In Crores)

Year ITR

(Times)

ICP

(Days)

DTR

(Times)

DCP

(Days)

CTR

(Times)

WTR

(Times)

CR

(Times)

QR

(Times)

ACR

(Times)

2013 29 19 14 25 10 21.33 1.16 0.71 0.34

2012 20 26 12 30 8 47.70 1.06 0.25 0.33

2011 18 29 11 34 13 26.72 1.12 0.37 0.26

2010 18 28 14 27 7 8.88 1.41 1.23 0.50

2009 17 30 13 29 11 11.27 1.35 0.81 0.36

2008 19 27 13 29 10 12.10 1.31 0.71 0.35

Total 121 158 76 174 60 127.99 7.41 4.08 2.14

Mean 20.10 26.30 12.70 28.99 9.93 21.33 1.24 0.68 0.36






Table-4: Working capital Ratios of Tata Motors Limited

(Rs. In Crores)

Year ITR

(Times)

ICP

(Days)

DTR

(Times)

DCP

(Days)

CTR

(Times)

WTR

(Times)

CR

(Times)

QR

(Times)

ACR

(Times)

2013 25 21 15 25 20 6.10 0.66 0.50 0.10

2012 21 24 21 17 22 22.55 0.89 0.68 0.11

2011 21 25 25 14 12 105.30 0.97 0.75 0.22

2010 22 24 35 10 33 9.87 1.36 1.04 0.11

2009 23 24 29 13 19 8.21 1.36 1.08 0.16

2008 24 22 22 17 9 32.25 1.08 0.84 0.31

Total 135 141 148 96 115 83.63 6.32 4.89 1.01

Mean 22.57 23.51 24.65 15.92 19.23 13.94 1.05 0.82 0.17


T-test

H0: No significant difference exists in the working capital of M&M Ltd. and Tata Motors Ltd.

H1: Significant differences exist in the working capital of M&M Ltd. and Tata Motors Ltd.

Table-5: Net Working Capital (Rs. in Crores)

Year M&M Ltd. Tata Motors Limited

2013 845.85 (5,834.61)

2012 265.17 (1,136.67)

2011 404.36 (272.85)

2010 1082.08 2784.05

2009 708.86 2545.95

2008 539.79 545.36


Degree of Freedom = n1+n2-2= 6+6-2=10

t at 5% i.e. t0.05 significance level for degree of freedom 10 = 2.228

Tcal = 0.6747

As t0.05 > tcal, the null hypothesis (H0) is accepted.

REFERENCES

1. Rustagi, R. P. Financial Management, pp. 225-240. Delhi.

2. Kishore, Ravi. Financial Management, pp. 560-590. Delhi.

3. Desai, Vasant. Small Scale Industries and Entrepreneurship, pp. 155-170.

4. Kothari, C. R. Research Methodology-Methods and Techniques, pp. 270-296.

5. Retrieved from www.bizresearchpapers.com

6. Retrieved from www.icmrindia.org

7. Retrieved from www.iif.edu

8. Retrieved from www.acmainfo.com

9. Retrieved from www.economywatch.com

10. Retrieved from www.in.kpmg.com

11. Retrieved from http://agridr.in/tnauEAgri/eagri50/AECO341/lec12.pdf

12. Retrieved from http://www.ediindia.org/doc/SpecialPDF/chp-14.pdf

13. Retrieved from http://www.studymode.com/essays/Working-Capital-Mgt-444832.html

14. Retrieved from http://en.wikipedia.org/wiki/Working_capital

*****

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EMERGENCE OF GOODS AND SERVICES TAX (GST) IN INDIA

Mukesh Kumar Kumawat16 Dr. Vibhor Paliwal17

ABSTRACT

India has witnessed substantial reforms in indirect taxes over the past two decades. The Goods and Service Tax (GST) is one

of the biggest taxation reforms in India. The central idea behind this form of taxation is to replace existing Taxes like value-

added tax, excise duty, service tax, and sales tax by levying a comprehensive tax on the manufacture, sale and consumption of

goods and services in the country. GST is expected to unite the country economically as it will remove various forms of taxes

that are currently levied at different points. This paper presents the background, silent features and the impact of GST in the

present tax scenario in India.

KEYWORDS

Goods and Service Tax, GST, VAT etc.

INTRODUCTION

Tax policies of a country play an important role on the economy through their impact on both efficiency and equity. A good tax

system should keep in view issues of income distribution and at the same time generate tax revenues to support government

expenditure on public services and infrastructure development. The framework of value added tax (VAT), recognized as GST as

well in several countries, has been one of the major development in taxation structures worldwide. More than 135 countries

adopted the GST/ VAT framework effectively. Indian economy is getting more and more globalized. Introduction of an integrated

Goods and Services Tax (GST) to replace the existing multiple tax structures of Centre and State taxes is not only desirable but

imperative in the emerging economic environment. The implementation of GST would ensure that India provides a tax regime

that is almost similar to the rest of the world. It will also improve the international cost competitiveness of native goods and

services. According to a report by the National Council of Applied Economic Research, GST is expected to increase economic

growth by 0.9 percent to 1.7 percent and Exports are expected to increase by 3.2 percent to 6.3 percent.

OBJECTIVES OF STUDY

The study has been geared towards achieving the following objectives:

To understand the concept of Goods and Services Tax;

To know the benefit of Goods and Services Tax to economy, business and industry and consumer;

To examine the features of Goods and Services Tax; and

To provide information for future research works on GST.


The research paper is an attempt of exploratory research, based on the secondary data sourced from journals, magazines, articles

and media reports. Looking into requirements of the objectives of the study the research design employed for the study is of

descriptive type. Keeping in view of the set objectives, this research design was adopted to have greater accuracy and in depth

analysis of the research study Available secondary data was extensively used for the study. The investigator procures the required

data through secondary survey method. Different news articles, Books and Web were used which were enumerated and recorded.


Girish Garg, (2014) Studied “Basic Concepts and Features of Good and Service Tax in India”, and found that GST is the most

logical steps towards the comprehensive indirect tax reform in our country since independence. GST will create a single, unified

Indian market to make the economy stronger. Experts say that GST is likely to improve tax collections and Boost India’s

economic development by breaking tax barriers between States and integrating India through a uniform tax rate. Under GST, the

taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base

and minimizing exemptions.

Dr. R. Vasanthagopal, (2011) Studied “GST in India: A Big Leap in the Indirect Taxation System”, and found that the positive

impacts are dependent on a neutral and rational design of the GST, balancing the conflicting interests of various stakeholders, full

16Associate Professor, Vision School of Management, Rajasthan, India, [email protected] 17Associate Professor, Sangam University, Rajasthan, India, [email protected]







political commitment for a fundamental tax reform with a constitutional amendment, the switchover to a „flawless‟ GST would be

a big leap in the indirect taxation system and also give a new impetus to India’s economic change. It is also noted that, buoyed by

the success of GST, more than 140 countries have introduced GST in some form to other and is fast becoming the preferred form

of indirect tax in the Asia Pacific region.

WHAT IS GST?

Goods and Service Tax (GST) is a comprehensive tax levy on manufacture, sale and consumption of goods and service at a

national level. In simple terms, GST may be defined as a tax on goods and services, which is leviable at each point of sale or

provision of service, in which at the time of sale of goods or providing the services the seller or service provider may claim the

input credit of tax which he has paid while purchasing the goods or procuring the service. It is basically a tax on final

consumption Ex-CAG Mr. Vinod Rai in his inaugural address to the National Conference on GST described the concept as "An

integrated scheme of taxation that does not discriminate between goods and services and is a part of the proposed tax reforms that

centre on evolving an efficient and harmonized consumption tax system in the country." Under the GST regime, both the Centre

and the State would have the powers to tax the supply of goods and services right from their primary stage to final consumption.

At the center’s level, introduction of the GST will mean that it takes the place of central excise duty, service tax and additional

customs duties. At the state level, the GST will take the place of State VAT.

GOODS AND SERVICES TAX IN INDIA

The introduction of GST in India is not an entirely new initiative, but it is to rectify certain basic implementation shortcomings of

VAT. Therefore, this is an attempt to improve the existing VAT system further and the tax system of India. VAT was introduced

in the Indian taxation system from April 1, 2005 in an effort to address the shortcomings associated with the earlier Sales Tax.

The States have switched over from a multiple point Sales tax to a Value Added Tax (VAT) covering all transactions of sale of

goods within the State The essence of GST is to correct certain shortcomings of VAT like, the way it taxes inputs and outputs,

bringing services under tax net, which is not possible under the VAT system. Hence, GST has been modeled as an extension of

the current VAT that would make the tax system more comprehensive and smoother in its functioning.

Finance minister Mr. P. Chidambaram, in his budget speech of 2007-08 had announced the implementation of the Goods and

Services Tax (GST) from April 1st 2010. He said, “It is my sense that there is a large consensus that the country should move

towards a national level GST that should be shared between the centre and the states. I propose that we set April 1, 2010 as the

date of introducing GST. World over, Goods and Services attract the same rate of Tax. This is the foundation of GST. People

must get used to the idea of a GST. We must progressively converge the service tax rate and Central Value Added Tax

(CENVAT) rate." In order to take the GST related work further, a Joint Working Group consisting of officers from Central as

well as State Government was constituted in May 2007 to prepare a GST module. In November 19, 2007, Joint Working Group

submitted its report to the Empowered committee. The report was discussed in detail in November 28, 2007 in the meeting of the

Empowered committee.

An important interaction also took place between Shri Pranab Mukherjee, the Union Finance Minister and the Empowered

Committee in October 19, 2009, on the related issue of compensation for loss of the States because of phasing out of CST. The

Empowered Committee has now taken a detailed view on the recommendations of the Working Group of officials and other

related matters. This detailed view of the Empowered Committee on the structure of GST is now presented in terms of the First

Discussion Paper on November 10, 2009 setting out a target date for its implementation as April 1, 2010. The Union Finance

Minister, Mr. Pranab Mukherjee, while delivering the budget speech in 2010, extended the date to April 1, 2011. This deadline

was subsequently extended to April 1, 2012. Ex-Finance minister P. Chidambaram in his budget speech of 2013-14 while

apologizing for the failure to meet the April 2012 deadline announced further postponement of the same to April 2014.

KEY FEATURES OF THE GOODS AND SERVICES TAX

The GST would be applicable to all transactions of goods and services made for a consideration except the exempted

goods and services, goods that are outside the purview of GST.

GST will be paid to the accounts of the Centre (Central GST) and the States (State GST) separately, rates for which

would be prescribed appropriately, reflecting revenue considerations and acceptability.

Since the Central GST and State GST are to be treated individually, taxes paid against the Central GST shall be allowed

to be taken as input tax credit (ITC) for the Central GST and could be utilized only against the payment of Central GST.

The GST will be levied on import of goods and services into the country.

The rules for taking and utilization of credit for the Central GST and the State GST would be aligned.

To the extent feasible, uniform procedure for collection of both Central GST and State GST would be prescribed in the

respective legislation for Central GST and State GST.

Each taxpayer would be allotted a PAN-linked taxpayer identification number with a total of 13/15 digits. This would

bring the GST PAN linked system in line with the prevailing PAN-based system for Income tax, facilitating data

exchange and tax payer compliance





The taxpayer would need to submit common format for periodical returns, to both the concerned Central and State GST

authorities.

DUAL GST MODEL

India is a federal country where both the Centre and the States have been assigned the powers to levy and collect taxes through

appropriate legislation. It has been proposed that there would be a “Dual GST “model in India, taxes will be levied by both center

(Central GST) and state (State GST) on Goods and Services. Hence, a dual GST would be according to the Constitutional

requirement of fiscal federalism.

Central GST will be levied and collected by the Central Government.

State GST will be levied, collected and appropriated by each of the States.

TAXES TO BE SUBSUMED

The various Central, State and Local levies were examined to identify their possibility of being subsumed under GST. Central and

State indirect taxes and levies listed below would be subsumed under the proposed GST:

Central tax and levies to be subsumed:

Central Excise Duty;

Additional Excise Duties;

The excise Duty levied under the Medicinal and Toiletries Preparation Act;

Service Tax;

Additional Customs Duty, commonly known as Countervailing Duty (CVD);

Special Additional Duty of Customs – 4% (SAD);

Surcharges; and

Cesses.

State taxes and levies to be subsumed:

VAT/Sales tax;

Entertainment tax (unless it is levied by the local bodies);

Luxury tax;

Taxes on lottery, betting and gambling;

State Cesses and Surcharges in so far as they relate to supply of goods and services;

Entry tax not in lieu of Octroi.

RATE OF TAX

Determining a revenue neutral rate for GST will be a difficult task because all the states would be required to reach a consensus

on it. It has been proposed to adopt a two-rate structure, a lower rate for necessary items and items of basic importance and a

standard rate for goods in general. There will also be a special rate for precious metals and a list of exempted items. For Central

GST relating to goods, there might be a two-rate structure, with conformity in the levels of rate with the State GST. For taxation

of services, there may be a single rate for both Central GST and State GST.

GST ON EXPORT AND IMPORT

Exports will not be subject to GST.

Both Central Goods and Service Tax (CGST) and State Goods and Service Tax (SGST) will be levied on import of

goods and services into the country. The incidence of tax will follow the destination principle and the tax revenue in

case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-of i.e.

Input Tax Credit will be available on the GST paid on import on goods and services.

WHY IS IT IMPORTANT?

GST will widen the tax base, improve tax compliance, remove existing unhealthy competition among states and re-

distribute the burden of taxation equitably among manufacturing and services;

GST will ensure the uniformity of taxes across the states, regardless place of manufacture or distribution;

GST would integrate the tax base and allow seamless flow of input tax credit across the value chain of goods and

services, which will lead to reduced cost of goods and services;





GST environment would lead to improved disclosure of economic transactions which may have a positive impact on

direct tax collections also;

The average tax burden on companies will fall which will reduce the costs of Indian goods and services in the

international market and give boost to Indian exports;

It will mitigate cascading and double taxation and enable better compliance through the lowering of overall tax burden

on goods and services;

Overall, it will result in increasing revenue at the center, as the tax collection system becomes more transparent, making

tax evasion difficult.

BENEFITS OF GST

For business and industry:

Easy compliance,

Removal of cascading,

Improved competitiveness.

For Central and State Governments:

Simple and easy to administer,

Better controls on leakage,

Consolidation of tax base,

Higher revenue efficiency.

For the consumer:

Single and Transparent tax proportionate to the value of goods and services,

Reduction of prices.

CONCLUSION

GST is a single national uniform tax levied across India on all goods and services. In GST, all Indirect taxes such as excise duty,

Octroi, central sales tax (CST) and value-added tax (VAT) etc. will be subsumed under a single regime. Introduction of The

Goods and Services Tax (GST) will be a significant step towards a comprehensive indirect tax reform in the country. It is

expected to bring about efficiency and transparency in the indirect tax mechanism in India. Further, it will also encourage an

unbiased tax structure that is neutral to business processes and geographical locations. Given the enormity of the implication of

GST, it requires a consensus among all political parties and states. However, the implementation of GST has been delayed several

times because of lack of consensus between the States and Centre on aspects relating to limiting fiscal autonomy of the States.

History has proved that many countries have benefited from moving to a GST regime. In India, Implementation of GST would

also greatly help in removing economic distortions caused by present complex tax structure and will help in development of a

common national market.

REFERENCES

1. 2009). First Discussion Paper on Goods and Services Tax in India. New Delhi: Empowered Committee of Finance

Ministers.

2. (2013). Goods and Services Tax (GST) - A fact forward. Retrieved from

http://articles.economictimes.indiatimes.com/2013-08-13/news/41374977_1_services-tax-stategst-goods-and-services

3. Retrieved from

http://www.cbgaindia.org/files/primers_Manuals/Primer%20on%20Goods%20and%20Services%20Tax.pdf

4. Gupta, Saurabh, & Gupta, Madhur. (2014, January). How Impossible GST has become Inevitable for India?. Niveshak,

7(1), 26-28.

5. Mukherjee, Pranab. (2010, February 26). Speech at the Union Budget 2010-11. Retrieved from

http://www.thehindu.com/business/Economy/article113901.ece

6. Retrieved from http://www.kotaksecurities.com/budget2013-14/union-budget-2013-14/indianbudget-news/5-Points-to-

know-aboutGST.html#sthash.BfPSt6Re.dpbs

http://articles.economictimes.indiatimes.com/2013-08-13/news/41374977_1_services-tax-stategst-goods-and-services

http://www.cbgaindia.org/files/primers_Manuals/Primer%20on%20Goods%20and%20Services%20Tax.pdf

http://www.thehindu.com/business/Economy/article113901.ece

http://www.kotaksecurities.com/budget2013-14/union-budget-2013-14/indianbudget-news/5-Points-to-know-aboutGST.html%23sthash.BfPSt6Re.dpbs

http://www.kotaksecurities.com/budget2013-14/union-budget-2013-14/indianbudget-news/5-Points-to-know-aboutGST.html%23sthash.BfPSt6Re.dpbs





7. (2013). What is GST (Goods and Services tax)? Retrieved from

http://www.moneycontrol.com/smementor/mentorade/budget-2013/what-is-gstgoods-and-services-tax-827592.html

8. Garg, Girish. (2014). Basic Concepts and Features of Good and Service Tax in India.

9. Vasanthagopal, R. (2011, April). GST in India: A Big Leap in the Indirect Taxation System. International Journal of

Trade, Economics and Finance, 2(2).

10. (2012-2013). Seventy Third Report of Standing Committee on Finance. Retrieved from

http://www.prsindia.org/uploads/media/Constitution%20115/GST%20SC%20Report.pdf

11. Rajkumar, C. A., & Adukia, S. A Study on Proposed Goods and Services Tax [GST] Framework in India. Retrieved

from http://taxclubindia.com/simple/rajkumar.pdf

12. Retrieved from http://www.readbag.com/taxclubindia-simple-rajkumar

13. Retrieved from

http://finmin.nic.in/GST/Empowered%20Committee%20of%20SFM%20%20First%20Discussion%20paper.pdf

14. Retrieved from http://gst.puducherry.gov.in/Site_GO/First%20discussion%20paper%20on%20GST.PDF

15. Retrieved from http://empcom.gov.in/content/20_1_FAQ.aspx

16. Retrieved from http://www.xaam.in/2014/01/goods-and-services-tax-gst-step-forward.html

17. Retrieved from http://businesstoday.intoday.in/story/arpan-de-sarkar-on-goods-and-services-tax/1/203007.html

18. Retrieved from http://www.quora.com/What-is-going-to-be-the-impact-of-the-GST-on-the-Indian-economy-and-finance

19. Retrieved from http://taxguru.in/goods-and-service-tax/ppt-goods-services-tax-gst-india.html

20. Retrieved from http://www.quora.com/Devangshu-Anchalia#!n=30

21. Retrieved from http://www.caclubindia.com/articles/goods-and-service-tax-a-journey-4136.asp

22. Retrieved from http://www.gjms.co.in/index.php/gjms/article/view/213

23. Retrieved from

http://taxguru.in/goods-and-service-tax/gst-parliamentary-committees-report-constitution-amendment-s...

24. Retrieved from http://icaitv.com/live/cpe070813/GSTinIndia.pptx

25. Retrieved from

http://articles.economictimes.indiatimes.com/2013-08-13/news/41374977_1_services-tax-state-gst-goods...

26. Retrieved from

http://www.livemint.com/Politics/u2D1XJ3j6uys6FF3uuOnfI/Implementation-of-GST-single-most-important-...

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http://www.moneycontrol.com/smementor/mentorade/budget-2013/what-is-gstgoods-and-services-tax-827592.html

http://www.prsindia.org/uploads/media/Constitution%20115/GST%20SC%20Report.pdf

http://taxclubindia.com/simple/rajkumar.pdf

http://www.readbag.com/taxclubindia-simple-rajkumar

http://finmin.nic.in/GST/Empowered%20Committee%20of%20SFM%20%20First%20Discussion%20paper.pdf

http://gst.puducherry.gov.in/Site_GO/First%20discussion%20paper%20on%20GST.PDF

http://empcom.gov.in/content/20_1_FAQ.aspx

http://www.xaam.in/2014/01/goods-and-services-tax-gst-step-forward.html

http://businesstoday.intoday.in/story/arpan-de-sarkar-on-goods-and-services-tax/1/203007.html

http://www.quora.com/What-is-going-to-be-the-impact-of-the-GST-on-the-Indian-economy-and-finance

http://taxguru.in/goods-and-service-tax/ppt-goods-services-tax-gst-india.html

http://www.quora.com/Devangshu-Anchalia%23!n=30

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http://www.gjms.co.in/index.php/gjms/article/view/213

http://taxguru.in/goods-and-service-tax/gst-parliamentary-committees-report-constitution-amendment-s...

http://icaitv.com/live/cpe070813/GSTinIndia.pptx

http://articles.economictimes.indiatimes.com/2013-08-13/news/41374977_1_services-tax-state-gst-goods...

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AN ANALYTICAL STUDY OF INDO-ASEAN BILATERAL TRADE RELATION

Dr. Md Izhar Alam18 Dr. Mohammad Imran19

ABSTRACT

Indo-ASEAN economy is a vibrant regional grouping in Asia. Realizing the importance of the Asian region for sustaining

high trade growth, India announced its “Look- East” policy in 1991 in an attempt to increase its engagement with the East

Asian countries. The India-ASEAN Free Trade Agreement (IAFTA) was signed on 13 August 2009 in Bangkok. The

agreement covers trade in goods between India and the ASEAN members that came into effect on 1 January 2010.

In this paper, attempts have been made to analyze bilateral trade between India and ASEAN region-wise, country wise and

commodity-wise trade between India and ASEAN countries. For any Regional Trade Agreement (RTA) to be successful, it is

imperative for partner countries to have complementary trade structure to be exploited for mutual benefit. Countries, which

got complementary trade structure, are likely to trade more whereas economies with similar trade structure often struggle to

improve trade share unless there is substantial intra- industry trade. The bilateral trade analyses provide a useful insight into

the competitiveness of participating countries and hence reveal the possibility of increased trade cooperation between them.

KEYWORDS

Regional Trade Agreement, Free Trade Agreement etc.

INTRODUCTION

Indo-ASEAN (the Association of South East Asian Nations- ASEAN) economy is a vibrant regional economy in Asia. ASEAN is

a geo-political and economic organization with 10 member countries, formed in August 1967 by Indonesia, Malaysia, the

Philippines, Singapore and Thailand. Since then, the membership has expanded to include Brunei Darussalam, Cambodia, the Lao

People’s Democratic Republic, Myanmar and Viet Nam. ASEAN’s objectives are to accelerate economic growth, social progress

and cultural development among its members, protect the peace and stability of the region, and provide opportunities for the

member countries to discuss their differences peacefully. ASEAN for long followed export oriented growth strategy

simultaneously pursuing twin objectives of deepening regional integration efforts and carrying out multilateral trade liberalization

with rest of the world. Realizing the importance of the Asian region for sustaining high trade growth, India announced its “Look

East” policy in 1991 in an attempt to increase its engagement with the East Asian countries. Consequently, in 1992, it became a

sectoral dialogue partner of the Association of South East Asian Nations (ASEAN). India became a Full Dialogue Partner of

ASEAN in 1995 and a member of the ASEAN Regional Forum (ARF) in 1996. India and ASEAN signed a Framework

Agreement – the Comprehensive Economic Cooperation Agreement (CECA) – on 8 October 2003 with a view to providing an

institutional framework that would enable economic cooperation to come into effect. Negotiations on a trade in goods agreement

between India and ASEAN were started in March 2004. The negotiations continued for six years and finally the India- ASEAN

Free Trade Agreement (IAFTA) was signed on 13 August 2009 in Bangkok during a meeting of the Economic Ministers of

ASEAN. The agreement, which only covers trade in goods between India and the ASEAN members, came into effect on 1

January 2010 in the case of Malaysia, Singapore and Thailand. For the remaining ASEAN members it will come into force after

they have completed their internal requirements.

India ASEAN Free Trade Agreement (IAFTA) generated intense discussion on the economic impact on India’s trade in goods.

For any Regional Trade Agreement (RTA) to be successful, it is imperative on partner countries to have complementary trade

structure to be exploited for mutual benefit. Countries, which got complementary trade structure, are likely to trade more whereas

economies with similar trade structure often struggle to improve trade share unless there is substantial intra industry trade. RCA

indices, despite their limitations, provide a useful guide to underlying comparative advantage, offer a further insight into the

competitiveness of participating countries, and hence reveal the possibility of increased trade cooperation between them. In this

context, attempts have been made to analyze bilateral trade relation between India and ASEAN, region-wise, country-wise and

commodity-wise to see the overall trends in bilateral trade and to identify complementary and competing commodities of trade

between India and ASEAN countries to consolidate their strengths and to overcome the pitfalls. The synergies between India and

ASEAN need to be identified for further cementing the economic cooperation and deepening the relationship.

18Assistant Professor, College of Business Administration, King Saud University, Kingdom of Saudi Arabia; & Ex-Intern /

Consultant, Department of Commerce, Ministry of Commerce & Industry, Government of India, India,

[email protected] 19Assistant Professor, College of Business Administration, King Saud University, K.S.A, [email protected]







REGION WISE INDIA’S EXPORTS SHARE

India’s exports destinations based on region-wise have been reported in table-1. The table shows India’s exports share in its global

exports by the region wise. The European Union is India’s largest trading partner, accounting for 24 percent of India’s total

exports during the year 2000-01 followed by North America, north east Asia, West Asia-GCC and ASEAN during the same

period, i.e., 2000-01. The EU is still the largest trading partner of India, though India’s exports share has been declining from 24

per cent in 2000-01 to 16.40 per cent in 2013-14. These trends are also true for North America whose share in India’s global

exports shows almost decreasing trend. India’s exports share is consistently increasing in Asian continent. ASEAN and West Asia

(member of Gulf Co-operation Council) are the two emerging exports destination for India.

Table-1: Region- wise India’s Exports Share (In Percent)

Year EU N. America ASEAN W Asia- GCC NE Asia S. Asia RoW

2000- 01 24.00 22.82 6.54 8.77 14.10 4.39 19.39

2001- 02 23.17 21.30 7.89 8.67 13.29 4.68 21.01

2002- 03 22.55 22.49 8.76 9.32 14.92 5.28 16.69

2003- 04 22.74 19.61 9.12 11.07 14.70 6.73 16.04

2004- 05 21.85 17.96 10.09 11.75 15.83 5.51 17.02

2005- 06 22.53 18.25 10.10 11.42 15.74 5.38 16.57

2006- 07 21.23 16.22 9.97 12.95 15.36 5.12 19.14

2007- 08 21.17 13.85 10.06 13.34 16.25 5.91 19.43

2008- 09 21.24 12.51 10.33 17.34 13.73 4.62 20.23

2009- 10 20.16 11.89 10.13 17.05 16.17 4.69 19.90

2010- 11 18.33 10.97 10.20 16.91 14.84 4.64 24.09

2011- 12 17.18 12.47 12.01 14.83 14.81 4.35 24.36

2012- 13 16.78 13.26 10.99 17.00 13.11 5.03 23.83

2013- 14 16.40 13.80 10.54 15.33 12.97 5.57 25.39

Sources: DGCI&S, Kolkata, Department of Commerce, Ministry of Commerce & Industry, Government of India

It is clear from the table-1 that the exports share in India’s global exports are consistently increasing from 6.54 percent and 8.77

per cent to 10.5 percent and 15.3 per cent respectively from the period 2000- 01 to 2013- 14. India’s exports shares in North- East

Asia and South Asia are almost constant at 14 to 16 percent and 4 to 6 per cent respectively for the analysis periods, i.e., 2000- 01

to 2013- 14. Region wise India’s exports share has also been depicted in figure-1 to make it clearer.

Figure-1: Region-Wise India’s Exports Share (in percent)


0

5

10

15

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R E G I O N - WI S E I N D I A ’ S E XP O R T S S H A R E ( I N P E R C E N T )

EU N.America ASEAN W Asia- GCC NE Asia S. Asia RoW





INDIA’S BILATERAL TRADE WITH ASEAN REGION

AIFTA will boost bilateral trade between the two regions. Indo-ASEAN trade relation has been shown in table-2.

Table-2: India’s Bilateral Trade with ASEAN (figure in US$ Million)

Year Exports Imports Total Trade Trade Bal.

2000- 01 2913.78 4147.48 7061.26 -1233.7

2001- 02 3457.01 4387.22 7844.23 -930.21

2002- 03 4618.54 5150.17 9768.71 -531.63

2003- 04 5821.71 7433.11 13254.82 -1611.4

2004- 05 8425.89 9114.66 17540.55 -688.77

2005- 06 10411.30 10883.67 21294.97 -472.37

2006- 07 12607.43 18108.48 30715.91 -5501.05

2007- 08 16413.52 22674.81 39088.33 -6261.29

2008- 09 19140.63 26202.96 45343.59 -7062.33

2009- 10 18113.71 25797.96 43911.67 -7684.25

2010- 11 25627.89 30607.96 56235.85 -4980.07

2011- 12 36744.35 42158.84 78903.19 -5414.49

2012- 13 33008.21 42866.36 75874.57 -9858.15

2013- 14 33133.55 41278.09 74411.64 -8144.54


India’s exports to this region increased from mere US$ 2.9 billion in 2000- 01 to US$ 36.7 billion in 2010-11 and US$ 33 billion

in 2013- 14 that is almost 11-12 times over the period from 2000-01 to 2013-14. India exports to this region at an average of US$

15 billion per year during this period. This registered an average annual growth rate of 20.2 per cent and compound annual growth

rate of 22.4 per cent over the period from 2000- 01 to 2013- 14.

India’s imports from this region registered an average annual growth rate of 19.4 per cent and compound annual growth rate of

21.4 per cent during the analysis period, i.e., 2000- 01 to 2013- 14. It reaches from US$ 4.1 billion in 2000- 01 to US$ 41.2 billion

in 2013- 14, averaged at US$ 19 billion per year.

India’s total trade with ASEAN region rises at an average annual growth rate of 19.8 per cent and compound annual growth rate

of 21.8 per cent during analysis period. In 2000- 01 bilateral trade between India and ASEAN was worth almost US$ 7 billion and

reached at almost US$ 75 billion, almost 11 times over 2000- 01 to 2013- 14 which accounted at an average of US$ 34 billion per

year during these periods. India has been consistently facing trade deficit with ASEAN since 2000- 01, registering an average US$

4 billion per year trade deficit. The overall trends of bilateral trade between India and ASEAN have been shown in figure-2.

Figure-2: India’s Bilateral Trade with ASEAN (in US$ Million)


The annual growth rate in India’s global exports, global imports, global trade, India’s exports to ASEAN, India’s imports from

this region and India’s bilateral trade with ASEAN as well as the share of India’s exports to ASEAN in India’s total/global

exports, the share of India’s imports from ASEAN in India’s total / global imports and the share of India’s total trade with

ASEAN in India’s total/global trade have been shown in figure 3 to 5. Detailed tables are given in Annexure Table- 2A to 4A.

-20000

0

20000

40000

60000

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100000

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I N D I A ’ S B I L A T E R A L T R A D E WI T H A S E A N ( I N U S $ M N )

Exports Imports Total Trade Trade Bal.





Figure-3: India’s Exports Growth in ASEAN: 2000-01 to 2013-2014

Sources: Based on table-2A given in Annexure

The above figure 3 shows that India’s exports growth in ASEAN region is more than that of India’s global exports growth over

the years whereas India’s imports growth from ASEAN shows mixed trends while India’s total trade growth in this region also

depicts irregular trend.

Figure-4: India’s Imports Growth from ASEAN: 2000-01 to 2013-2014

Sources: Based on table-2A given in Annexure

Figure-5: India’s Total Trade Growth with ASEAN: 2000- 01 to 2013- 2014

Sources: Based on table- 4A given in Annexure

-20

0

20

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60

2 0 0 0 -0 1

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2 0 0 8 -0 9

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2 0 1 3 -1 4

I N D I A ’ S E XP O R T S G R O WT H I N A S E A N : 2 0 0 0 - 0 1 T O 2 0 1 3 - 2 0 1 4

India's Global Exports Growth India's Exports Growth in ASEAN

India's Exports Share (%) in ASEAN

-20

0

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I N D I A ’ S I M P O R T S G R O WT H F R O M A S E A N : 2 0 0 0 - 0 1 T O 2 0 1 3 - 2 0 1 4

India's Global Imports Growth India's Imports Growth from ASEAN

India's Imports Share (%) in ASEAN

-10

0

10

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2 0 1 3 -1 4 *

I nd i a ’ s T o t a l T r a de G r o w t h Wi t h A S E A N : 2 0 0 0 - 0 1 T o 2 0 1 3 - 2 0 1 4

India's Global Trade Growth India's Trade Growth in ASEAN India's Trade Share (%) in ASEAN





INDIA’S TRADE WITH ASEAN COUNTRIES: COUNTRY WISE ANALYSIS

Singapore, Indonesia, Malaysia and Thailand are the main export destination among ASEAN region for India. India exports to

Singapore at an average of US$ 6.5 billion per year from the periods 2000- 01 to 2013-14 with highest exports value of US$ 16.85

billion in the year 2011-12 and minimum exports to this country at US$ 0.87 billion in 2000-01. Indonesia is the second largest

exports destination for India among ASEAN region. India’s export to this country was at an average rate of US$ 2.5 billion per

year from the period 2000-01 to 2013-14. US$ 6.67 billion was the maximum export value to this country in 2011-12 and US$

0.39 billion was the lowest export volume in the year 2000-01. Malaysia is the third largest export destination with an average rate

of export volume at US$ 2.13 billion per year from 2000-01 to 2013-14. Country wise India’s exports to ASEAN region may be

depicted in figure-6 based on the tables- 5A to 7A given in Annexure.

Figure-6: India’s Exports to ASEAN (Country- wise): 2000-01 to 2013-2014

Sources: Based on Table- 5A, given in Annexure data extracted from DGCI&S,

Kolkata; Ministry of Commerce & Industry, Government of India

India’s imports from Indonesia was highest among ASEAN region with an average rate of import volume at US$ 5.76 billion per

year from the period 2000-01 to 2012-13 with maximum imports of US$ 14.87 billion in 2012- 13 and minimum import value of

US$ 0.91 billion in 2000-01. Singapore has been the second largest imports destination for India. India’s imports from this

country at an average rate of US$ 4.84 billion per year for the year 2000- 01 to 2012- 13 with maximum import value of US$ 8.38

billion in 2011-12 and minimum import value of US$ 1.3 billion in year 2001- 02. Malaysia comes at third in row as India’s

imports from this country at an average import value at US$ 4.62 billion per year for the analysis period, i.e., 2000-01 to 2012-13

with maximum import value of US$ 9.95 billion in 2012- 13 and minimum import value of US$ 1.13 billion in 2001- 02. Country

wise India’s imports from ASEAN region may be depicted in figure-7 based on the table- 6A given in Annexure.

Figure-7: India’s Imports from ASEAN (Country- wise): 2000- 01 to 2013- 2014

Sources: Based on Table- 6A, given in Annexure data extracted from DGCI&S,

Kolkata; Ministry of Commerce & Industry, Government of India

0

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I N D I A ’ S E XP O R T S T O A S E A N C O U N T R Y

BRUNEI CAMBODIA INDONESIA LAO PD RP

MALAYSIA MYANMAR PHILIPPINES SINGAPORE

THAILAND VIETNAM SOC REP

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India’s Imports From ASEAN Country

BRUNEI CAMBODIA INDONESIA

LAO PD RP MALAYSIA MYANMAR

PHILIPPINES SINGAPORE THAILAND

VIETNAM SOC REP





India’s trade with ASEAN is mainly concentrated in Singapore (averaged at US$ 11.35 bn per year from the period 2000- 01 to

2012- 13; minimum trade at US$ 2.27 bn and maximum trade value at US$ 25.24 bn), Indonesia (averaged at US$ 8.3 bn per year

from the period 2000- 01 to 2012- 13; minimum trade at US$ 1.3 bn and maximum trade value at US$ 21.4 bn), Malaysia

(averaged at US$ 6.75 bn per year from the period 2000- 01 to 2012- 13; minimum trade at US$ 1.78 bn and maximum trade

value at US$ 14.39 bn) , and Thailand (averaged at US$ 3.76 bn per year from the period 2000- 01 to 2012- 13; minimum trade at

US$ 0.87 bn and maximum trade value at US$ 9.08 bn). Country wise India’s total trade with ASEAN region may be depicted in

figure- 8 based on the table-7A given in Annexure. Detailed country wise descriptive trade data analysis has been reported in

annexure- table- 5A, 6A and 7A.

Figure-8: India’s trade with ASEAN (Country- wise): 2000- 01 to 2013-2014

Sources: Based on Table-7A, given in Annexure data extracted from DGCI& S, Kolkata;

Ministry of Commerce & Industry, Government of India

COMMODITY WISE TRADE ANALYSIS

India’s main export commodity to ASEAN region includes mineral fuels, mineral oils and products (HS Code- 27), ships, boats

and floating structures (HS Code-89), organic chemicals (HS Code-29), meat, edible meat offal (HS Code-02), cereals, vegetables

and fruit (HS Code- 10), nuclear reactors, boilers, machinery and mechanical appliances, parts Thereof (HS Code- 84) which have

been shown in table-3 with commodity wise growth over previous year and its share in total exports in ASEAN region in 2012-

13. This table reveals that India’s top 10 exports commodity to ASEAN accounted more than 70 per cent of India’s total exports

to ASEAN region in 2012-13. HS Code-27 which includes mineral fuels, mineral oils and products of their distillation;

bituminous substances; mineral waxes accounts maximum exports share of 31 percent.

Table-3: India’s Top 10 Exports Commodity to ASEAN Region in 2012-13

S.

No. HS Commodity

2012-2013

in US$ Mn

Growth

%

Share

%

1 27 Mineral Fuels, Mineral Oils and Products of their Distillation;

Bituminous Substances; Mineral Waxes.

10,249.46 -18.38 31.05

2 89 Ships, Boats And Floating Structures. 2,018.93 -59.92 6.12

3 29 Organic Chemicals 1,848.03 -3.14 5.60

4 02 Meat and Edible Meat Offal. 1,699.15 24.41 5.15

5 10 Cereals. 1,552.62 66.12 4.70

6 84 Nuclear Reactors, Boilers, Machinery and Mechanical Appliances;

Parts Thereof.

1,493.10 12.28 4.52

7 71 Natural or Cultured Pearls, Precious or Semiprecious Stones, Pre.

Metals, Clad With Pre. Metal And Artcls Thereof; Imit. Jewelry; Coin.

1,411.32 9.20 4.28

8 87 Vehicles Other Than Railway or Tramway Rolling Stock, And Parts

And Accessories Thereof.

1,182.07 12.03 3.58

9 72 Iron And Steel 1,082.48 47.03 3.28

10 23 Residues And Waste From The Food Industries; Prepared Animal

Foder.

923.27 23.21 2.80

Sum of Top 10 Commodities 23,460.43 -13.00 71.07

India's Total Exports to ASEAN 33,008.21 -10.16 100.0

Sources: Export- Import Data Bank, DGCI&S, Ministry of Commerce & Industry, GoI.

0

10000

20000

30000

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

INDIA'S TOTAL TRADE WITH ASEAN COUNTRIES (US$ Mn)

BRUNEI CAMBODIA INDONESIA LAO PD RP MALAYSIA

MYANMAR PHILIPPINES SINGAPORE THAILAND VIETNAM





The main imports items by India from the ASEAN region include mineral fuels, animal and vegetable fats, electrical machinery

and equipment and parts thereof, nuclear reactors, boilers, organic chemicals, wood products, rubber products, etc. which have

been reported in table-4 with commodity wise imports, its growth over the previous year and its share in total imports from

ASEAN in 2012-13. This table reveals that India’s top 10 imports commodity from this region accounted more than 80 per cent in

India’s total imports from ASEAN in 2012- 13. HS code 27, 15 and 85 registered highest share as more than 50 per cent in total

imports from this region.

Table-4: India’s Top 10 Imports Commodity from ASEAN Region in 2012-13

SN HS Commodity 2012-2013

in US$ Mn

Growth

%

Share

%

1 27 Mineral Fuels, Mineral Oils And Products of Their Distillation;

Bituminous Substances; Mineral Waxes.

10,013.53 -8.64 23.36

2 15 Animal or Vegetable Fats and Oils and their Cleavage Products; Pre.

Edible Fats; Animal or Vegetable Waxex.

8,313.71 12.21 19.39

3 85 Electrical Machinery and Equipment and Parts Thereof; Sound

Recorders and Reproducers, Television Image and Sound Recorders

and Reproducers, and Parts.

4,607.97 11.16 10.75

4 84 Nuclear Reactors, Boilers, Machinery and Mechanical Appliances;

Parts Thereof.

3,531.63 -0.81 8.24

5 29 Organic Chemicals. 2,226.52 -0.17 5.19

6 44 Wood and Articles of Wood; Wood Charcoal. 1,566.17 9.96 3.65

7 89 Ships, Boats and Floating Structures. 1,332.71 56.54 3.11

8 39 Plastic and Articles Thereof. 1,322.91 10.70 3.09

9 71 Natural or Cultured Pearls, Precious or Semiprecious Stones, Pre.

Metals, Clad With Pre. Metal and Artcls Thereof; Imit. Jewlry; Coin.

1,033.31 66.70 2.41

10 40 Rubber and Articles Thereof. 1,028.93 -4.62 2.40

India's Top 10 Imports Commodity from ASEAN 34,977.39 4.48 81.60

India's Total Imports from ASEAN 42,866.36 1.67 100.0

Sources: Export- Import Data Bank, DGCI&S, Ministry of Commerce & Industry, GoI.

With the implementation of the trade in goods agreement, most of these goods will be granted duty-free entry to the markets of the

partner countries in the ASEAN region as well as in India. It will boost bilateral trade among India and ASEAN member

countries.

SUMMARY, CONCLUSIONS AND SOME POLICY IMPLICATIONS

One of the most striking aspects of India’s expanding presence in global trade is related to its increased integration with Asian

countries (IDEAs 2009). The EU is still the largest trading partner of India, though India’s exports share has been declining from

24 percent in 2000-01 to 16.78 percent in 2012-13. These trends are also true for North America whose share in India’s global

exports shows almost decreasing trend. India’s exports share is consistently increasing in Asian continent. ASEAN and West Asia

(member of Gulf Co-operation Council) are the two emerging exports destination for India. Since the late 1990s, the dominance of

developed countries in India’s trade has slightly declined, but the share of Asian developing countries in its exports and imports

has gone up significantly. However, this shift has been more marked in the case of imports. While the developed countries,

despite a decline in their share over time, continue to remain more important as destinations for India’s exports, the Asian

developing countries have become increasingly important as sources of India’s imports. India’s exports to this region (ASEAN)

increased from mere US$ 2.9 billion in 2000-01 to US$ 36.7 billion in 2010- 11 and US$ 33 billion in 2012-13, which is almost

11-12 times over the period from 2000-01 to 2012-13. India exports to this region at an average of US$ 15 billion per year during

this period. This registered an average annual growth rate of 20.2 per cent and compound annual growth rate of 22.4 per cent over

the period from 2000- 01 to 2012-13.

India’s imports from this region registered an average annual growth rate of 19.4 per cent and compound annual growth rate of

21.4 per cent during the analysis period, i.e., 2000- 01 to 2012- 13. It reaches from US$ 4.1 billion in 2000- 01 to US$ 42.8 billion

in 2012- 13, averaged at US$ 19 billion per year.

India’s total trade with ASEAN region rises at an average annual growth rate of 19.8 per cent and compound annual growth rate

of 21.8 per cent during analysis period. In 2000- 01 bilateral trade between India and ASEAN was worth almost US$ 7 billion and

reached at almost US$ 76 billion, almost 10 times over 2000- 01 to 2012- 13 which accounted at an average of US$ 34 billion per

year during these periods.





India has been consistently facing trade deficit with ASEAN since 2000- 01, registering an average US$ 4 billion per year trade

deficit. Singapore, Indonesia, Malaysia and Thailand are the most important markets for India within ASEAN.

India’s main export commodity to ASEAN region includes mineral fuels, mineral oils and products, ships, boats and floating

structures, organic chemicals, meat, edible meat offal, cereals, vegetables and fruit, nuclear reactors, boilers, machinery and

mechanical appliances, parts thereof while the main imports items by India from the ASEAN region are mineral fuels, animal and

vegetable fats, electrical machinery and equipment and parts thereof, nuclear reactors, boilers, organic chemicals, wood products,

rubber products, etc.

REFERENCES

1. Export- Import Data Bank, DGCI&S. Government of India. Kolkata: Ministry of Commerce & Industry. Retrieved

from http://commerce.nic.in/eidb/default.asp

2. International Trade Centre. Retrieved from http://www.intracen.org

3. UN COMTRADE Statistics. Retrieved from http://comtrade.un.org/db/dqQuickQuery.aspx

4. (2009). China, India and Asia: The Anatomy of an Economic Relationship (International Development Economics

Associates (IDEAs) Report). Retrieved from www.networkdieas.org

5. Retrieved from

http://www.researchgate.net/publication/228447250_Impact_of_India-ASEAN_Free_Trade_Agreement_A_cross...

6. Retrieved from http://mpra.ub.uni-muenchen.de/33138/1/MPRA_paper_33138.pdf

7. Retrieved from

http://www.livemint.com/Multimedia/1Vy8kL23NcryaV7l51okgJ/Indias-top-10-exported-commodities.html

8. Retrieved from http://mpra.ub.uni-muenchen.de/29279/1/MPRA_paper_29279.pdf

9. Retrieved from http://archive.financialexpress.com/news/indiaasean-trade-likely-to-cross-50-bn-by-10/482856

10. Retrieved from http://www.business.gov.in/trade/trade_agreements.php

11. Retrieved from https://www.wto.org/english/tratop_e/tpr_e/s118-5_e.doc

12. Retrieved from http://www.customsmap.com/suscriptor/index/2190

13. Retrieved from

http://www.researchgate.net/publication/228122756_Growing_Interconnections_between_India_and_ASEAN-1...

APPENDIX

Table-1A: India’s Major Trading Region-Country Wise

EU Member Country ASEAN South Asia

AUSTRIA BRUNEI AFGHANISTAN TIS

BELGIUM CAMBODIA BANGLADESH PR

BULGARIA INDONESIA BHUTAN

CYPRUS LAO PD RP MALDIVES

CZECH REPUBLIC MALAYSIA NEPAL

DENMARK MYANMAR PAKISTAN IR

ESTONIA PHILIPPINES SRI LANKA DSR

FINLAND SINGAPORE

FRANCE THAILAND West Asia- GCC

GERMANY VIETNAM SOC REP BAHARAIN IS

GREECE KUWAIT

HUNGARY NE Asia OMAN

IRELAND TAIWAN QATAR

ITALY CHINA P RP SAUDI ARAB

http://commerce.nic.in/eidb/default.asp

http://www.intracen.org/

http://comtrade.un.org/db/dqQuickQuery.aspx

http://www.networkdieas.org/

http://www.researchgate.net/publication/228447250_Impact_of_India-ASEAN_Free_Trade_Agreement_A_cross...

http://mpra.ub.uni-muenchen.de/33138/1/MPRA_paper_33138.pdf

http://www.livemint.com/Multimedia/1Vy8kL23NcryaV7l51okgJ/Indias-top-10-exported-commodities.html

http://mpra.ub.uni-muenchen.de/29279/1/MPRA_paper_29279.pdf

http://archive.financialexpress.com/news/indiaasean-trade-likely-to-cross-50-bn-by-10/482856

http://www.business.gov.in/trade/trade_agreements.php

https://www.wto.org/english/tratop_e/tpr_e/s118-5_e.doc

http://www.customsmap.com/suscriptor/index/2190

http://www.researchgate.net/publication/228122756_Growing_Interconnections_between_India_and_ASEAN-1...





LATVIA HONG KONG

LITHUANIA JAPAN North America

LUXEMBOURG KOREA DP RP CANADA

MALTA KOREA RP MEXICO

NETHERLAND MACAO U S A

POLAND

PORTUGAL

ROMANIA

SLOVAK REP

SLOVENIA

SPAIN

SWEDEN

UK


Table-2A: India’s Exports to ASEAN: 2000- 01 to 2013- 2014 (Figure in US$ Mn)

Year

India's Global

Exports

India's Global

Exports Growth

India's Exports

to ASEAN

India's Exports

Growth in ASEAN

India's Exports

Share (%) in ASEAN

2000- 01 44560.29 21.01 2913.78 30.22 6.54

2001- 02 43826.72 -1.65 3457.01 18.64 7.89

2002- 03 52719.43 20.29 4618.54 33.60 8.76

2003- 04 63842.55 21.10 5821.71 26.05 9.12

2004- 05 83535.94 30.85 8425.89 44.73 10.09

2005- 06 103090.5 23.41 10411.3 23.56 10.10

2006- 07 126414.1 22.62 12607.43 21.09 9.97

2007- 08 163132.2 29.05 16413.52 30.19 10.06

2008- 09 185295.4 13.59 19140.63 16.62 10.33

2009- 10 178751.4 -3.53 18113.71 -5.37 10.13

2010- 11 251136.2 40.49 25627.89 41.48 10.20

2011- 12 305963.9 21.83 36744.35 43.38 12.01

2012- 13 300400.7 -1.82 33008.21 -10.17 10.99

2013- 14 314405.3 4.66 33133.55 0.38 10.53


Table-3A: India’s Imports from ASEAN: 2000- 01 to 2013- 2014 (Figure in US$ Mn)

Year

India's

Global Imports

India's Global

Imports Growth

India's Imports

from ASEAN

India's Imports

Growth from ASEAN

India's Imports

Share (%) in ASEAN

2000- 01 50536.45 1.61 4147.48 -10.41 8.21

2001- 02 51413.28 1.74 4387.22 5.78 8.53

2002- 03 61412.14 19.45 5150.17 17.39 8.39

2003- 04 78149.11 27.25 7433.11 44.33 9.51

2004- 05 111517.4 42.70 9114.66 22.62 8.17

2005- 06 149165.7 33.76 10883.67 19.41 7.30

2006- 07 185735.2 24.52 18108.48 66.38 9.75

2007- 08 251654.0 35.49 22674.81 25.22 9.01

2008- 09 303696.3 20.68 26202.96 15.56 8.63

2009- 10 288372.9 -5.05 25797.96 -1.55 8.95

2010- 11 369769.1 28.23 30607.96 18.64 8.28

2011- 12 489319.5 32.33 42158.84 37.74 8.62

2012- 13 490736.6 0.29 42866.36 1.68 8.74

2013- 14 450199.79 -8.26 41278.09 -3.71 9.16






Table-4A: India’s Trade with ASEAN: 2000- 01 to 2013- 2014 (Figure in US $ Mn)

Year

India's

Global Trade

India's Global

Trade Growth

India's Trade

With ASEAN

India's Trade

Growth in ASEAN

India's Trade

Share (%) in ASEAN

2000- 01 95096.74 9.86 7061.26 2.83 7.43

2001- 02 95240.00 0.15 7844.23 11.09 8.24

2002- 03 114131.57 19.84 9768.71 24.53 8.56

2003- 04 141991.66 24.41 13254.82 35.69 9.33

2004- 05 195053.37 37.37 17540.55 32.33 8.99

2005- 06 252256.26 29.33 21294.97 21.40 8.44

2006- 07 312149.29 23.74 30715.91 44.24 9.84

2007- 08 414786.19 32.88 39088.33 27.26 9.42

2008- 09 488991.67 17.89 45343.59 16.00 9.27

2009- 10 467124.31 -4.47 43911.67 -3.16 9.40

2010- 11 620905.32 32.92 56235.85 28.07 9.06

2011- 12 795283.41 28.08 78903.19 40.31 9.92

2012- 13 791137.33 -0.52 75874.57 -3.84 9.59

2013- 14 764605.09 -3.35 74411.64 -1.92 10.54


Table-5A: India's Exports to Asean Countries (Figure in US$ Mn)

Year

BR

UN

EI

CA

MB

OD

IA

IND

ON

ES

IA

LA

O P

D R

P

MA

LA

YS

IA

MY

AN

MA

R

PH

ILIP

PIN

ES

SIN

GA

PO

RE

TH

AIL

AN

D

VIE

TN

AM

SO

C R

EP

2000- 01 3.31 7.86 399.75 6.24 608.15 52.71 202.61 877.11 530.12 225.90

2001- 02 2.86 11.29 533.71 3.16 773.69 60.89 247.79 972.31 633.13 218.17

2002- 03 4.45 19.84 826.06 1.58 749.37 75.07 472.00 1,421.58 711.2 337.39

2003- 04 4.59 18.60 1,127.20 0.43 892.76 89.64 321.53 2,124.83 831.68 410.43

2004- 05 5.06 18.13 1,332.60 2.65 1,084.06 113.19 412.23 4,000.61 901.39 555.96

2005- 06 42.94 24.19 1,380.20 5.47 1,161.86 110.70 494.66 5,425.29 1,075.31 690.68

2006- 07 8.31 52.07 2,032.96 2.39 1,305.22 140.44 580.98 6,053.84 1,445.54 985.69

2007- 08 10.43 53.50 2,164.17 3.86 2,575.26 185.82 620.32 7,379.20 1,810.87 1,610.09

2008- 09 17.64 46.90 2,559.82 9.00 3,419.97 221.64 743.77 8,444.93 1,938.31 1,738.65

2009- 10 24.44 45.54 3,063.36 16.93 2,835.41 207.97 748.77 7,592.17 1,740.16 1,838.95

2010- 11 23.07 66.94 5,700.78 13.11 3,871.17 320.62 881.10 9,825.44 2,274.21 2,651.44

2011- 12 895.49 99.45 6,677.99 14.97 3,980.36 545.38 992.91 16,857.71 2,961.01 3,719.09

2012- 13 40.02 112.28 5,331.30 28.91 4,444.07 544.66 1,187.19 13,619.24 3,733.17 3,967.37

2013- 14 32.45 141.31 4850.2 49.89 4197.93 787.01 1419 12510.54 3703.27 5441.94

AAGR 20.77 22.16 21.59 12.78 16.57 19.46 14.73 22.86 16.27 23.88

CAGR 23.08 24.81 24.09 13.63 18.03 21.48 15.87 25.68 17.66 26.97

Mean 79.65 51.28 2712.86 11.33 2278.52 246.84 666.06 6936.06 1734.96 1742.27

Max. 895.49 141.31 6677.99 49.89 4444.07 787.01 1419 16857.71 3733.17 5441.94

Min 2.86 7.86 399.75 0.43 608.15 52.71 202.61 877.11 530.12 218.17

Std. Dev. 235.22 40.97 2090.98 13.59 1479.13 224.49 356.66 4984.15 1090.22 1637.43

CV 2.95 0.80 0.77 1.20 0.65 0.91 0.54 0.72 0.63 0.94






Table-6A: India's Imports to Asean Countries (Figure in US$ Mn)

Year

Bru

nei

Ca

mb

od

ia

Ind

on

esia

La

o P

D R

P

Ma

lay

sia

My

an

ma

r

Ph

ilip

pin

es

Sin

ga

po

re

Th

ail

an

d

Vie

tna

m

SO

C R

ep

2000- 01 0.15 1.32 910.24 NA 1,176.80 181.69 63.04 1,463.91 337.92 12.39

2001- 02 0.36 1.12 1,036.81 0.04 1,133.54 374.43 94.84 1,304.09 423.09 18.91

2002- 03 0.32 0.61 1,380.87 0.15 1,465.42 336.04 123.77 1,434.81 379 29.18

2003- 04 0.34 0.28 2,122.06 0.13 2,046.55 409.01 122.11 2,085.37 609.05 38.21

2004- 05 0.54 0.24 2,617.74 0.05 2,299.01 405.91 187.39 2,651.40 865.88 86.5

2005- 06 0.88 0.78 3,008.11 0.1 2,415.61 525.96 235.49 3,353.77 1,211.58 131.39

2006- 07 285.38 1.6 4,181.96 0.35 5,290.31 782.65 166.79 5,484.32 1,747.75 167.38

2007- 08 227.24 2.9 4,821.25 0.11 6,012.90 808.63 204.54 8,122.63 2,300.93 173.68

2008- 09 397.52 2.72 6,666.34 0.53 7,184.78 928.97 254.77 7,654.86 2,703.82 408.66

2009- 10 428.65 5.05 8,656.66 20.05 5,176.78 1,289.80 313.07 6,454.57 2,931.52 521.81

2010- 11 234.17 8.01 9,918.63 0.22 6,523.58 1,017.67 429.39 7,139.31 4,272.09 1,064.90

2011- 12 605.02 7.27 14,765.93 89.26 9,473.64 1,381.15 441.38 8,388.49 5,283.84 1,722.87

2012- 13 814.80 11.90 14,879.49 138.64 9,951.06 1,412.69 504.00 7,486.38 5,352.61 2,314.78

2013- 14 763.6 12.72 14748.3 39.4 9229.88 1395.67 391.59 6762.49 5340.2 2594.25

AAGR 71.67 18.32 23.28 67.92 17.79 17.09 17.32 13.6 23.02 43.58

CAGR 104.76 20.11 26.22 97.24 19.47 18.64 18.91 14.57 25.89 54.63

Mean 268.50 4.04 6408.17 22.23 4955.70 803.59 252.30 4984.74 2411.38 663.21

Max. 814.80 11.90 14879.49 138.64 9951.06 1412.69 504.00 8388.49 5352.61 2314.78

Min 0.15 0.24 910.24 0.04 1133.54 181.69 63.04 1304.09 337.92 12.39

Std. Dev. 295.28 4.30 5296.91 43.51 3227.09 441.50 141.89 2774.73 1945.61 901.19

CV 1.10 1.06 0.83 1.96 0.65 0.55 0.56 0.56 0.81 1.36


Table-7A: India's Total Trade with Asean Countries (Figure in US$ Mn)

Year

Bru

nei

Ca

mb

od

ia

Ind

on

esia

La

o P

D R

P

Ma

lay

sia

My

an

ma

r

Ph

ilip

pin

es

Sin

ga

po

re

Th

ail

an

d

Vie

tna

m

SO

C R

ep

2000- 01 3.46 9.18 1309.99 6.24 1784.95 234.4 265.65 2341.02 868.04 238.29

2001- 02 3.22 12.41 1570.52 3.2 1907.23 435.32 342.63 2276.4 1056.22 237.08

2002- 03 4.77 20.45 2206.93 1.73 2214.79 411.11 595.77 2856.39 1090.2 366.57

2003- 04 4.93 18.88 3249.26 0.56 2939.31 498.65 443.64 4210.2 1440.73 448.64

2004- 05 5.6 18.37 3950.34 2.7 3383.07 519.1 599.62 6652.01 1767.27 642.46

2005- 06 43.82 24.97 4388.31 5.57 3577.47 636.66 730.15 8779.06 2286.89 822.07

2006- 07 293.69 53.67 6214.92 2.74 6595.53 923.09 747.77 11538.16 3193.29 1153.07

2007- 08 237.67 56.4 6985.42 3.97 8588.16 994.45 824.86 15501.83 4111.8 1783.77

2008- 09 415.16 49.62 9226.16 9.53 10604.75 1150.61 998.54 16099.79 4642.13 2147.31

2009- 10 453.09 50.59 11720.02 36.98 8012.19 1497.77 1061.84 14046.74 4671.68 2360.76

2010- 11 257.24 74.95 15619.41 13.33 10394.75 1338.29 1310.49 16964.75 6546.3 3716.34

2011- 12 1500.51 106.72 21443.92 104.23 13454 1926.53 1434.29 25246.2 8244.85 5441.96

2012- 13 854.82 124.18 20210.79 167.55 14395.13 1957.35 1691.19 21105.62 9085.78 6282.15

2013- 14 796.05 154.03 19598.5 89.29 13427.81 2182.68 1810.59 19273.03 9043.47 8036.19

AAGR 45.91 21.71 22.8 27.42 17.4 17.69 15.43 18.32 19.57 27.27

CAGR 58.27 24.24 25.61 31.55 19 19.35 16.68 20.11 21.61 31.35

Mean 348.15 55.32 9121.04 31.97 7234.22 1050.43 918.36 11920.80 4146.33 2405.48

Max. 1500.51 154.03 21443.92 167.55 14395.13 2182.68 1810.59 25246.20 9085.78 8036.19

Min 3.22 9.18 1309.99 0.56 1784.95 234.40 265.65 2276.40 868.04 237.08

Std. Dev. 439.20 45.04 7317.28 51.40 4661.10 644.23 488.49 7546.84 3018.44 2522.15

CV 1.26 0.81 0.80 1.61 0.64 0.61 0.53 0.63 0.73 1.05


*****





INDIA’S TRADE IN SERVICES: A STRUCTURAL ANALYSIS

Dr. Satyanarayan K. Kothe20

ABSTRACT

The structure of the economy has been changed over the past decades, with services playing an increasingly central role. The

increasing share of services in GDP and high growth of services is evident feature in India's recent growth history. Hence, the

services have been contributing in GDP and employment significantly is now undoubtedly true. The sectors like

telecommunications, transportation, education and health and not to forget ICT sector have changed the growth paradigm in

India. It is believed that the growth in the service sector in India has been led by the IT–ITES sector, contributing substantially

to increase in GDP, employment, and exports. The exports of IT and ITES have cemented the dominating existence of India's

trade in services in the world. Therefore, it is indeed required to evaluate the trade in services in detail. Therefore, the present

study attempts to analyses the role of trade in services in India Services Revolution in recent period. In addition, discovers the

structural change in trade in services for the period of 1975 to 2010.

KEYWORDS

Trade in Services, Structural Break, Services Revolution, Globalization etc.

INTRODUCTION

An introduction made in A Handbook of International Trade in Services by Mattoo, Stern and Zanini (2008) signifies that

international trade and investment in services are an increasingly important part of global commerce. Advances in information and

telecommunication technologies have expanded the scope of services that can be traded cross-border. More and more people are

travelling abroad to consume tourism, education, and medical services, and to supply services ranging from construction to

software development. In fact, services are the fastest growing components of the global economy, and trade and foreign direct

investment (FDI) in services have grown faster than in goods over the past decade and a half. Kothe and Sawant (2010) have

indicated that Indian services sector attracted FDI significantly in comparison to other sectors. Kothe (2013) also linked the

productivity and growth and stated that one per cent growth in GDP brings in 14 per cent increase in incremental capital output

ratio that implies that services led growth attract more FDI towards services. That is equally turned out in the context of trade in

services in India. Kothe and Kouthe (2009) have pointed out that India have never experienced any deficit in services trade

balance since 1994-95 and in addition to this the net surplus in services trade has been increasing since 1995.

The structure of the economy has been changed over the past decades, with services playing an increasingly central role. The

increasing share of services in GDP and high growth of services is evident feature in India's recent growth history (Gordon and

Gupta, 2004; Verma, 2006 and Kothe and Mungase, 2007). Hence, the services have been contributing in GDP and employment

significantly is now undoubtedly true. Kothe (2012b) found that the services sector has been found to be high employment

intensive to growth compared to other two sectors in the economy. The sectors like telecommunications, transportation, education

and health and most importantly ICT sector have changed the growth paradigm in India. It is believed (Kothe, 2014) that the

growth in the service sector in India has been led by the IT–ITES sector, contributing substantially to increase in GDP,

employment, and exports. Further Kothe and Kouthe (2009) found causal relationship between services exports and economic

growth in India for the period 1990-91 to 2007-08. The exports of IT and ITES have cemented the dominating existence of India's

trade in services in the world. Therefore, it is indeed required to evaluate the trade in services in detail.

Trade in Services

Adam Smith claimed that services are unproductive and thus are non-tradable. We can believe Adam Smith discussing the

characteristics of services. There are certain characteristics of services, that can be listed herewith, a) intangibility - services

cannot be stored, b) simultaneity - production and consumption is simultaneous so these are bounded by location, c) instantaneity

- production and consumption of service occurs instantaneously i.e. they cannot be separated in time, d) non-separability – service

product and service producer cannot be separated, loosen the possibilities of trade in services. These characteristics of services

made the term ‘trade in services’ an oxymoron- an internal contradiction (Feketekuty, 1988).

However, the evolution of services is capable of defending the existence of trade in services may be domestic. The trade in

services is as old as trade in goods. If knowledge is service, then Buddhism is adopted by many Asian countries, which originated

from India, which emerged in 5th century BC and Christianity is spread out worldwide through holy Bible after the holy end of

Christ. In addition, if migration and immigration of people from one country to another country fits in the definition of trade in

services under GATS that led to globalization, then it is very old. Many services are being traded through trade in goods, as some

20Assistant Professor (Sr.), Department of Economics, University of Mumbai, Maharashtra, India, [email protected]






of them are embodied in goods. The evolution of Information and Communication Technology has made trade in services a global

phenomenon. The services like entertainment, information and knowledge can now be stored and traded globally.

Trade in Services refers to the sale and delivery of an intangible product, called a service, between a producer and consumer.

Trade in services takes place between a producer and consumer that are, in legal terms, based in different countries, or economies,

this is called International Trade in Services. Bhagwati (1984) classified services with characteristics of simultaneity and

instantaneity in their delivery as a) mobile supplier of services and immobile user of service viz. migration of teachers, doctors

and consultants to serve their customers in the host countries, b) mobile user of service and immobile service provider viz. travels

by students, patients, sportsmen, etc. and c) mobile service provider and mobile consumer viz. cultural events, sports

competitions, etc. Further Sampson and Snap (1985) categorizes the trade in services as a) movement of Consumers to another

country to consume services (tourism, education, health care, etc.), b) movement of service providers to another country to supply

services (software experts, consultants, doctors, teachers, etc.), c) commercial presence of service provider by starting an

establishment (like banking, insurance, retail stores, management consultancy firms, etc.) and d) cross-border trade in the services

which embodied in goods (floppy disc or CD or DVD containing soft material). WTO adopted the standardized form of

classification by Sampson and Snape (1985) and Sapir and Winter (1994) and introduced it in GATS on 1st January, 1995. These

four categories are recognized as modes of international transaction.

The General Agreement on Trade in Services (GATS) came into existence because of the Uruguay Round of negotiations and

entered into force on 1 January 1995, with the establishment of the WTO. The multilateral legal instruments resulting from the

Uruguay Round were treated as a single undertaking. India also signed all the WTO agreements under the single undertaking rule

and GATS is a part of this whole package. These four modes under GATS are as follows.

Table-1a

Criteria Supplier Presence

Mode 1: Cross-border supply Service delivered within the territory of the Member, from the

territory of another Member. Service supplier not

present within the territory

of the member. Mode 2: Consumption abroad

Service delivered outside the territory of the Member, in the

territory of another Member, to a service consumer of the

Member.

Mode 3: Commercial presence Service delivered within the territory of the Member, through the

commercial presence of the supplier. Service supplier present

within the territory of the

Member. Mode 4: Presence of a

natural person

Service delivered within the territory of the Member, with

supplier present as a natural person.

Note: From the document MTN.GNS/W/124, available on the World Trade Organization Website, posted courtesy of ISTIA


Prior to the Uruguay Round, services were considered to offer less potential for trade expansion than goods, due to existence of

technical, institutional and regulatory barriers. However, the development of new transmission technologies facilitating the supply

of services (e.g. satellite communication, electronic banking, tele-education), the opening of monopolies in many countries (e.g.

voice telephony), and gradual liberalization of hitherto regulated sectors like transport, banking and insurance combined with

changes in consumer preferences, enhanced the "tradeability" of services. These developments increased international services

flows and created a similar need for multilateral disciplines - as in the area of goods. Thus, the main purpose for the creation of the

General Agreement on Trade in Services (GATS) was to create a credible and reliable system of international trade rules, which

ensured fair and equitable treatment of all countries on the principles of non-discrimination. It aims at stimulating trade and

development by seeking to create a predictable policy environment wherein the member countries voluntarily undertake to bind

their policy-regimes relating to trade in services.

Therefore, it is certainly apparent that 1995 is the year that brought in significant change in trade in services due to GATS.

Economic Survey (1995-96) records that GATS covers all services sectors, including financial services, and is based on two

elements. The first is the set of rules and disciplines, which apply to all WTO members; the second is the "schedules of specific

commitments". The "Schedules" are analogous to the tariff schedules, which govern market access commitments of each WTO

member with respect to merchandise goods. The services schedules, each of which amounts to a legally enforceable and binding

undertaking on the part of the Member concerned, contain commitments on individual services sectors and service activities,

which define the conditions for access to the market. India's schedule of commitments in financial services is made in accordance

with the General Agreement on Trade in Services and the Annexure on Financial Services. All the commitments are subject to

entry requirements, domestic laws, rules and regulations. India's objective in the negotiation under GATS was to offer entry to

foreign services providers in services sector in which such entry was considered most advantageous for us in terms of capital





flows, technology and employment. In return, India sought greater access for its skilled personnel to the markets of its major

trading partners.

Broadly, its commitments cover a limited offer in the insurance sector as per then existing practice. In the banking sector, in 1995-

96, India permitted entry of eight new licenses per year for both new entrants and existing banks, subject to a maximum share of

assets in India both on and off balance sheet of foreign banks not exceeding 15 per cent of the banking system as a whole. As far

as commitments in other financial services, such as merchant banking, financial leasing, factoring, venture capital, financial

consultancy, etc., all envisage locally incorporated joint venture companies with foreign equity not exceeding 51 per cent except

for stock broking where the limit is 49 per cent.

The above policy discussion implies that India's trade policy shouldered the GATS commitments immediately after 1995.

Therefore, though New Economic Policy, 1991 initiated liberalization, real reforms in trade in services started post 1995 in India.

And 1995 could be the year of structural break, if any, as far as India's trade in services are concerned. Kothe (2012a) states that

the services revolution in India is caused by the process of globalization continued since 1991.

Therfore the present study attempts to analyse the role of trade in services in India’s Services Revolution in recent period. And

also discovers the structural change in trade in services for the period of 1975 to 2010.

DATA AND METHODOLOGY

The trade in services rafers to the ratio of sum of service exports and imports to GDP. The data on GDP from CSO and export and

imports of services from RBI is not as required to find the trade in services. Therefore the data for trade in services is considered

from world development indicators from World Development Report, 2013. The trade in services data is vailable for the year

1975 to 2010 from World Bank. According to World Development Report, 2013, trade in services is the sum of service exports

and imports divided by the value of GDP, all in current U.S. dollars. Though the data on trade in services is avalable for the period

of 1975 to 2010, we have divided the series in to two periods. The one is pre GATS and later is the post GATS, as GATS came in

to effect since 1995.

The present study attempted to find structural change, if any, in trade in services since 1975 till 2010. The Chow test (1960) could

have been exercised to find the exogenous structural break. Since it has limitations, we have use dummy variable method

(Gujarati, 1970) to find the exogenous structural break. For this purpose of estimation the following equation is employed.

𝑇𝑆 = 𝛼 + 𝛽1𝐷 + 𝛽2𝑡 + 𝛽3𝐷𝑡 + 𝑢 (1)

Where TS is trade in services and t stands for time i.e 1975 to 2010. For pre GATS period equation D = 0 for 1975 to 1995 and

for post GATS period equation D =1 for 1996 to 2010; but there have been criticism on testing exogenous break in a time series

variable for which one can use Chow test (1960) and Gujarati (1970). Perhaps there has been assertion by econometricians that

one should not dectate the break point and be determined endogenously by estimating as many as regressions with unknown

breaks. The debate on how best various tests like Bai and Perron (1998, 2003 and 2006) be inferred and what should be the best

information criteria adopted through data generation processes is discussed in detail by Hall, Osborn and Sakkas (2012). Bai and

Perron (2006) not only helps in finding the structural break endogenously but also enables one to test multiple breaks for which

one can use sequential regression or information criterion like Schwarz (1978) - (BIC) or Liu, Wu, and Zidek (1997) - LWZ.

Perhaps Bai and Perron test allows serial correlation and the standard augmented Dickey-Fuller test (1979) for unit root gives low

power results in the presence of structural break. And therefore either Zivot and Andrews (1992) or Perron and Vogelsang (1992)

procedure be followed to determine the unknown break (Glynn, Perera and Verma, 2007). Clemente, Montañés, and Reyes (1998)

proposed tests that though allow for two events within the observed history of a time series, either additive outliers (the AO

model, which captures a sudden change in a series) or innovational outliers (the IO model, allowing for a gradual shift in the mean

of the series) can be used for single break.

RESULTS AND CONCLUSION

The trade in services have been increasing across the years since 1975. But the rise in trade in services after liberalization in India

has been transformational. It follows structural change in trade in services since 1995. The post GATS environment for services

trade have been doubted and cautioned initially by developing countries along with India. One may say India had to accept the

clauses and fulfill the GATS obligations as per its commitments. Perhaps the services revolution in India is consequence of GATS

and the reforms since 1991. Hence there is no doubt that exports and imports of services rose significantly since 1991. Further

besides the barriers to trade in services structural changes in India’s trade in services have been prominent and positioning India as

services facilitator in world.

When regression as stated in equation 1 is run in STATA, the results are enlisted in Table No. 1.The estimated regression is stated

herein.





𝑇𝑆 = 1.966334 − 14.66128𝐷 + 0.1072471𝑡 + 0.6638164𝐷𝑡 (2)

It indicate that the estimated coefficient of Dt, which the differential of regression coefficient for two different periods, is

significant at 5 percent level of significance. Invariably, if the coefficient of Dt is significant then there exists significant structural

break at the given point of time. It suggests that the year, 1995, in which GATS were introduced and become obligatory to all

member nations of WTO, India have experienced a structural break in trade in services. The Chow test also confirms the results

stated above.

The graphical presentation may be more revealing than explanatory (Figure 1). The structural break in Trade in Services is evident

in above figure with the significant difference between the slopes of two regression lines fitted and also the coefficient of

determination for the same for pre and post 1995 period respectively.

The present study attempted to test for unknown structural break with the help of Perron (1989), Zivot and Andrews (1992) and

Clemente, Montañés, and Reyes (1998) only IO model since there is gradual shift in the mean of the series. In addition, all the

tests confirmed that 1996 is the year of structural break in trade in services, which coincides with the exogenous break largely.

The study of Burange, Chaddha and Kapoor (2009) asserts that the recent growth in services have also augmented exports of

services. Das (2006) also underlines that since the 1990s, India’s services exports have grown faster than its services output,

which reflects a strong outward orientation of the services sector in India in the recent past. The most impressive growth in

services exports has been recorded by the Information Technology (IT) sector, which itself has demonstrated an unambiguous

outward orientation with the lion’s share of its revenues being generated from exports. In addition, that would further contribute to

services exports as policy of SEZs have been initiated since 2005 that is boosting the investment in IT and ITES because 60 per

cent of the sanctioned SEZ are IT and ITES based service activities (Kothe and Mungase, 2007).

As Das (2006) pointed out that India was prime opponent for liberalising trade in services have changed its stand and became

prominent proponent of GATS by revisiting its conservative offer of 2004. And ambitious revised offer was made in Agust 2005

when it was sought that India have established as the promissing and competitive service provider in the world. As a consequence

we find more augmentation in trade in services in post 2005 period.

As concluded by De (2011) services trade facilitation reform is a key factor affecting services export from India. As India is

facing enormous problems, post global crisis of 2007-08, with the developed world regarding varoius barriers to India’s exports in

these nations including professional qualifications of professional service providers like legal, medical and financial services

facilitators. There is need to persue to relax varoius barriers to services exports like visa regulations by the developed trading

partners for India’s renowned services like IT professionals and software developers. India also have to look very seriously

towords imports of transportation services where it lag at large and need to motivate investors in this sector to become self

suffucient at some extent which will not only save its revenue but also can provide its services to its trading partners.

Concerns stated by Burange, Chaddha and Kapoor (2009) and Das (2006) can not be overlooked. India have to take policy

initiatives to sustain its growth story and also its brand as prominent servicer provider in perticular BPOs, ITES and software

services. There have been evoled avenues in legal, medical and financial sectors. Conclusively, the present study subscribes that

services revolution in India also have brougt in phenomenal changes in trade in services. And Kothe and Kouthe (2009) stated that

increasing exports of services which is larger part in trade in services have been correcting India’s overall balance of payments

since 1991. Though with the limitations the study has been sussessfully attempted to evaluate structural changes in trade in

services, it also suggests that there is need of detailed study of sub sectoral trade in services to understand the lagging services in

terms of trade in services.

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30. Perron, P. (1989). The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis. Econometrica, 57(6), 1361–

1401. doi:10.2307/1913712

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44–62.

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Integration, 28(1), 108–143. doi:10.2307/41825678

34. Retrieved from http://en.wikipedia.org/wiki/Trade_in_services

35. Retrieved from http://ideas.repec.org/p/cwl/cwldpp/795r.html

36. Retrieved from http://en.wikipedia.org/wiki/Trade_in_services

37. Retrieved from http://bedokce.com/services

APPENDIX

Table-1: Results of Exogenous Structural Break in Trade in Services based on Equation 1 excuted in STATA

. regress TS t D Dt

Source | SS df MS Number of obs = 36

-------------+------------------------------ F( 3, 32) = 311.27

Model | 547.27525 3 182.425083 Prob > F = 0.0000

Residual | 18.7541395 32 0.58606686 R-squared = 0.9669

-------------+------------------------------ Adj R-squared = 0.9638

Total | 566.02939 35 16.1722683 Root MSE = .76555

------------------------------------------------------------------------------

TS | Coef. Std. Err. t P>|t| [95% Conf. Interval]

-------------+----------------------------------------------------------------

t | 0.1072471 0.0275885 3.89 0.000 0.0510512 0.1634431

D | -14.66128 1.385413 -10.58 0.000 -17.48328 -11.83929

Dt | 0.6638164 0.0534249 12.43 0.000 0.5549935 0.7726394

_cons | 1.966334 0.3464162 5.68 0.000 1.260707 2.671961

------------------------------------------------------------------------------


http://www.upo.es/RevMetCuant/art11.pdf

http://en.wikipedia.org/wiki/Trade_in_services

http://ideas.repec.org/p/cwl/cwldpp/795r.html

http://en.wikipedia.org/wiki/Trade_in_services

http://bedokce.com/services





Table-2: Results of endogenous structural break in Trade in Services based on Perron Test (1989)

Perron Unit Root Test

Sample:1975 2010

Effective observations: 36

Null Hypothesis: TS has a unit root with a structural

break in both the intercept and trend

Chosen lag length: 2 (Maximum lags: 4)

Chosen break point: 1995

t-Statistic

Perron Unit Root Test -3.901418

1% critical value: -6.32




Table-3: Results of endogenous structural break in Trade in Services based on Zivot-Andrews Test (1992)

Zivot-Andrews Unit Root Test

Sample: 1975 2010

Included observations: 36

Null Hypothesis: TS has a unit root with a structural

break in both the intercept and trend

Chosen lag length: 2 (maximum lags: 4)

Chosen break point: 1996

t-Statistic Prob. *

Zivot-Andrews test statistic -3.892116 0.365378




* Probability values are calculated from a standard t-distribution

and do not take into account the breakpoint selection process


Table-4: Results of endogenous structural break in Trade

in Services based on Clemente-Montañés-Reyes Test (1998)

Clemio1 TS, trim (0.15) maxlag (5) graph

Clemente-Montañés-Reyes unit-root test with single mean shift, IO model

TS T = 26 optimal breakpoint: 1996

AR (5) du1 (rho - 1) const.

-------------------------------------------------------------------------

Coefficient: 1.00239 0.26078 -0.32117

t-statistic: 2.127 1.563

P-value: 0.045 -4.270 (5% crit. value)






Figure-1: Structural Break in India's Trade in Services

Sources: Authors estimation based on data from World Development Report, 2013

Figure-2: Structural break in India's Trade in Services (Perron test, 1989)


Figure-3: Structural Break in India's Trade in Services (Zivot-Andrews test, 1992)


-4

-3

-2

-1

0

1

1975 1980 1985 1990 1995 2000 2005 2010

PERRON BREAKPOINTS

-4

-3

-2

-1

0

1

1975 1980 1985 1990 1995 2000 2005 2010

Zivot-Andrew Breakpoints





Figure-4: Structural break in India's Trade in Services (Clemente-Montañés-Reyes Test, 1998)


*****

01

23

D.TS

1980 1985 1990 1995 2000 2005Year

D.TS.5

11.

52

2.5

brea

kpoi

nt t-

statis

tic

1980 1985 1990 1995 2000 2005Year

Breakpoint t-statistic: min at 1996

in series: TS

Clemente-Montañés-Reyes single IO test for unit root



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PROMOTIONAL AND DEVELOPMENTAL ACTIVITIES OF SIDBI

Dr. Shallu Sharma21

ABSTRACT

In this paper, entrepreneurship development has been studied in the context of promotional and developmental activities of

SIDBI. The promotional and developmental activities of the bank are crystallized into Micro Enterprises Promotion

Programmes (MEPPs), Entrepreneurship Development Programmes (EDPs), Management Development Programmes viz.

Small Industries Management Programmes (SIMAPs) and Skill-cum-Technology Up-gradation Programmes (STUPs), Cluster

Development Programmes and various other Initiatives of the bank.

To achieve the objective of the study, secondary sources of data have been used. The major sources of secondary data were

annual reports of SIDBI for the period under study and Small Industries Development Bank of India P&D Manual. The P&D

activities of the bank have been analyzed with the help of arithmetic mean and exponential growth rates for the period from

1990-91 to 2012-13. To test the variations revealed based on selected parameters used in different years, the co-efficient of

variation has been applied for the same period. The overall analysis revealed that the number of units promoted under Micro

Enterprises Promotion Programmes since inception by SIDBI registered a growth of 17.97 per cent during the period. The

EDPs conducted by the bank also increased and recorded a growth of 10.78 per cent during the period. Further, both SIMAPs

and STUPs supported by the bank since inception have also increased during study period.

KEYWORDS

SIDBI, P&D, MSME, MEPPs, SIMAPs, EDPs, STUPs etc.

INTRODUCTION

Promotional and Developmental (P&D) support to the MSME sector has always been an integral part of the bank’s activities.

P&D activities pursued by SIDBI since inception creates new avenues and cater to growth and welfare especially of rural poor and

women. As an apex financial institution, SIDBI meets the varied developmental needs of the MSME sector through its wide range

of promotional and developmental activities. The objectives behind P&D initiatives of the bank are to strengthen the micro, small

and medium enterprise sector to make them globally competitive, economic development of poor through self-employment as

well as promotion of micro-enterprises. The bank extends development and support services in the form of loans and grants to

different implementing agencies like Technical Consultancy Organisations (TCOs), NGOs, associate financial institutions,

marketing agencies, etc. engaged in the promotion and development of MSME units. The conducting agencies are given the

required amount as allocated under this scheme by SIDBI to conduct the particular activity. These agencies then fulfill the

formalities and follow the procedure as laid by SIDBI until completion of the program. The banks Regional offices (ROs)/Branch

offices (BOs) are fully involved in the implementation and monitoring of the P&D activities to achieve the desired result.

REORIENTATION OF PROMOTIONAL AND DEVELOPMENTAL ACTIVITIES

It has been recognized that P&D activities of the bank act as a catalyst through its significant contribution in the overall growth of

Micro, Small and Medium Enterprise (MSME) sector in India. Thus, a strong need was felt to make requisite changes in the

existing schemes to enhance credibility of the bank’s P&D activities. The promotional and developmental activities of the bank

are crystallized into schemes mentioned below:

Micro Enterprises Promotion Programmes (MEPPs)

Entrepreneurship Development Programmes (EDPs)

Management Development Programmes

Small Industries Management Programmes (SIMAPs),

Skill-cum-Technology Up-gradation Programmes (STUPs),

Cluster Development Programmes

Other Initiatives of the bank

Environment and Quality Management,

Marketing Activities,

SIDBI support for North Eastern Region,

Other Activities.

21Assistant Professor, Department of Commerce & Management, Goswami Ganesh Dutta Sanatan Dharma College, Chandigarh,

India, [email protected]






Micro Enterprises Promotion Programmes (MEPPs)

Micro Enterprises Promotion Programme earlier known as Rural Industries Programme is a unique approach for providing benefit

to rural entrepreneurs. The programme lays emphasis on stimulating and guiding the potential entrepreneurs in setting up of

industrial enterprises in rural areas. The programme attempts to mitigate the problems such as rural unemployment, under-

utilization of technical expertise and resources for development of viable and self-sustaining micro and small enterprises in India.

The MEPPs of SIDBI is a comprehensive Business Development Service (BDS) programme designed to provide information,

training, credit technology support and marketing of products for promoting rural enterprises. The MEPPs are normally of 3 years

duration and will be further extended because of performance of the Implementing Agency (IA). The main role of the IA is to

inculcate professional inputs among entrepreneurs and to help them in project identification and implementation. As per the policy

modifications, the programme has been discontinued in non-performing areas based on results obtained under portfolio review.

The startup support in the form of administrative expenses for reputed implementing agencies has been increased from Rs 5 lac to

Rs 7 lac per district. The performance fee of units requiring higher investment through SIDBI finance has been increased to

promote expansion of the existing units. Since inception, more than 38,000 enterprises have been promoted under MEPPs, which

provides benefit to about 1.07 lac persons as on March 31, 2012. A brief profile of the beneficiaries under MEPPs conducted

through SIDBI is given in Table-1.

Entrepreneurship Development Programmes (EDPs)

Entrepreneurship development is regarded as a key element of small industry promotion. Entrepreneurship can be developed by

training which results in development of skills and enhancement of managerial capabilities of small entrepreneurs. As we know

that small enterprises are unable to attract professionally qualified persons so, to make the Entrepreneurship Development

Programmes (EDPs) result-oriented, SIDBI provides training to entrepreneurs to set up their own enterprises. The Ministry of

MSME has set up various institutions at national level for entrepreneurship development. The EDPs aim at promotion of self-

employed ventures resulting in employment generation especially in rural areas comprising less privileged sections of the society

like women, SCs/STs, minorities, etc. The bank undertakes EDPs for the MSME entrepreneurs through its Rural Development

and Self-Employment Training Institute (RUDSETI) at Ujire, Entrepreneurship Development Institute of India (EDII) at

Ahmedabad, Technical Consultancy Organisations (TCOs) and NGOs.

The EDPs are normally of 4-6 weeks duration along with practical training. The duration can be extended or reduced as per the

need of the participants. Each programme covers about 25 participants for developing their entrepreneurial traits. According to

recent policy guidelines, the capability of new as well as existing entrepreneurs has been facilitated through adequate training and

counseling and by establishing linkage under SIDBI’s Micro Enterprise Lending (MEL). The performance fee structure under

EDP has been changed and now is at par with MEPPs. Under this programme, about 36000 participants have been benefitted

through EDPs supported by the bank as on March 31, 2012. The MEPPs and EDPs supported by SIDBI are shown in Table-1.

Table-1: MEPPs and EDPs supported by SIDBI

Year MEPPs Since Inception %age Change EDPs since Inception %age Change

1995-96 2700 - - -

1996-97 3950 46.30 623 -

1997-98 4500 13.92 743 19.26

1998-99 5419 20.42 884 18.98

1999-00 6022 11.13 1098 24.21

2000-01 7100 17.90 1317 19.95

2001-02 8485 19.51 1581 20.05

2002-03 10800 27.28 1709 8.10

2003-04 13651 26.40 1943 13.69

2004-05 17376 27.29 2083 7.21

2005-06 22400 28.91 2230 7.06

2006-07 26000 16.07 2376 6.55

2007-08 29600 13.85 2561 7.79

2008-09 32600 10.14 2661 3.90

2009-10 35000 7.36 2732 2.67

2010-11 37000 5.71 2831 3.62

2011-12 38000 2.70 2894 2.23

EGR 17.97 10.78

Mean 17682.53 1891.63

CV 73.13 41.08

Sources: Compiled from Annual Reports of SIDBI





Table-1 shows that the number of units promoted under Micro Enterprises Promotion Programmes since inception by SIDBI

increased from 2700 units in 1995-96 to 38000 units in 2011-12 and registered growth of 17.97 per cent during the period. The

bank supports 17683 units on an average for the period under study. The growth in MEPPs was highest (46.30 per cent) in the

year 1996-97 and lowest (2.70 per cent) in the year 2011-12. The Entrepreneurship Development Programmes conducted by the

bank increased from 623 programmes in 1996-97 to 2894 programmes in 2011-12 and recorded growth of 10.78 per cent during

the period. The average number of EDPs supported by the bank is 1892 over the period. The growth in EDPs was highest (24.21

per cent) in the year 1999-00 and lowest (2.23 per cent) in the year 2011-12. Further, the table highlights that the EDPs showed

greater consistency (CV=41.08) as compared to MEPPs (CV=73.13) during the reference period.

Management Development Programmes (MDPs)

In the present scenario, managerial deficiency and lack of adequate skill have been found a major shortcoming in the growth of

MSMEs. In this regard, SIDBI introduced two schemes under Management Development Programmes for removing the

weaknesses of HRD in MSME sector namely, Small Industries Management Programmes (SIMAPs) and Skill-cum-Technology

Up-gradation Programmes (STUPs). To strengthen the institutional network of the MSME sector, SIDBI provides support to

different specialized management and technology institutions for conducting SIMAPs and STUPs. These programmes enhance the

entrepreneurial skill and talent that helps them in evaluating technology needs and ensures industry-institution association. The

total number of management development programmes (both SIMAPs and STUPs) conducted by the bank since inception

provides benefit to about 39,690 participants at the end of financial year 2012. Both these schemes are explained below:

Small Industries Management Programmes (SIMAPs)

These programmes aim at developing entrepreneurs through training like industrial managers to assist small entrepreneurs of the

MSME sector. Thus, the programme serves the dual objective by providing second line of industrial managers to the MSME

sector and by providing professional qualification to young graduates for productive employment. SIMAP provides training to

unemployed graduates, diploma holders and industry-sponsored candidates for enhancing managerial capabilities and making

them professionally competent.

The programme is conducted for a period of 14-18 weeks in three stages. Each programme covers about 20-25 candidates. In the

first phase, classroom sessions of about 5-8 weeks are covered that provides information and skills required for management of

the MSME units. In the second phase, 8 weeks on-the-job practical training is provided. This is followed by the third phase of 1-2

weeks wherein refresher session is conducted before awarding programme certificates to the candidates. In addition, the bank also

conducts specialized SIMAPs in the area of marketing, finance, production, etc. as per the requirement of the specific industry.

These are conducted for only those candidates who have previous work experience and it increases the placement chances of

candidates. The SIMAPs supported by the bank are shown in Table-2.

Skill-cum-Technology Up-gradation Programmes (STUPs)

The objective of STUPs is to enhance the existing skill and competence of the entrepreneurs to improve the performance of

MSME units. The programme determines ways to strengthen process improvements, technological developments among MSME

units. Thus, programme laid emphasis on upgrading the technology profile of the existing micro, small and medium enterprises.

The programme imparts training to entrepreneurs or senior executives having similar composition in terms of their profile, nature

of industry, financial position etc. The duration of the programme is for a period of 4-6 days on full-time basis and 8-12 days on

part-time basis covering maximum 25 participants. The programme concentrates more on specific areas like product and process

technology, industrial design rather than on general topics. The participants should pay only 25 per cent of the programme fee and

balance would be met by SIDBI. The SIMAPs and STUPs supported by the bank are shown in Table-2.

Table-2: SIMAPs and STUPs Supported by SIDBI

Year SIMAPs since Inception %age Change STUPs since Inception %age Change

1995-96 93 238

1996-97 120 29.03 338 42.02

1997-98 130 8.33 460 36.09

1998-99 148 13.85 529 15.00

1999-00 180 21.62 677 27.98

2000-01 199 10.56 803 18.61

2001-02 219 10.05 902 12.33

2002-03 240 9.59 1074 19.07

2003-04 260 8.33 1241 15.55

2004-05 265 1.92 1302 4.92





2005-06 270 1.89 1351 3.76

2006-07 276 2.22 1389 2.81

2007-08 281 1.81 1429 2.88

2008-09 284 1.07 1460 2.17

2009-10 288 1.41 1475 1.03

2010-11 292 1.39 1488 0.88

2011-12 295 1.03 1504 1.08

EGR 7.48 12.21

Mean 226 1039

CV 30.06 43.06

Sources: Compiled from Annual Reports of SIDBI

Table-2 shows that the number of Small Industries Management Programmes supported by the bank since inception increased

from 93 programmes in 1995-96 to 295 programmes in 2011-12 and registered a growth of 7.48 per cent during the period. The

bank supports 226 programmes on an average for the period under study. The growth in SIMAPs was highest (29.03 per cent) in

the year 1996-97 and lowest (1.03 per cent) in the year 2011-12.

The Skill-cum-Technology Up-gradation Programmes conducted by the bank increased from 238 programmes in 1995-96 to 1504

programmes in 2011-12 and recorded growth of 12.21 per cent during the period. The average number of STUPs supported by the

bank is 1039 over the period. The growth in STUPs was highest (42.02 per cent) in the year 1996-97 and lowest (1.03 per cent) in

the year 2009-10. Further, the table highlights that the STUPs showed lower degree of consistency (CV=43.06) as compared to

SIMAPs (CV=30.06) during the reference period.

Cluster Development Programmes (CDPs)

The primary goal of the bank is technology up-gradation of the MSME units and to expand its benefits to large number of

industries. The bank has initiated number of steps for providing developmental support to MSME units. Under the CDPs, a new

approach was followed for improving the technical capabilities and competitiveness among MSME units. In this regard, Cluster

Development Programmes have been introduced in homogeneous clusters of industries to improve the technical and marketing

skills of the participants. This approach leads to up-gradation of quality and productivity through reduction in cost of raw material.

During 2002-03, the bank’s framework of Cluster Development Programme has changed from a technology centric approach to a

comprehensive approach of business development services. The new approach aims at creating awareness on new product/design,

management practices, skill and technology up-gradation etc. Some of the ongoing clusters where CDPs were implemented are

the bicycle and bicycle part components cluster at Ludhiana, hand tool unit at Jalandhar, Punjab and foundry units at Howrah,

West Bengal etc. SIDBI opened retail offices in selected industrial clusters for creating a group of trained business service

provider by providing suitable training to the cluster development agents.

The first step in Cluster Development Programme involves the selection of 5-10 units in clusters. These clusters must be

homogeneous in terms of nature of technology, products, production levels, trade practices and their capability to absorb

improved technology. Then expert consultancy agencies assess the technology up-gradation need of the individual clusters and

formulate unit-specific modernization packages. These agencies also outline the domain for grouping of technical capabilities of

existing units. Until date, the bank has supported around 85 CDPs in India.

Other Initiatives of the bank

In addition to its above-mentioned P&D activities, the bank also concentrates on some other relevant issues. These are:

Environment and Quality Management

An important initiative adopted by bank is to provide support to MSME units related to environmental issues. It has been realized

by the bank that some industrial units have been causing pollution in the country and MSMEs are unable to exercise control over

this issue. Thus, SIDBI through its environment and management programmes creates awareness on environmental issues to

MSMEs with the help of demonstration pollution control projects. These programmes should be conducted for a period of about 2

days for 25-30 homogeneous clusters engaged in the process of recycling. This will enable the MSMEs to improve technology,

material savings and to implement only those projects having benefits of pollution control. During 2003-04, this programme

became part of the Corporate Social Responsibility of the bank. As per this principle, the bank will provide credit to only those

MSMEs who have obtained ‘No Objection Certificate’ from the Pollution Control Board. Further, the bank does not provide

credit to ozone depleting industries.

During 1992-93, the bank emphasized on creating quality consciousness among MSME units. To achieve this, SIDBI organized a

campaign in collaboration with Confederation of Indian Industry (CII) on “Total Quality Management” and ‘ISO-9000 Series





Certification’ for small entrepreneurs. The basic objective is to educate and make the entrepreneurs aware about the importance of

quality management. The bank provides guidance and financial support to MSMEs for acquiring ISO certification through its

professional consultants. Until 2000, the bank has supported about 200 awareness programmes across the country. Subsequently,

this programme also becomes the part of Corporate Social Responsibility of the bank.

Marketing Activities

Since inception, SIDBI has focused its attention on marketing problems of the MSME units. These units are unable to sell their

products due to lack of finance required for advertising and promotion of a product. To overcome this problem, SIDBI established

Marketing Finance and Development Department (MFDD) in 1996 as its nodal department for providing market related support to

various micros, small and medium units.

The bank provides support through organizing various trade fairs, exhibitions at national and international levels, sponsoring

market studies, etc. to provide market related information at concessional rates to MSMEs. The marketing events sponsored by the

bank over the year includes India Tech 98 Nairobi, Kenya, INTEC-2010 organized by During 2011-12, SIDBI provides support in

organizing 53 exhibitions, seminars etc. for the benefit of MSMEs. These programmes benefitted about 5000 entrepreneurs of the

MSME sector. In addition, some other programmes conducted through various institutions in different states were also assisted by

SIDBI that would provide benefit to about 2700 entrepreneurs of micro units.

SIDBI’s Support for North Eastern Region

The Committee on the Financial Sector Plan for the North Eastern Region (NER) has made some suggestions for SIDBI as

regards implementation of its developmental programmes in the North East during 2006-07. The bank took number of initiatives

related to rural industrialization, entrepreneurship development, micro finance, marketing support etc. for the development of the

North Eastern Region. Some important measures taken by the bank in NER are:

Establishment of a new cell namely the Cell for Development of North-Eastern Region (DONER) for enhancing the

entrepreneurship development programmes, SIMAPs, STUPs, promotion of clusters in handicrafts etc. in the region.

The bank also provides financial assistance through North Eastern Industrial and Technical Consultancy Organization

Ltd. (NEITCO) in 2007-08 to summarize project information of small sector projects specifically in the NER that assist

entrepreneurs in establishment of business.

Further, SIDBI has co-promoted North-Eastern Development Finance Corporation Ltd. (NEDFi) at Guwahati and

provides credit to Indian Institute of Entrepreneurship (IIE), Guwahati during 2009-10 for the overall development of

the NER.

In addition, the bank established a Micro Enterprise Business Information Counselors (MEBIC) Centre at Guwahati

during 2010-11 for the development of micro enterprises in the region.

Besides this, under the bank’s Micro Enterprises Promotion Programmes (MEPPs) about 2398 units were promoted as

on March 31, 2013. While, the 40 Cluster Development Programmes conducted by the bank till March 31, 2013

provides benefit to about 6000 artisans in the NER.

The bank introduced a website called www.smallB.in to provide adequate and timely information to existing and

prospective entrepreneurs about setting up of business, access to finance, new government schemes etc. for their growth

and development.

Other Activities

Apart from the above-mentioned activities, the bank also actively participates in other activities. These are:

The bank has taken another initiative of promoting new industries through print and electronic media with the help of

professional agencies. In this context, SIDBI introduced ‘Udyog Sadhana’ Radio programme in 1996-97, that provided

exposure about new project ideas through telecast of its various programmes.

In 1999-00, the bank created Andhra Pradesh Technology Development Centre (APTDC) by contributing Rs 10 lac for

providing technological support services to the MSMEs.

Further, to meet the non-credit needs of SIDBI’s clients, a new scheme was introduced by the bank in 2005-06. Under

this scheme, support will be provided by the bank to meet technology up-gradation needs, market research, innovation,

hiring of services of experts etc. under its direct lending operations.

The Technical Consultancy Organisations (TCOs) provide consultancy services to the existing as well as new

entrepreneurs. The shareholding of TCOs has been transferred to SIDBI through an agreement in 2009-10. Since then,

SIDBI has become the major shareholder of 9 out of 17 TCOs.

In 2010-11, a Minority Cell was set up at SIDBI’s head office according to the recommendations of Sachar Committee.

The bank supports various training programmes like dress designing, embroidery etc. for minorities in Government





notified minority districts. It has been observed that by March 31, 2013 these programmes benefitted about 6000

persons belonging to minority community.

As per recent P&D activities policy modifications, incentives would be given to agencies viz-a-viz finance companies,

NGOs, MFIs for generating business linkages to SIDBI. The existing SIDBI customers will be assisted by Business

Management Software i.e. Cloud Computing, Enterprise Resource Planning etc. The bank in collaboration with

‘Institute of Chartered Accountants of India’ (ICAI) introduced a new course “Certified MSME Accounts Manager”, for

helping MSMEs.

Thus, P&D initiatives of the bank played an important role in developing entrepreneurs by inculcating desired skills through its

financial support to various management and technology institutions. In addition, the bank lays emphasis on creating awareness

on environment and quality management among MSMEs. Further, special attention has been given by the bank for the

development of NER through its resigned business strategies. Thus, P&D initiatives of SIDBI not only cater the existing needs of

the MSMEs, but also help in generating gainful employment opportunities in the country.

FINDINGS

The number of units promoted under Micro Enterprises Promotion Programmes since inception by SIDBI increased from 2700

units in 1995-96 to 38000 units in 2011-12 and registered a growth of 17.97 per cent during the period. The bank supported 17683

units on an average for the period under study. The growth in MEPPs was highest (46.30 per cent) in the year 1996-97 and lowest

(2.70 per cent) in the year 2011-12. The EDPs conducted by the bank also increased from 623 programmes in 1996-97 to 2894

programmes in 2011-12 and recorded a growth of 10.78 per cent during the period. The bank supported 1892 EDPs on an average

over the period of study. The growth in EDPs was highest (24.21 per cent) in the year 1999-00 and lowest (2.23 per cent) in the

year 2011-12.

The number of SIMAPs supported by the bank since inception has increased from 93 programmes in 1995-96 to 295 programmes

in 2011-12 and registered a growth of 7.48 per cent during the period. The bank supported 226 programmes on an average for the

period under study. The growth in SIMAPs was highest (29.03 per cent) in the year 1996-97 and lowest (1.03 per cent) in the year

2011-12. The STUPs conducted by the bank increased from 238 programmes in 1995-96 to 1504 programmes in 2011-12 and

recorded a growth of 12.21 per cent during the period. The average number of STUPs supported by the bank was 1039 over the

period. The growth in STUPs was highest (42.02 per cent) in the year 1996-97 and lowest (1.03 per cent) in the year 2009-10.

CONCLUSION

The promotional and developmental activities organized through the bank revealed that the number of enterprises promoted under

(MEPPs) since inception by the bank were more as compared to (EDPs). The level of growth of MEPPs was more than that of

EDPs. Further, the (STUPs) conducted through the bank since inception registered higher growth rate as compared to (SIMAPs).

The enterprises promoted under these programmes lead to creation of employment opportunities for millions of masses. In

addition, the Cluster Development Programmes and other initiatives taken by the bank in the form of environment and quality

management support, marketing related activities in the form of product promotion etc. also showed remarkable results.

REFERENCES

1. (1990-91 to 2012-13). Annual Reports of Small Industries Development Bank of India.

2. (1998, January). Small Industries Development Bank of India P&D Manual.

3. (1999). SIDBI Report on Small Scale Industries Sector.

4. Retrieved from www.sidbi.in

5. Retrieved from

http://www.preservearticles.com/201101203595/functions-of-small-industries-development-bank-of-india...

6. Retrieved from http://www.slideshare.net/Dharmikpatel7992/development-bank-in-india-24274835

7. Retrieved from http://dcmsme.gov.in/an10.pdf

8. Retrieved from http://www.maharashtradirectory.com/IndustrialResources/sidbi.htm

*****

http://www.sidbi.in/

http://www.preservearticles.com/201101203595/functions-of-small-industries-development-bank-of-india...

http://www.slideshare.net/Dharmikpatel7992/development-bank-in-india-24274835

http://dcmsme.gov.in/an10.pdf

http://www.maharashtradirectory.com/IndustrialResources/sidbi.htm





GENDER INFLUENCE IN BUILDING OF BRAND LOYALTY AND RELATED ASPECTS

IN INDIAN CELLULAR PHONE INDUSTRY

Oindrila Chakraborty22 Dr. Sitanath Mazumdar23

ABSTRACT

The Study revealed the influence of women and men on brand loyalty pattern, brand identification, word of mouth

communication and post purchase satisfaction pattern in the field of telecommunication, especially in case of choosing mobile

handsets in India. The research involved Logistic regression, t-test and structural equation modeling and measurement

modeling tools to investigate gender influence on cellular phone buying behaviour. While the study concluded females are less

critical with their satisfaction and could likely to be .39 times more satisfied than men , though are less likely to get satisfied

percentage wise than men. The study also confirmed the obvious difference in the behavioral pattern of men and women.

KEYWORDS

Consumer, Gender, Brand Loyalty, Brand Identification, Word of Mouth Report, Cellular Phone, Telecommunication,

Satisfaction etc.

INTRODUCTION

Indian telecom Industry is flourishing with a very rapid growth rate and the pattern is supposed to be very different for different

sections of demographics. Nowadays cellular phone has its way into consumers’ lives and is becoming intricately allowed into the

daily lives of people (Nikouand Mezei, 2012). Consumers of the mobile phone sector are diverse and so are their preferences,

needs and expectations. Thus, business houses are focusing on value creation for different demographic, psychographic and

geographic customer profiles to contend in the active business domain. Deng et al. (2009) have rightly pointed out that to craft or

to design a product in inimitable way and to build up long lasting relations with consumers these kind of investigation is a need of

the hour, which should be reflected through their different offerings; therefore business organizations are creating arrangement to

hasten consumer satisfaction and telecommunication industry is struggling to build up long term relation with consumer through

manifold investigated offerings to satisfy the targeted customers. Brand loyalty is supposed to be a by-product of satisfaction and

hence Brand Loyalty and post purchase satisfaction should be directing consumers toward brand perception building and

commercial long-term relationship (Eshghi et al., 2007). However, it is not an effortless task to maintain the consumers of a

product or service satisfied and loyal, but according to Anderson et al. (2004), it is revenue generating for any business house in

the long run.

RESEARCH OBJECTIVES

The principal purpose of this study is to inspect the effects of demographic features on brand loyalty and allied fields and whether

there lies any difference between different demographic categories like gender. Though the prime objective of the study has been

to investigate the effect of Gender on Brand Loyalty pattern, Brand Identification, Word of Mouth Reports and the current

satisfaction level with the existing cellular phone set, but the secondary objective has been to investigate the impact of gender,

Brand Identification, Brand Loyalty and Word of Mouth Report on each other.

LITERATURE REVIEW

Gender Influence on Purchase Intention

Sidin, Zawawi, Wong, Busu, & Hamzah, (2004) reported that the family members would have dissimilar roles to play while

making purchase related decisions. The decision maker may not be always the same person who has the got purchasing power

(Mansumitchai, 2002) and decision makers could have been divided into male and female according to their gender. Therefore, it

can be said that, when there is a gender difference, the consumption pattern of the product should also be different. The factors

that would influence gender to make purchase decision are also dissimilar. For instance, to purchase a car, male would look for

mechanical part of a car while female will emphasize on decor part. Hence, the buying decision would be different along the

different role of genders (Sidin, Zawawi, Wong, Busu, & Hamzah, 2004).

22Assistant Professor, Calcutta Institute of Engineering and Management; Research Scholar, University of Calcutta, Department of

Management, West Bengal, India, [email protected] 23 Professor and Head, Department of Business Management, University of Calcutta, West Bengal, India,

[email protected]







Gender Influence on Brand Loyalty

Academic study has exposed significant differences in cognitive processes and actions of male and female customers (Fisher and

Dubé 2005; Meyers-Levy 1988, 1989; Meyers-Levy and Maheswaran 1991; Meyers-Levy and Sternthal 1991). These disparities

are echoed in the extensive application of gender as a segmenting variable in marketing domain. More common stereotypes,

probably on the basis of on extensively publicized result showing that males exhibit lower levels of sexual loyalty than females on

a comparative parameter (e.g., Blumstein and Schwartz 1983; Hansen 1987), advocating that females are more likely to be loyal

customers than males. Loyalty has many definitions (Fournier 1998; Jacoby and Chestnut 1978; Oliver 1999; Pritchard, Havitz,

and Howard 1999; Reichheld1993; 2003). In spite of considerable divergence about the precise definition and nature of the loyalty

concept, familiar characteristics of all loyalty definitions are that there is a relationship of (with different degree of relationship,

ranging from very shallow to very strong) an actor and another entity and that the actor exhibits behavioral or psychological

commitment to that entity in the existence of alternative entities of same or similar nature. Over the years, researchers have

investigated many antecedents of customer loyalty to stores, companies, and brands (Dick and Basu 1994; Johnson, Herrmann and

Huber 2006; Oliver 1999).

Gender Influence on Word of Mouth Reports

Word-of-mouth report is a process of interpersonal control that can be engaged in a significant role in the buyer decision making

process (Leonard-Barton, 1985; Richins, 1983), considerably affecting product assessment (Brown & Reingen, 1987; Price &

Feick, 1984; 1989). A review on WOM through relevant literature study revealed gender effects on WOM communication.

According to a study conducted by Garbarino and Strahilevitz (2004), it was found that WOM information was more successful in

decreasing perceived risk and rising eagerness to buy online among women than among men. However, those revelations were

contradictory to File & Prince (1992), who declared that recipient gender had no significant impact on the level of influence by

WOM on bank selection.

Gender Influence on Brand Identification

According to Enrique P. Becerra, Vishag Badrinarayanan, (2013) consumer-brand relationships affect brand evangelism, despite

in different manner. While brand trust affects purchase intentions and positive referrals, and brand identification affects positive

and oppositional brand referrals. In a holistic way, the result exposes the power of consumer-brand relationships in creating brand

evangelism, relative to other factors such as extraversion, gender, and brand experience.

Gender Influence on Brand Satisfaction

According to Irene George, Pankaj Priya and Moly Kuruvilla (2014) gender influence is very significant in the field of content

marketing and media due to the changed nature of psychological and economic pattern of females in current decade.

Telecommunication

According to Lin (2010), telecom market is highly challenging, segmented and competitive market, where every day new strategy

has to be developed to entice old consumers along with the new ones. Therefore, brand loyalty establishment has been advocated

as the widespread cure for all organizations as well as to cope with day-by-day enhanced rivalry in the market. This could be also

being applicable for telecommunication sector. Gerpott et al. (2001) stated that in telecommunication sector, it is frequently put

forth that once consumers have been obtained and connected to the telecommunication network, their long-term relations with

company are of greater importance to the success of the company in competitive markets than in other industry sectors .This is

one of the justifications of selection of the telecommunication sector in broad spectrum. Negi (2009) portrayed mobile service

industry in a manner to excel the amazing expectations from experts in the field.

CONCEPTUAL FRAMEWORK OF RESEARCH

Since the study investigates the effect of gender on brand loyalty, brand identification, Self-expressive value of the brand

personality, Word of Mouth Report and current satisfaction level of the brand, it could be conceptually expressed in the following

way:

Figure-1: Conceptual Framework of the Study






RESEARCH QUESTIONS

The following questions could have been explored through this study:

Is Brand Loyalty Pattern is different form Men to Women?

Is Brand Identification is different from Men to women?

Is Word of Mouth Report pattern different from men to women?

How does Gender, Brand Loyalty, Brand Identification, Word of Mouth Reports influence each other?

What is impact of gender on current satisfaction pattern of cellular phone?

RESEARCH HYPOTHESES

The following null hypotheses were tested and were rejected only if the tests were significant at a minimum 95% confidence level:

H1= There is no significant difference with respect to Brand Loyalty in men and women.

H2= There is no significant difference with respect to Brand Identification in men and women.

H3= There is no significant difference with respect to Word of Mouth Report patterns in men and women.

H4= Current satisfaction level with the cellular phone has a statistically significant relationship with gender.

H5= Brand Loyalty, Brand Identification, Word of Mouth Reports influence each other.


Sample and Data Collection

Since the study dealt with Gender influence of a product related to consumer behaviour across Indian market, any product could

have been the matter of study, but telecom sector was chosen, because of its highly dynamic and booming nature in Indian

Market.

The research had been conducted across India, especially in and around three cities like Kolkata, Mumbai, and Hyderabad with

both the genders, who are mobile phone users, with some or no brand loyalty for the available mobile phone manufacturer. The

sampling technique was random sampling, where an automated random number generation system had been utilized for survey

procedure. The sample size taken for the study was 124, while the respondents or the sample unit was chosen as a person, from

both the gender, within the age boundaries of less than 20 to 61 and above, having the per capita income of less than 10,000 to

more than 50,000 per month. Then, a questionnaire was devised and a short pre-test was conducted amongst 30 university level

P.G. students and the questionnaire was then revised based on the results of the pre-test and was circulated among 124

respondents across the three cities of India. In the study, 30% was women while rest was men.

Measures

Brand Loyalty: Brand loyalty was measured on a four-item scale developed by Aaker (1996) and Ratchford (1987) and modified

by Kim (1998). Though, this scale was originally comprised of a seven-point Likert scale (1 being “strongly disagree” and 5 being

“strongly agree”) ,but for the convenience of Indian consumers, the scale was modified into a five point Likert scale, having

following statements:

I will continue to use this brand because I am satisfied and acquainted with the brand,

I will use this brand in spite of competitors’ deals,

I would buy additional products and service in this brand,

I prefer the brand to others.

Word of Mouth Report: Word of Mouth was measured on a three item scale developed by File, Judd and Prince (1992) and this

scale was also originally comprised of seven point Likert scale and for the convenience and better understanding of Indian

consumer, it was changed into a five point scale (1 being “strongly disagree” and 5 being “strongly agree”), having all three

original statements:

Recommend to other people that brand, should be theirs as soon as possible.

Recommend the brand to other people.

Talk directly about your experience with them.

Brand Identification: Brand Identification was measured on a six-item scale originally developed by Meal and Ashforth (1992),

consists of seven point Likert scale, and was converted into five-point scale. Having following statements:





This brand’s successes are my successes.

I am interested in what others think about this brand.

When someone praises this brand, it feels like personal compliments.

When I talk about this brand, I usually say “we” rather than “they”.

If a story in the media criticized the brand, I would feel embarrassed.

When someone criticizes this brand, it feels like a personal insult.

Current Satisfaction of cellular Handset: Current satisfaction of the handset was measured on a nominal scale with “yes” and

“no” options, “yes” indicating satisfaction and “no” indicating dissatisfaction.

DATA ANALYSIS AND RESULT

Reliability Test

The Cronbach alpha test was applied to determine the reliability of the data set, using SPSS 20 for all the measures and the values

of the constructs were all above 0.8 (Table:1), indicating high internal reliability and consistency of the data (Nunnally &

Bernstein 1994).

Sample Adequacy Test

Later KMO and Baelett’s test of spherecity were performed (Table-1) for sample adequacy and found to be above required level

(KMO all above .67 for all variables and Bartlett’s Test of spherecity with a very high value), indicating sample size to be

adequate for the tests.

T-Test

Then t test was performed along with Gender and the items of the different constructs. In all cases the significance value was

below .05, indicating that null hypothesis of no difference between genders for different constructs to be rejected (Table:1).

Measurement Model and Structural Equation Modeling Using AMOS

Then measurement models were drawn between gender and the different items of the different constructs separately and were

analyzed with values. Finally, a SEM model was drawn with all the variables. A logistic regression was performed with gender

and their current brand satisfaction pattern responses.

Testing of Hypotheses

H1= Brand loyalty is not different for different Gender

First all the items of the brand loyalty scale were subjected to t-test along with gender and the t-value for gender was

52.911(table:1) and for item no.(a)[ I will continue to use this brand because I am satisfied and acquainted with the brand], it was

40.311, for item no.( b)[ I will use this brand in spite of competitors’ deals], it was 39.121, for item no.(c)[ I would buy additional

products and service in this brand], it was 42.467 and for item no.(d) [I prefer the brand to others], it was 45.0555 (table:1), in all

cases significance value was .000 (below .05), indicating rejection of null hypothesis i.e. brand loyalty is significantly affected by

gender difference.

The components of Brand Loyalty scale were tested through a measurement model along with gender (Figure-2). In Model

Summery (table-2 and 3), the NFI is .97 (Table-3) and if, the Normed Fit Index (NFI) exceeds .90 (Byrne, 1994) or .95

(Schumacker & Lomax, 2004), then the model can be acceptable. In addition, the CFI is .997 (Table-3), while even if it exceeds

.93 (Byrne, 1994) the model should be accepted. The CMIN/DF is 1.105(Table-2) while the acceptance range for relative chi

square or normed chi square is from less than 2 (Ullman, 2001) to less than 5 (Schumacker & Lomax, 2004). Therefore, the

model falls within acceptable range. T-test of the constructs suggested the same.

H2 = There is no significant difference with respect to Brand Identification in men and women

As per the protocol, all the individual items of Brand Identification scale were subjected to t-test along with gender. For gender

the t value was 52.911, while for item( a) [This brand’s successes are my successes], it was 30.367, for item(b) [I am interested in

what others think about this brand], it was 32.465, for item (c) [When someone praises this brand, it feels like a personal

compliment], it was 32.670, for item no. (d) [When I talk about this brand, I usually say “we” rather than “they”], it was 32 .412,

for item no. (e) [If a story in the media criticized the brand, I would feel embarrassed], it was 33.452 and for the last item (f)

[When someone criticizes this brand, it feels like a personal insult] it was 25.593.Sig. value was .000 in all cases, which is below

.05, indicating rejection of null hypothesis.

All the components of Brand Identification scale were tested through a measurement model along with gender (Figure-3). In

Model Summery (table-4 and 5), the NFI is .92 (Table-5) and if, the Normed Fit Index (NFI) exceeds .90 (Byrne, 1994) or .95





(Schumacker & Lomax, 2004), then the model does have implication. In addition, the CFI is .964 (Table-5), while even if it

exceeds .93 (Byrne, 1994) the model should be significant. The CMIN/DF is 1.813(Table-4) while the acceptance range for

relative chi square or normed chi square is from less than 2 (Ullman, 2001) to less than 5 (Schumacker & Lomax, 2004).

Therefore, the model falls within acceptable range. This gender does have statistically significant effect on Brand Identification,

indicating similar result to the t-test of its component items with the gender.

H3 = There is no significant difference with respect to Word of Mouth Report patterns in men and women

All the three items of Word of Mouth Report scale were subjected to t-test along with gender. For gender the t value was 52.911,

while for item (a) [Recommend to other people that the brand , should be theirs as soon as possible], it was 42.823, for item(b)

[Recommend the brand to other people.], it was 46.137, for item (c) [Talk directly about your experience with them.], it was

46.681, and a p-value below .05 in all cases, which indicated a statistically significant difference of gender influence on Word of

Mouth Report or communication.

Again, components of Word of Mouth scale were tested through a measurement model along with gender (Figure-4). In Model

Summery (table-6 and 7), the NFI is .987 (Table-7) and if, the Normed Fit Index (NFI) exceeds .90 (Byrne, 1994) or .95

(Schumacker & Lomax, 2004), then the model does have implication. In addition, the CFI is 1 (Table-7), while even if it exceeds

.93 (Byrne, 1994) the model should be significant. The CMIN/DF is .748 (Table-6) while the acceptance range for relative chi

square or normed chi square is from less than 2 (Ullman, 2001) to less than 5 (Schumacker & Lomax, 2004). Therefore, the

model falls within acceptable range. This gender does have statistically significant effect on word of mouth report, indicating

similar result of the t-test of its component items.

H4= Current satisfaction level with the cellular phone has a statistically significant relationship with gender.

For this set of study, a Logistic Regression was performed with the current satisfaction level of both the genders. In the results,

table-8 was showing internal value of the responses, while table 9 was showing the frequency of categorical responses. Under

Model Summary, (table-10) of the SPSS results, -2loglikelyhood statistics is found to be 77.9, according the principles of

statistics, smaller the value, the better the model, since the statistic is not very large, therefore, the model should be ideally strong

enough and a good fitting model. Since, Cox and Snell R2 and Nagelkerke R2 (table-10) both are comparable with R2 in multiple

regression and imitates R2 of multiple regression based on likelihood, (though Cox and Snell R2 cannot reach a maximum value of

1 like R2 and has poorer predictability; while, Nagelkerke R2 can reach a maximum value of 1 and thus a better predictor of the

explainability of the model.) therefore, (table-10) Nagelkerke R2 suggests that only 16% of the satisfaction can be explained by the

predictor or independent variable or gender, rest are dependent on external factors.

H-L statistics (table-11) shows a result to be below .05, indicating null hypothesis to be rejected.

Based on table-13, two types of Logistic regression equations could be formed.

Logit (Current Satisfaction) = -2.113 - .932 gender (1) ......................................................................... (i)

OR

In (ODDS) = -2.113 - .932 gender (1) ..................................................................................................... (ii)

In the dataset, male=0, then ODDS= e-2.113-.932(0) = e-2.113 = .1208 (fitting in the equation- ii) i.e. a man is only .1208 as likely to be

satisfied as compared to be dissatisfied. Again, in the research, ODDS can be converted in to probability, then for men -

Y= 𝑶𝑶𝑫𝑺

𝟏+𝑶𝑫𝑫𝑺 =

.𝟏𝟐𝟎𝟖

𝟏+.𝟏𝟐𝟎𝟖 =.10778 =.11 i.e. only 11% men are likely to be satisfied with the current brand of cellular phone.

In the research, female=1, then the ODDS = e-2.113-.932(1) =e-3.045 =.04760 i.e. a woman is .048 more likely to get satisfied than to be

dissatisfied. If ODDS are converted into probability, then for women –

Y=𝑶𝑫𝑫𝑺

𝟏+𝑶𝑫𝑫𝑺=

.𝟎𝟒𝟕𝟔𝟎

𝟏.𝟎𝟒𝟕𝟔𝟎 =.05 i.e. only 5% women would likely to be satisfied with the current brand of cellular phone.

Odd Ratio Calculation

From the variables in the equation table (table: 13) Exp B value is found, which is also known as odd ratio predicted by model.

Again, according the table: 13, e-.932 = .3937, indicating chance of being satisfied is .3937 times more for women than for men.

Even the Exp (B) column of table-13 shows relative odds or Odd Ratio .394 indicating that females are .394 times as likely to be

satisfied than men, which matches exactly with the value of e-.932.





H5= Brand Loyalty, Brand Identification, Word of Mouth Reports influence each other.

All the components of Brand Loyalty, Brand Identification, Word of Mouth scale were tested with each other through a SEM

along with gender (Figure-5) just to see whether they all influence each other or not. In Model Summery (table-14 and 15), the

NFI is .864 (Table-15), which is almost .9 and if, the Normed Fit Index (NFI) exceeds .90 (Byrne, 1994) or .95 (Schumacker &

Lomax, 2004), then the model does have implication. In addition, the CFI is .945 (Table-15), while even if it exceeds .93 (Byrne,

1994) the model should be significant. The CMIN/DF is 1.551 (Table-14) while the acceptance range for relative chi square or

normed chi square is from less than 2 (Ullman, 2001) to less than 5 (Schumacker & Lomax, 2004). Therefore, the model falls

within acceptable range. Hence, gender does have statistically significant effect on all the considered scales i.e. Brand Loyalty,

Brand Identification, Word of Mouth, as well as Brand Loyalty, Brand Identification, Word of Mouth, influencing each other

indicating similar result of the t-test of its component items.

KEY FINDINGS

The study reveals that gender has a very strong influence on Brand Loyalty pattern, Brand Identification as well as Word of

Mouth Communication / Report pattern i.e. all of these would be different from men to women. In addition, Brand Loyalty cannot

be established, if it is being negatively influenced by Brand Identification or Word of Mouth Report. According to the Logistic

Regression, women are likely to be easily satisfied than men, though the overall percentage of men likely to be satisfied with the

currently used brand is higher than the women, but it might be because of the fact that the male respondents for the study were

much higher in number than females. It might be so that females are easily satisfied because they are not that critical about

technical gadgets like cellular phones, while men are more critical about it, hence to satisfy them it takes more efforts. However,

the higher percentage of men (11%) likely to be satisfied with cellular phones shows mobile companies are able to reach the level

to satisfy their critical point of view, which is a very positive side for the entire mobile industry. While lower percentage of

females (5%) likely to be satisfied most probably indicates their somewhat confused state of mind regarding satisfaction pattern of

mobile handset.

CONCLUSION

It can be concluded that mobile companies should work more on females, because they need an extra care to come out of their

confused state of mind regarding their satisfaction pattern. However, females are ‘easy customers’ from the point of view of

critically of judgment, since they can be easily satisfied without much of effort, proved from the results of Logistic Regression. If

mobile companies are making women centric promotional campaign, it could have been more effective to come out of such kind

of situations.

LIMITATIONS OF STUDY AND SCOPE OF FURTHER RESEARCH

The most vital limitation of the study is unequal presence of both the gender in the research, which might be the reason behind

less likelihood of satisfaction for women. Another limitation is lack of investigation of the reason behind the difference of

satisfaction pattern and other behavioral differences between two genders. The third important limitation is only having samples

from three cities across the India, while it should have been much more elaborative and holistic in manner with more samples

from other cities also.

REFERENCES

1. Anderson, E. W., Fornell, C., & Mazvancheryl, S. K. (2004). Customer Satisfaction and Shareholder Value. Journal

of Marketing, 68(1), 172-185.

2. Becerra, Enrique P., & Badrinarayanan, Vishag. (2013). The influence of brand trust and brand identification on

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37. Retrieved from http://en.wikipedia.org/wiki/Business_strategy

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39. Retrieved from http://www.ijbssnet.com/journals/Vol._2_No._14;_July_2011/24.pdf

40. Retrieved from http://www.surveymonkey.com/s/P2KGFLB

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43. Retrieved from http://www.slideshare.net/journalsats/ijcatr04021003

APPENDIX

Table-1: Showing Reliability Statistics, Sample Adequacy of the Other Constructs and ‘T’ Value Along With Gender

Construct Bartlett's

Test of

Sphericity

KMO

Cronbach’s

Alpha

Number

of Items

t-value

Sig. Value

(2-tailed)

Items

Gender 52.911 .000

Brand

Loyalty

176.283 .808 .830 4 40.311 .000 I will continue to use this brand

because I am satisfied and

acquainted with the brand.

39.121 .000 I will use this brand in spite of

competitors’ deals.

42.467 .000 I would buy additional products

and service in this brand.

45.055 .000 I prefer the brand to others.

Brand

Identification

330.198

.869 .868 6 30.367 .000 This brand’s successes are my

successes.

32.465 .000 I am interested in what others think

about this brand.

32.670 .000 When someone praises this brand,

http://en.wikipedia.org/wiki/Business_strategy

http://www.researchgate.net/profile/Tammo_Bijmolt/publication/33052665_Are_women_more_loyal_customer...

http://www.ijbssnet.com/journals/Vol._2_No._14;_July_2011/24.pdf

http://www.surveymonkey.com/s/P2KGFLB

http://www.southampton.ac.uk/assets/imported/transforms/peripheral-block/UsefulDownloads_Download/04...

http://www.csun.edu/~vcsoc00i/classes/s680f13/Nick.pptx

http://www.slideshare.net/journalsats/ijcatr04021003





it feels like a personal compliment.

32.412 .000 When I talk about this brand, I

usually say “we” rather than “they”.

33.452 .000 If a story in the media criticized the

brand, I would feel embarrassed.

25.593 .000 When someone criticizes this

brand, it feels like a personal insult.

Self-

Expressive

Value of

Brand

Personality

274.910 .764

.923 3 34.671 .000 The brand helps me to express

myself.

32.506 .000 The brand reflects my personality.

32.226 .000 The brand enhances myself.

Word of

Mouth

Reports

113.778

.663

.786 3 42.823 .000 Recommend to other people that

the brand, should be theirs as soon

as possible.

46.137 .000 Recommend the brand to other

people.

46.681 .000 Talk directly about your experience

with them.


Figure-2: Measurement Model between Gender and Brand Loyalty (BL)


Model Fit Summary

Table-2: CMIN

Model NPAR CMIN DF P CMIN/DF

Default Model 15 5.527 5 .355 1.105

Saturated Model 20 .000 0

Independence Model 5 185.681 15 .000 12.379






Table-3: Baseline Comparisons

Model NFI

Delta1

RFI

rho1

IFI

Delta2

TLI

rho2 CFI

Default Model .970 .911 .997 .991 .997

Saturated Model 1.000 1.000 1.000

Independence Model .000 .000 .000 .000 .000


Figure-3: Measurement Model between Brand Identification and Gender


Model Fit Summary

Table-4: CMIN


Default Model 21 25.386 14 .031 1.813





Model NFI

Delta1

RFI

rho1

IFI

Delta2

TLI

rho2 CFI

Default Model .926 .852 .965 .928 .964








Figure-4: Measurement Model between Gender and Word of Mouth Report


Model Fit Summary

Table-6: CMIN


Default Model 12 1.496 2 .473 .748





Model NFI

Delta1

RFI

rho1

IFI

Delta2

TLI

rho2 CFI

Default Model .987 .937 1.004 1.023 1.000




Table-8: Dependent Variable Encoding of Logistic Regression

Original Value Internal Value

Yes 0

No 1


Table-9: Categorical Variables Coding’s for Logistic Regression

Frequency Parameter Coding

(1)

Gender Female 22 1.000

Male 102 .000






Table-10: Model Summary of Logistic Regression

Step -2 Log likelihood Cox & Snell R Square Nagelkerke R Square

1 77.900a .08 .16

Note: a. Estimation terminated at iteration number 6 because parameter

estimates changed by less than .001.


Table-11: Hosmer and Lemeshow Test for Logistic Regression

Chi-square d.f. Sig.

8.760 6 .000


Table-12: Classification Tablea for Logistic Regression

Observed Predicted

Satisfaction with current brand Percentage

Correct Yes No

Step 1 Satisfaction with current brand

Yes 112 0 100.0

No 12 0 .0

Overall Percentage 90.3

Note: a. The cut value is .500


Table-13: Variables in the Equation for Logistic Regression

B S.E. Wald d.f. Sig. Exp. (B) 95% C.I. for EXP (B)

Lower Upper

Step 1a gender(1) -.932 1.072 .755 1 .385 .394 .048 3.221

Constant -2.113 .319 43.815 1 .000 .121


Figure-5: SEM Model Fit between Gender, Brand Loyalty, Brand Identifaction, word of Mouth Report






Model Fit Summary

Table-14: CMIN


Default Model 57 147.315 95 .000 1.551





Model NFI

Delta1

RFI

rho1

IFI

Delta2

TLI

rho2 CFI

Default Model .864 .806 .947 .921 .945




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SHG - BANK LINKAGE PROGRAMME IN INDIA: A CRITICAL STUDY

Sathisha S. M.24

ABSTRACT

Indian economic growth is not contributing positively to the poverty alleviation and Indian economic growth has failed to

make a significant improvement in poverty figures with 400 million more than the total in the poorest African Nations - still

strict in poverty.1 All the governmental sponsored poverty alleviation programmes failed to fetch the desired results. The

reasons may be such as failure to access the target group, loopholes in the system, developing a robust mechanism to name a

few. The SHG bank linkage programme is a main plank of the strategy for delivering financial services to the poor and

marginalized to come together to a common platform to solve their conditional problems.2 Empowerment of women now-a-

days is assuming glaring importance. Empowering women in developing countries is essential to reduce poverty since women

represents most of the global poor population. When women are empowered, the entire family benefits and those benefits

often have ripple affects the future generation.

KEYWORDS

SHGs, Women Empowerment, Poverty Alleviation, Self Help Group Bank Linkage, Economic Growth etc.

INTRODUCTION

Microfinance is acknowledged as the best means all over the globe as far as poverty alleviation is concerned. Poverty alleviation

is possible if members invest money in income generating actively. It was found as a general feature that as the groups become

older and older to loan utilization also changes and percentage of investment spent also includes (Basu and Srinivas 2005)3 and

(Pahazendhi and Batatya 2007)4. The starting of income generating activities leads to creation of more employment opportunities

among the members (Galab et al., 2003)5. Access to financial services in a sustainable manner would ensure employment and

economic growth leading to poverty reduction. The poverty reduction if done through Self Help Groups which are popular

voluntary organisations among known women, locality, caste, area per member since and peer keeps a constant touch with all the

members monitors the fund utilization and advises the smooth run of the SHG.

CONCEPT OF MICRO FINANCE

The history of micro finance dates back to the establishment Syndicate Bank in 1921, which concentrated on raising micro

deposits in the form of daily / weekly basis and allotted micro loans for small period. Microfinance is a global novel approach to

provide saving and investment facility to the poor and deserved. Efficient and improved access of micro finance products like

savings, credit and insurance facilities in particular help the poor to smoothen their consumption, manage their risks better,

gradually buildup their asset base etc. In India, micro finance mainly operates through the popular model SBLP, NGOs and credit

agency. Since the poor do not possess any worthy asset base they have to be provided with mortgage free loans (Akula, 2008)6.

PERFORMANCE OF SHG - BANK LINKAGE PROGRAMME IN INDIA

SHG-Bank Linkage programme (SBLP) has become a part of Banks corporate strategy. Initially SBLP achieved only a limited

success only due to banks apathy to adopt SBLP scale though NBARD successfully pilot tested. The RBI directed all commercial

banks to give priority to SBLP programme. In India, it started only with 500 SHGs and now reached a tremendous progress during

the two previous decades and now SBLP programme in India has become a powerful strategy to overcome poverty. Further, the

continuation of this programme will be highly beneficial to empower rural and urban women. SHGs have become popular even in

urban areas in the eradication of poverty in the slum and out-skirts and this strategy has become a ray of hope among the poor,

depressed and deserving.

CREDIT LINKAGE

Table-1 clearly highlights the credit linkage on SHGs from 1992-93 to 2010-11. The table reveals a rapid growth in the number of

credit linked SHGs since 1992. There were only 255 SHGs in 1992-93 and now by the end of 2010-11 it stood at 1196134. As far

as bank loan is concerned, the table shows that he bank loan amount which was only Rs. 0.01 billion in 1992-94 increased to Rs.

681.72 billion by 2010-11 indicating growth of SHGs in India.

24Lecturer, School of Business Studies, Bangalore University, Karnataka, India, [email protected]






SHG SAVINGS WITH BANKS

Savings with banks data is available from 2005-2006. Table-2 highlights the savings of SHGs with banks from 2006-07 to 2010-

11. It was 23.9 billion in 2005-06 and rose to 70.16 billion. Further the table also provides that he number of SHGs having savings

with banks has increased from 26305 to 2005-2006 to 7461946 by the end of 2010-11 showing growth rate of 7.32 comparing to

previous year 2009-10.

REGION-WISE AND STATE-WISE OUTREACH OF SHG

Table-3 reveals data on region and state wise outreach of SHGs. State-wise Andhra Pradesh stood highest in the number of SHGs

on 31st March 2011 (19.65%) and Tamil Nadu stood second (12.64%) with highest number of SHGs. There are some states and

union territories where the percentage of SHGs formed to the total SHGs in less than 1%. SBLP programme was started with the

objective of assisting poor who are deprived of formal banking system, who mainly consist of marginal farmers, landless

labourers, artisans and craftsman and others engaged in the small business such as vending and hawking. However, unfortunately

microfinance movement is mostly Southern centric and it is yet to take off in the real sense in other regions of India. There is a

wide regional difference both in terms of spread of SHGs linked to banks and cumulative bank loan disbursed under the

programme. Table-4 reveals that data about new SHGs financed by banks during year 2007-08 to 2010-11. New SHGs financed

during the year 2007-08 amounted to Rs. 12.28 lakhs and stood at Rs. 11.56 lakhs SHGs by the end of 2010-11.

CURRENT SCENARIO OF SHG - BANK LINKAGE PROGRAMME

SHG Bank Linkage programme model of reaching the needy sector has emerged as the major programme in the country. This

model is adopted by commercial Banks, RRBs, co-operative banks. In 2009-10, 159 million new SHGs were credit limited with

banks and bank loan of Rs. 14453 crores (including repeat loans) was disbursed to those SHGs (See table-4) on an average, the

amount of savings per SHGs was 8915 as compared to the amount of credit outstanding of 57795 in 2009-10 (see table-8). As per

the status of micro finance in India 2009-10 released by the National Bank for agriculture and rural development (NABARD)

there are 6953000 SHGs in the country savings linked with banks and 4851000 SHGs having loan outstanding as on 31st March

2010. The number of households covered under this scheme is about 970 lakhs, total savings amounted Rs. 6198.71 crores, and

the total amount of loans outstanding as on 31st March, 2010 is Rs. 28038.28 crores. Table-5 reveals data on SHG savings with

banks during 2008-09, 2009-10 and 2010-11. It is shown in the table SBLP, 74.62 lakh SHGs are linked to banks by 31st March

2011. Out of 74.62 lakh, SHGs about 27% are savings linked through eh SGSY programme and around 82% are of women

groups. Out of the total savings amount of 7016.30 crores, 75.5% is of women groups as on 31st March 2011.

LOANS DISBURSED TO SHG

The details of loan disbursement for the period of 2008-09, 2009-10 and 2010-11 are presented in the table-6. It is clearly revealed

in the table that bank loans are disbursed to 10.17 lakh women SHGs during 2010-11 registering a negative growth rate of 21.4%

when compared to 2009-10. On the other hand, there is a growth rate (1.6%) with regard to amount of loan during the same

period. A comparison of data in the said period shows registering in the year 2008-09 an highest growth rate regarding loan

disbursement. Table-7 reveals data agency wise NPAs of Bank loans to SHGs and NPAs. Rs. 6340 crores were disbursed by the

end of 31st March 2012 and NPAs stood at 221273 crores. It is evident from the table gradual increase in overall growth of NPAs.

BANK LOANS OUTSTANDING AGAINST SHG

Table-8 reveals data overall programs under SHG Bank Linkage - Loans outstanding during 2008-09, 2009-10 and 2010-11. The

data shows there is a growth rate of 13.4% in the outstanding loan amount of women SHGs during 2010-11 as against 23.9%

during 2009-10. This tendency reveals that there is a decline in the outstanding loan amount from 2009-10 to 2010-11.

NON-PERFORMING ASSETS

Table-8 and table-9 clearly reveals data regarding agency-wise loan outstanding against SHG agency and NPAs for different

periods. Table-8 shows total bank loans outstanding against SHG for the year 2010-11 amounting to Rs. 31221.16 crore and Rs.

65234 loan outstanding per SHG. Further, the table-8 reveals that loans disbursed out of total to SGSY amounting to 12.85 lakh

SHGs amounting to Rs. 7829.38 crore. Table-9 shows clearly that the amount of SPAs have gone up from Rs. 823.04 crores

during 2009-10 (2.94%) to 1474.11 crores as on 31-3-2011 (4.72%). The percentage of NPAs to loan outstanding is found to be

high in private commercial banks as on 31-3-2011 (10.10%) when compared to other banks. The data further reveals that

percentage of NPAs to loans outstanding as on 31-3-11, in co-operative banks in 7.04%, followed by 4.76% in public commercial

banks and 3.06 in RRBs. Though there is an increase in NPAs to some extent from 2009-10 to 2010-11, the national percentage of

NPAs of loan amount outstanding is only 5%. Further the position as on 31-3-2011, total bank loan outstanding against SHGs, per

SHG Bank loan outstanding and loan disbursed to SGSY is presented in the table-10.





REFERENCES

1. Padmalochana. (et al.). (2012). Status of MF in India - A Review. International Journal of Marketing, Financial

Services and Management Research, 1(11), 142.

2. Kondala Rao Devarapalli and Jyothi Guntaka. (2014). “SHG Bank Linkage Programme in India: A study”. Southern

Economist Vol. 52, No. 18, P. 39-40.

3. Basu, Priya, & Srivastava. (2005, June). Scaling up Micro Finance for rural Poor (Policy research working paper

3646). The World Bank. South Asia Region: Finance and Private Sector Development Unit.

4. Puhazhendhi, V., & Badatya, K. C. (2007, June 06). Growing Members to undertake income generating activities and

Micro Enterprises – A case study of Andhra Pradesh. In Proceedings of the International Conference and Andhra

Pradesh Experience with membership based organisations of poor (pp. 62-75). Hyderabad: centre for economic and

social studies. India.

5. Rao, Gulab S., & Chandrashekar, N. (2003). Women’s Self Help Groups, poverty alleviation and empowerment.

Economic and Political Weekly, 38(12 & 13), 1274-1280.

6. Akula, Bikram. (2008). A firstful of rice. Boston: Harvard Business Review Press.

7. Retrieved from http://www.ukessays.com/essays/economics/help-groups-bank-linkage-programme-in-india-economics-

essay...

8. Retrieved from http://www.rbi.org.in/scripts/PublicationsView.aspx?id=15192

9. Retrieved from http://www.rbi.org.in/scripts/PublicationsView.aspx?id=15861

10. Retrieved from http://www.slideshare.net/iaeme/10120140503008

APPENDIX

Table-1: Progress of SHG-Bank Linkage Programme in India (From 1992-93 to 2010-2011

Year Number of SHG Credit Linked Bank Loans (Rs. Billion)

Number Cumulative Amount Rs. Cumulative Rs.

1192-93 255 255 0.01 0.01

1993-94 365 620

1994-95 1502 2122 0.02 0.02

1995-96 2635 4757 0.04 0.06

1996-97 3841 8598 0.06 0.12

1997-98 5719 14317 0.12 0.24

1998-99 18678 32995 0.33 0.57

1999-2000 81780 114775 1.36 1.93

2000-01 149050 263825 2.88 4.81

2001-02 197653 461478 5.45 10.26

2002-03 255882 717360 10.22 20.49

2003-04 361731 1079091 18.56 39.05

2004-05 539365 1618456 29.94 68.99

2005-06 620106 2238565 44.99 113.98

2006-07 1105749 65.70 179.68

2007-08 1227770 88.49 268.17

2009-10 1586822 144.53 536.24

2010-11 1196134 145.48 680.72

Sources: NABARD, Mumbai

From 2006-07 onwards, data on number of SHGs financed by banks and bank loans inclusive of existing groups receiving repeat

loans. Owing to this change, NABARD discontinued the publication of data on a cumulative basis from 2006-07. As such, there

appears a decline in the number of groups in 2010-11.

http://www.ukessays.com/essays/economics/help-groups-bank-linkage-programme-in-india-economics-essay...

http://www.ukessays.com/essays/economics/help-groups-bank-linkage-programme-in-india-economics-essay...

http://www.rbi.org.in/scripts/PublicationsView.aspx?id=15192

http://www.rbi.org.in/scripts/PublicationsView.aspx?id=15861

http://www.slideshare.net/iaeme/10120140503008





Table-2: Savings of SHGs with Banks (From 2006-07 to 2010-11)

Year Number of SHGs Having Savings with Banks Savings of SHGs with Banks

Number Growth Rate Amount (Rs Billion) Growth Rate

2005-06 2630510 ------ 23.9 ------

2006-07 4160584 58.17 35.12 46.95

2007-08 5009794 20.41 37.85 7.77

2008-09 6121147 22.18 55.46 46.50

2009-10 6953250 13.59 61.99 11.77

2010-11 7461946 7.32 70.16 13.18


Table-3: Region-Wise-State-Wise SHGs as on 31st March 2011

S. No. Region / State Comm. Banks Reg. Banks Coop. Banks SHGs

No. % to No. % to No. % to No. % to

Total Total Total Total

A Northern Region

1 Haryana 20397 57.75 12919 36.58 2003 5.67 35319 0.47

2 Himachal Pradesh 28571 53.79 5955 11.21 18587 35.00 53113 0.71

3 Punjab 32156 78.58 3483 8.51 5280 12.90 40919 0.55

4 Jammu & Kashmir 3828 68.74 596 10.70 1145 20.56 5569 0.07

5 Rajasthan 103817 44.41 61937 26.49 68039 29.10 233793 3.13

6 New Delhi 3015 97.42 - - 80 2.58 3095 0.04

7 Chandigarh 964 100.00 - - - - 964 0.01

Total 192748 51.71 64890 22.77 95134 25.52 372772 5.00

B. North Eastern Region 1 Assam 84597 34.51 136642 55.74 23881 9.74 245120 3.28

2 Meghalaya 8484 79.64 2169 20.36 - - 10653 0.14

3 Nagaland 5646 57.23 625 6.33 3595 36.44 9688 0.13

4 Tripura 10979 32.00 17644 51.42 5689 16.58 34312 0.46

5 Arunachal Pradesh 5822 82.24 1050 14.83 207 2.92 7079 0.09

6 Mizoram 1837 40.00 2085 45.41 670 14.59 4592 0.06

7 Manipur 5027 48.78 5279 51.22 - - 10306 0.14

8 Sikkim 2212 78.69 - - 599 21.31 2811 0.04

Total 124604 38.37 165494 50.96 34641 10.67 324739 4.35

C Eastern Region 1 Bihar 109840 44.26 138357 55.74 - - 248197 3.33

2 Jharkhand 58331 66.89 28874 33.11 - - 87205 1.17

3 Orissa 243965 46.81 199679 38.31 77508 14.87 521152 6.98

4 West Bengal 324200 48.66 190403 28.58 151711 22.77 666314 8.93

5 A & N Islands 1180 24.84 3570 75.16 4750 0.06

Total 737516 48.28 557313 36.48 232789 15.24 1527618 20.47

D Central Region

1 Chhattisgarh 45660 38.64 50686 42.89 21821 18.47 118167 1.58

2 Madhya Pradesh 81667 53.09 57870 37.62 14280 9.28 153817 2.06

3 Uttarakhand 23242 52.47 10270 23.19 10783 24.34 44295 0.59

4 Uttar Pradesh 205734 43.76 255508 54.35 8915 1.90 470157 6.3

Total 356303 45.31 374334 47.60 55799 7.10 786436 10.54

E Western Region 1 Goa 4985 62.89 - - 2941 37.11 7926 0.11

2 Gujarat 111708 57.93 50625 26.25 30501 15.82 192834 2.58

3 Maharashtra 420259 55.29 52685 6.93 287217 37.78 760161 10.19

Total 536952 55.88 103310 10.75 320659 33.37 960921 12.88

F Southern Region

1 Andhra Pradesh 1041184 71.01 401730 27.40 23311 1.59 1466225 19.65

2 Karnataka 219667 38.91 164100 29.07 180778 32.02 564545 7.57

3 Kerala 390242 79.10 40851 8.28 62254 12.62 493347 6.61

4 Lakshadweep 164 100.00 - - - - 164 0

5 Tamil Nadu 704598 74.71 88789 9.41 149711 15.87 943098 12.64

6 Pondicherry 19495 88.29 2586 11.71 - - 22081 0.3

Total 2375350 68.07 698056 20.00 416054 11.92 3489460 46.76

Grand Total 4323473 57.94 1983397 26.58 115076 1.54 7461946 100

Note: Row Percentage, “Column Percentage”

Comm. Banks = Commercial Banks; Reg. Banks = Regional Rural Banks; Coop. Banks = Cooperative Banks Sources: NABARD, Mumbai





Table-4: New SHGs Financed by Banks during the Year

Year Number (Lakh) Amount (Rs. Crore) Growth (%)

2007-08 12.28 8,849.26 --

2008-09 16.09 12.256.51 38.50

2009-10 15.87 14,453.30 17.90

2010-11 11.96 14,547.73 0.65


Table-5: Overall progress under SHG-Bank Linkage-SHG Savings with Banks during 2008-09, 2009-10 and 2010-11

(Amount Rs. in Crore / Numbers in Lakh)


Tabe-6: Overall Progress under SHG-Bank Linkage-Loans Disbursed to SHGs during 2008-09, 2009-10 and 2010-2011

(Amount Rs. in Crore / Numbers in Lakh)


Table-7: Agency wise NPAs of Bank Loans of SHGs






Table-8: Overall Progress under SHG Bank Linkage-Loans Outstanding against SHG

During 2008-09, 2009-10 and 2010-11

(Amount Rs. in crore/Numbers in lakh)


Table-9: Agency Wise NPAs of Bank Loans to SHGs

(Rs. in Crores)


Table-10: Bank Loans Outstanding Against SHG Agency-Wise Position during Years 2006-07 to 2010-11

Sources: Status of Microfinance in India 2006-07 to 2010-11

*****





FDI - ENVIRONMENT NEXUS IN INDIA

Gopal Ji Singh25

ABSTRACT

This paper takes an attempt to find out the Foreign Direct Investment (FDI)-Environment Nexus in India for the period 1980-

2009. The unit root test analysis shows that the variables are non-stationary at level but after taking the first difference, they

are stationary. The co-integration analysis is applied to examine long-run relationships among foreign direct investment (FDI),

economic growth, and the CO2 in India for the period 1980-2009. However, FDI inflow in India is found to have a detrimental

effect on environmental quality in long run, for supporting pollution haven hypothesis. Finally, it is found that, in the end the

FDI, GDP, and CO2 are co-integrated and they are long run associated to each other.

KEYWORDS

Unit Root Test, Co-integration, FDI, GDP, CO2 etc.

INTRODUCTION

Economic development through rapid industrialization and growing environmental consciousness together has generated a heated

debate on how economic development is linked with environment. Thus, linkage between environmental quality and economic

development evoked much discussion in 1990’s. This linkage has evoked a question “whether cross border integration

(globalization) help or hurt this economic development process.” It has been observed that impact of globalization on environment

depends on characteristic of economy. The basic characteristic of country and its dominating comparative advantage determine

how trade liberalization affects its structural composition and consequently environmental outcome.

Trade has mainly three effects i.e. Scale effect, composition effect and technique effect. Scale effect and environmental quality

have negative relationship. The scale effect comprises, as increasing trade volume (export) would expand the size of economy,

thereby increasing extent of pollution.

Some economists have argued that trade is not main cause of environmental damage (Bridsoll and Wheeler 1993, Lee and Roland

Hust 1997, Jones et.al.1995) Antweiler et.al. (2001) and Liddle (2001) argue that trade may be good for environment. Trade may

improve environmental quality through technique effect. As income increases environmental regulation is tightened and it induces

for pollution reducing innovations. However, trade links one country to other countries through export and import. An UDC may

depend on technology transfer through FDI that may reduce pollution level. Poor countries may be able to improve their

environmental quality as investment raises their income level. Thus, globalization may facilitate pollution reduction.

Polluting activity in a high-income country normally faces higher regulatory costs than its counterpart in developing country

(Mani and Wheeler, 1998). Under these conditions pollution intensive industries have a natural tendency to migrate to the

countries with lax environmental regulations (Coopland and Taylor, 1995). This is known as PHH. PHH is possibility that a

polluting industries concentrate in developing countries with low environmental standards.

POLLUTION HAVEN AND CAPITAL INFLOW

Over the last few decades, developing countries have emerged as net exporters of dirty goods and on other hand, developed

countries as net importers of dirty goods. It means, there is a migration of dirty industries from developed to developing countries

because of their low environmental standards.

Capital flight and displacement of dirty industries can be explained by differences in environmental standards across developed

and developing countries. In developed countries the awareness and demand for better environment is high as it is related to

income level, so cost of operation of dirty industries in these countries is high. However, in developing countries, there is high

preference for faster output growth. Therefore, there is loose implementation of environmental standards. As because of low per

capita income level, there is low preference for better environmental qualities. There is low political pressure on local

governments to raise environmental standards. Therefore, capital finds better and reliable returns in developing countries than

developed countries. This is the basic reason for capital flight hypothesis.

Pollution haven hypothesis (PHH) is extension of capital flight hypothesis. PHH states that developing countries keep their

environmental standards low to attract FDI. It means developing countries choose to remain pollution haven for dirty industries by

25Research Scholar, Department of Economics, Banaras Hindu University, Uttar Pradesh, India, [email protected]






ignoring environmental regulations. Further, this weak environmental standard in developing countries establishes comparative

advantage in production of dirty goods and enables them to export dirty goods.

This PHH states that generally MNCs try to established their pollution intensive productive units to developing countries, which

have low environmental standards. Thus, developing countries will have a comparative advantage in dirtier goods. In addition,

becomes “Haven” for polluting industries. Thus, it is said that developed countries will lose all polluting industries and developed

countries will get at all because of low environmental standards. Another fact for this displacement hypothesis is differences in

consumer preferences. In developed countries, consumers prefer cleaner environment but in poor countries, consumers prefer

dirtier environment as there is less awareness about environmental quality among people.

DATA SOURCE AND METHODOLOGY

In this paper, we have taken data form world development indicator and the data are covering the period 1980-2009. Data are

taken from WDI and RBI .In this paper; we have used Augmented-Dickey fuller test to check stationary and Johansen’s Co-

integration test for analysis of long run or short run relationship.

EMPIRICAL EVIDENCES OF FDI-ENVIRONMENT NEXUS IN INDIA

Table-1: Unit Root Test (ADF Test)

Level First difference

Variables t Statistics K** t Statistics* K**

CO2 -1.250815 1

FDI -0.365882 1

GDP 1.356801 1

-3.337660 1

-5.522502 1

-4.900900 1


Note: *Statistically Significant at 5% Level

**The optimal lags (k) for conducting the ADF test were determined by AIC

(Akaike Information Criteria).

In Table-1 all the variables CO2, FDI, GDP are non -stationary at level but stationary at first difference. Therefore, Johansen’s co-

integration method can be applied.

Table-2: Johansen’s Test for Multiple Co-integration Vectors (Trace statistics)

GDP

Hypothesis Trace Statistics .05 Critical Value P Value

None 18.86349 15.49471 0.0149*

At most 1 1.743054 3.841466 0.1868


Note: *Statistically Significant at 5% level

Table-3: Johansen’s Test for Multiple Co-integration Vectors (Maximum Eigen Statistics)

GDP

Hypothesis Max. Eigen Statistics .05 critical Value P value

None 17.12043 14.26460 0.0172*

At most 1 1.743054 3.841466 0.1868



From Table (2) and Table (3), it is clear that null hypothesis NONE is rejected at 5% level of significance as P value is lesser than

5%. Both trace and maximum Eigen value test statistic result shows that there is one co-integrating equation at 5% level. It

means variables have long run association. It also shows that GDP, and FDI have long run relationship and if any disequilibrium

in long run must be explained by the short run model which is known as Vector Error Correction Model.





Table-4: Johansen’s Test for Multiple Co-integration Vectors (Trace statistics)

CO2

Hypothesis Trace Statistics .05 Critical Value P Value

None 30.16830 29.79707 0.0453*

At most 1 8.022516 15.49471 0.4630



Table-5: Johansen’s Test for Multiple Co-integration Vectors (Max. Eigen Statistics)

CO2

Hypothesis Max. Eigen Statistics .05 Critical Value P Value

None 22.14578 21.13162 0.0359*

At most 6.368612 14.26460 0.5664



From Table (4) and Table (5), it is clear that null hypothesis NONE is rejected at 5% level of significance as P value is lesser than

5%. Both trace and maximum Eigen value test statistic result shows that there is one co-integrating equation at 5% level. It

means variables have long run association. It also shows that CO2, FDI and GDP have long run relationship and if any

disequilibrium in long run must be explained by the short run model, which is known as Vector Error Correction Model

CONCLUSION

This paper tries to explore the relationship between Foreign Direct Investment and Environment in India for the period 1980-

2009. The unit root test results shows that variables are non-stationary at level but after taking the first difference they are

stationary. The Johansen’s Test results shows that there are long run relationship between the variables in the both the test

statistics.

REFERENCES

1. Acharyya, J. (2009). FDI, Growth and the Environment: Evidences from India on CO2 Emissions during the last two

decades. Journal of Economic Development, 34(1), 43-57.

2. Agras, J., & Chapman, D. (1999). A dynamic approach to the Environmental Kuznets Curve hypothesis. Ecological

Economics, 28(2), 267 - 277.

3. Busse, M. (2004, July). Trade, Environment Regulations and the World trade Organization: New Empirical Evidence

(Working Paper 3361). World Bank Policy Research.

4. Copeland, B. R., & Taylor, M. S. (2004). Trade, Growth and the Environment. Journal of Economic Literature, XLII,

7–71.

5. Dietzenbacher, Erik, & Mukhopadhyay, Kakali. (2007). An empirical examination of the pollution haven hypothesis for

India: Towards a green Leontief Paradox? Environmental and Resource Economics, 36(4), 427-449.

6. Eskeland, G. S., & Harrison, A. E. (2003). Moving to greener pastures? Multinationals and the pollution haven

hypothesis. Journal of Development Economics, 70(1), 1-23.

7. Levinson, A. (1996). Environmental Regulations and Manufacturers. Journal of Public Economics, 63, 5-29.

8. Leonard, H. J., & Duerksen, C. J. (1980). Environmental Regulations and the Location of Industry: An International

Perspective. Columbia Journal of World Business, 52-68.

9. List, J. A., & C. Y. Co. (2000). The Effects of Environmental Regulations on Foreign Direct Investment. Journal of

Economics and Environmental Management, 40(1), 1-20.

10. Mani, M. & Wheeler, D. (1998). In search of pollution havens? Dirty industry in the world economy: 1960 – 1995.

Journal of Environment and Development, 7(3), 215 - 247.





11. Mukhopadhyay, K., Chakraborty, D., & Dietzenbacher, E. (2005). Pollution Haven And Factor Endowment Hypotheses

Revisited: Evidence from India. In Proceeding of the Fifth International Input-Output Conference at Renmin

University in Beijing, China, during June 27 – July 1.

12. Mukhopadhyay, Kakali. (2006). Impact on the Environment of Thailand’s Trade with OECD Countries. Asia-Pacific

Trade and Investment Review, 2(1), 25-46.

13. Suri, V., & Chapman, D. (1998). Economic growth, trade and the energy: Implications for the environmental Kuznets

curve. Ecological Economics, 25, 195-208.

14. Smarzynska, B., & S-J Wei. (2004). Pollution Havens and Foreign Direct Investment: Dirty Secret or popular myth?

Contributions to Economic Analysis & Policy. The B.E. Journals in Economic Analysis & Policy, 3(2), Article 8.

15. Xing, Y., & Kolstad, C. (1998). Do lax Environmental Regulations attract Foreign Investment? [Monograph]. Santa

Barbara: University of California.

16. Waldkrich, A., & Gopinath. (2004). Pollution Haven or Myth? New Evidence from Mexico’ International Trade

0412005 (Economics Working Paper Archive at WUSTL 1-34.

17. Retrieved from

http://www.researchgate.net/publication/228451986_Globalization_and_Environment_Can_Pollution_Haven_...

18. Retrieved from

http://www.researchgate.net/publication/23507361_A_Dynamic_Approach_to_the_FDI-Environment_Nexus_The...

19. Retrieved from http://ageconsearch.umn.edu/bitstream/6508/2/467514.pdf


*****





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MODEL DEVELOPMENT FOR KEY ENABLERS IN ENHANCEMENT

OF EFFECTIVE COMPLIANCE OF SERVICE TAX PROVISIONS

K. Hema Malini26 Dr. V. Balachandran27

ABSTRACT

Fostering voluntary compliance on part of every taxpayer has become the key administrative approach for both direct and

indirect taxation in developed countries including the USA, UK and Australia. This approach emphasizes the taxpayers’

responsibility to report their income and the need for them to determine their own tax liability. This requires the development

of public awareness of tax laws, acquaintance with adequate tax knowledge and improvements in voluntary compliance

together with careful consideration in designing appropriate and effective tax systems. The objective of the study is to

investigate how facilitating factors interact in the enhancement of effective tax compliance of the taxpayers in meeting their

tax liability. With a more focus in the context of developing country, the study emphasis on the key enablers that tend to

increase the compliance mechanism with particular reference to service tax in India. The study was limited to Madurai District

of Tamil Nadu with a sample survey of 350 service tax assesses. Structural Equation Modeling was used in assessing the

impact of the key factors in enhancement of effective tax compliance of service tax provisions.

KEYWORDS

Service Tax, Tax Liability, Tax Compliance, Key Enablers, Structural Equation Modeling etc.

INTRODUCTION

Achieving high levels of voluntary tax compliance and/or maintaining current compliance rates as well as increasing the marginal

levels are issues of concern to fiscal policy makers in developed and developing countries alike. This is the case because,

irrespective of the nature of the economy, the principal objective of taxation is the same: to raise revenue towards the financing of

public goods and services, and funding of governments. Indeed taxes are a major part of the means through which monetary

resources are mobilized by governments for the prosecution of projects and programmes. These projects and programmes are

usually undertaken with the view to provide varied services to the citizens ranging from road infrastructure, internal security, and

protection against external aggression, sewage services, and disaster management and to the new phenomenon of counter

terrorism.

India being a developing country, with a view to increase its Gross Domestic Product and to keep in pace with its counterpart

countries, attempted to tap the new areas of taxation from which emerged taxing on services. Service tax was implemented in

India through the Finance Act, 1994 on three mere services namely, telephone, stock broking and non-life insurance service at a

uniform rate of 5%. With this modest beginning in view of the predominant role played by service tax in India, the number of

services increased year after year form 3 services to 120 categories of services and the rate of service tax also witnessed a rapid

rise from 5% to 12.36%. Today taxation on services cover wide range of activities such as management, banking, insurance,

hospitality, consultancy, communication, administration etc. and is occupying the centre stage of the Indian economy.


Abubakari Abdul, Razak, and Christopher Jwayire Adafula (2013) in their study evaluated taxpayers’ attitude and its effects

on tax compliance decisions in Tamale – Ghana. Three major factors were hypothesized and tested. These were perception of

burden of tax, respondents’ level of understanding of the tax laws and respondents’ perceptions of governments’ accountability.

The results indicated that, individuals are highly concerned with the amount of taxes they pay. The rates of income taxes in Ghana

are generally perceived to be high. Furthermore, the burden of taxes paid affects the attitudes of individuals, which showed how

they evaluate the tax system and consequently their compliance decisions.

Mohd Rizal Palil et al (2013, June) in their paper exhibits the role of religiosity in the relationship between tax education and tax

knowledge towards tax compliance. For the purpose of the study, they surveyed 70 working adults pursuing MBA program in a

Malaysian public university. Three variables were used in the study: tax awareness (education, knowledge), tax compliance and

religiosity. The result of study revealed that the respondents’ tax compliance was lower compared to their education and

knowledge towards tax. The results of the study suggested that religious values play a very important role to make the taxpayers

liable for tax compliance. Moral and ethical values distinguish each offense towards non-tax compliant as a sin and should be

avoided.

26Research Scholar, Corporate Secretaryship, Alagappa University, Tamil Nadu, India, [email protected] 27Professor & Head, Department of Corporate Secretaryship, School of Management, Alagappa University, Tamil Nadu, India,

[email protected]







Clifford, G., Machogu, and Jairus, B (2013, August) sought to establish in their study the effect of taxpayer education on

voluntary tax compliance, among Small and Micro-Enterprises (SMEs) in Mwanza City - Tanzania. Specifically, the study

establishes the level of taxpayer education among SMEs, the level of voluntary tax compliance among the SMEs and the effect of

taxpayer education on the level of voluntary tax compliance, among entrepreneurs in Mwanza City.

OBJECTIVES OF STUDY

The study is undertaken with the objectives given below:

To study the demographic profile of the service tax assesses in Madurai District.

To identify the determinants that influence in fostering effective compliance of service tax provisions.

To examine the usefulness of the model in assessing effective compliance mechanism.

To evaluate whether all the measures fit the recommended value, indicating a good fit of the structural model for the

collected data.

METHODOLOGY USED

Data Collection and Sample Size

The present study is confined to the Service Tax assesses of Madurai District in the State of Tamil Nadu with a sample survey of

350 respondents. The primary data were collected through a structured interview schedule, which was administered to service tax

assesses considered for the study. The questionnaire is divided into two parts: the first part comprised the demographic profile of

the respondents. The second part of the questionnaire dealt with the enablers that influenced in increasing the compliance

mechanism of service tax provisions. The primary data were supported by the secondary data collected from various books,

journals, research articles, company websites, magazines, newspapers and other publications.

Data Analysis

Collected data were analyzed with the help of software package SPSS and Analysis of Moment Structure (AMOS) 16. Statistical

techniques like those that descriptive analysis is used to explore the demographic profile of the service tax assesses considered for

the study. Structural equation modeling (SEM) is used for data analysis.

RESULTS AND DISCUSSION

Profile of the Respondents

This section presents information about the demographic characteristics of the respondents in terms of gender, age, formal

education, years of experience, locality of the business, jurisdiction, annual turnover of the business and service tax paid by the

assesses as on 31st March, 2014. Table-1 illustrated below depicts the demographic profile of service tax assesses considered for

the study.

Table-1: Demographic Profile of Service Tax Assesses (n=350)

S. No. Characteristics Categories Number of

Respondents

Percentage

to Total

1 Gender Male 267 76.3

Female 83 23.7

2 Age Below 30 years 45 12.9

30- 40 years 103 29.4

41-50 years 115 32.9

Above 50 years 87 24.9

3 Educational Qualification HSC/Diploma 11 3.1

Under Graduate 125 35.7

Post Graduate 153 43.7

Tax Professional 61 17.4

4 Type of Ownership Proprietorship 135 38.6

Partnership 77 22.0

Trust 14 4.0

Company 124 35.4

5 Years of Experience Below 5 years 74 21.1

6-10 years 127 36.3





11-15 years 71 20.3

16-20 years 48 13.7

Above 20 years 30 8.6

6 Locality of Business Urban 283 80.9

Semi Urban 67 19.1

Rural 0 0.0

7 Jurisdiction Madurai Division I 237 67.7

Madurai Division II 113 32.3

8 Annual turnover of the Business as on 31st

March, 2014

Below 1 Crore 201 57.4

1 Crore -5 Crores 64 18.3

5 Crores-15 Crores 54 15.4

Above 15 Crores 31 8.9

9 Service Tax paid on 31st March, 2014 Below 10 Lakhs 238 68.0

10 Lakhs -25 Lakhs 68 19.4

25 Lakhs -50 Lakhs 30 8.6

Above 50 Lakhs 14 4.0

Sources: Primary Data

As summarized from table-1, elicited as above, out of 350 service tax assesses 76.3% were male and 23.7% were female

respondents. Men draw a high level of participation in engagement of service rendering business than female.

With regard to the age group of respondents, 32.9% of the respondents were between 41-50 years of age, followed by 29.4% of

the respondents in the age group of 30-40 years. Respondents below 30 years of age witnessed a low percentage share of

participation with 12.9% followed by 24.9% participation of respondents in the age group of above 50 years.

As presented in the above table most of the respondents have good academic qualification, where 153 respondents constituting

43.7% were post graduates and 35.7% (125) of the respondents were under graduates followed by 61 (17.4%) tax professionals of

the total respondents. Only 11 respondents with 3.1 % had low level of education including diploma or secondary level.

With reference to type of ownership of business held by the respondents, 135 (38.6%) of the respondents were proprietors

followed by 124 with 35.4% of the respondents from company registered form of business. Only 14 respondents with 4.0% were

from trust ownership, which forms a least score in the total level of participation followed by 77 respondents from partnership

form of business with percentage of 22.0% of the total respondents.

The collected data reveals that in terms of years of experience, 36.3% of the respondents have been operating their business for 6-

10 years. Respondents having experience below 5 years and 11-15 years were observed with more or less equal share of

percentage of 21.1% (74) and 20.3% (71) respectively. Only few respondents gaining experience for about 16-20 years (48

respondents) and above 20 years (30 respondents) were witnessed with 13.7% and 8.6% respectively of the total respondents

considered for the study.

As far as the locality of the business is considered, since Madurai District is a combination of semi-urban area the entire

respondents considered for the study where from urban and semi- urban place constituting 283 (80.9%) and 67 (19.1%)

respondents respectively of the total share of the respondents.

With respect to jurisdiction of the service tax assesses, 244 respondents belong to Madurai Division – I with a percentage share of

69.7% of the total respondents. Madurai Division – II comprised of 106 (30.3%) respondents.

The annual turnover of the service tax assesses extracted from the business revealed that majority of the assesses’ annual turnover

were below 1 crore comprising of 201 (57.4%) respondents, followed by 64 respondents (18.3%) in the range between 5-15

crores. Only 8.9% (31) of the respondents were generating annual turnover of more than 15 crores from their business operation.

With regard to the amount of service tax paid by the assesses to the Central Excise department, from the above table it could be

observed that majority of the service tax assesses (68%) pay service tax below 10 lakhs, followed by 68 respondents with 19.4%

paying service tax between 10-25 lakhs. Only 4.0% (14 respondents) of the total respondents are large taxpayers in paying service

tax of above 50 lakhs of the total service tax assesses.

STRUCTURAL EQUATION MODEL (SEM)

Structural equation modeling (SEM) is a statistical modeling technique that combines factor analysis and multivariate multiple

regressions (Hair, J.F et al 2006). Structural equation provides estimation of multiple, interrelated dependence relationship, and

the capacity to stand for unobserved concepts in these association and explanation for measurement error in the estimation





process. The primary aim of SEM is to explain the model of a sequence of inter-related dependence associations simultaneously

among a set of dormant (unobserved) constructs, each measured by one or more manifest (observed) variables. SEM is a

multivariate technique, which combines Confirmatory Factor Analysis (CFA) modeling from psychometric theory and structural

equations modeling Yu-Kai H. (2009).

In order to recognize a right model for the sample data, fit indices have no single statistical test of significance. There are number

of goodness of fit (GOF) indices that decides the fitness of the model. Thus, “fit should be evaluated from the standpoint of

numerous fit statistics” Schumaker, R.E., and Lomax, R.G. (1996). The overall fit measures, the Goodness-of-Fit statistic

(GFI), Adjusted Goodness-of-fit statistic (AGFI), Root Mean squared residual (RMR), and the Normed Fit Index (NFI), are all

useful measures in assessing the quality of the hypothesized measurement model Bentler, P.M., and Bonnet, D.C. (1980).

Absolute fit indices determine how well a priori model fits the sample data.

For further analysis of the sample data considered for the study, Structural Equation Modeling was used to analyze the suitability

of the model based upon the collected samples. As discussed earlier the Structural Equation Model (SEM) is most useful when

assessing the causal relationship between variables as well as verifying the compatibility of the model used Peter, T. (2011). The

variables recognized in setting up a SEM is discussed as under.

Variables used in the Structural Equation model

The Structural Equation path model was built to find the impact of six selected enablers namely, ‘Awareness level of Service Tax

Assesses’, ‘Education on Service tax related areas’, ‘Knowledge on service tax’, ‘Attitudes of service tax assesses and

‘Administrative measures undertaken by the service tax department’ on ‘Effective compliance of service tax provisions’.

There are two endogenous variables or dependent variables. The first endogenous variable ‘Knowledge on Service Tax’ is

depended on two enablers or independent variables namely ‘Awareness level of Service Tax Assesses and ‘Education on Service

tax related areas’. The second endogenous variable or the key objective of the research work is ‘Compliance of service tax

provisions’ which relies on three selected enablers namely ‘Attitudes of service tax assesses’, ‘Administrative measures’ and

‘Knowledge on service tax’(which itself is an endogenous variable). The details of the variables identified for the path model is

enumerated as under:

Observed, Endogenous Variables

Service Tax Knowledge (Qn.12-Factors1-8).

Effective Compliance of Service Tax Provisions (Qn.15- Factors 1-43).

Observed, Exogenous Variables

Awareness towards Service tax related Rules and Provisions (Qn.10- Factors 1-14).

Education on Service Tax related areas (Qn.11- Factors 1-8).

Attitudes of Service Tax Assesses (Qn.13 –Factors1-12).

Administrative measures undertaken by the Service tax Department (Qn.14- Factors1-10).

Unobserved, Exogenous Variables

e1: Error term for Service Tax Knowledge.

e2: Error term for Effective Compliance of Service Provisions.

The number of variables used in the SEM is summarized in table 2 laid as under:

Table-2: Number of Variables used in SEM

Variables Number

Number of variables in this model 8

Number of observed variables 6

Number of unobserved variables 2

Number of exogenous variables 6

Number of endogenous variables 2

Sources: Primary Data

Path Loadings of the Model

In the structural model, path loading represents the predictive links among the constructs. It shows significant relationship fit

between the variables and its indicators. The path loadings of the model is depicted in figure 1 indicated below.





Figure-1: Effective Compliance of Service Tax Provisions Structural Model


From the SEM path model displayed above, based on the sample survey undertaken for the study, it could be affirmed that the

model develops as an instrument in enhancing effective compliance of service tax provision by the assesses in Madurai District.

The arrow leading form the three enablers to Effective compliance of service tax provisions indicates that these enablers serve as

the key factors in influencing the compliance mechanisms of service tax provisions by the assesses, where due focus on these

enablers tend to reduce the difficulties faced by the service tax assesses in compliance of the tax provisions. The double-headed

arrows in the path diagram that connects the four enablers, specifies that these enablers may be correlated with each other.

The impact of the selected enablers depicted in the path model on effective compliance of service tax provisions is summarized in

Table 3 shown as under.

Table-3: Variables in the Structural Equation Model Analysis

Variables Unstandardized

Co-efficient

Standard

Error

Standardized

Co-efficient

Critical

Ratio

P value

Service Tax

Knowledge <--

Service Tax

Awareness .311 .025 .507 12.555 <0.001**

Service Tax

Knowledge <---

Service Tax

Education .251 .030 .333 8.299 <0.001**

Effective Compliance

of Service Tax

Provisions

<---

Attitudes of

Service Tax

Assesses

-1.037 .047 -.677 -22.218 <0.001**


of Service Tax

Provisions

<---

Administrative

Measures -.588 .106 -.198 -5.553 <0.001**


of Service Tax

Provisions

<---

Service Tax

Knowledge -.818 .168 -.268 -4.867 <0.001**

Source: Primary Data

Note: **Denotes significant at 1% level

From the above table it could be inferred that the coefficient of Service Tax Awareness is 0.311, which represents the partial

effect of influence towards Knowledge on Service tax, holding the other variables as constant. The estimated positive sign implies

that such effect has a positive impact on attainment of service tax knowledge, which would increase by 0.311 for every unit

increase in awareness level of service tax assesses at 1% level of significance. The coefficient of service tax education with 0.251

has similar partial positive effect in acquaintance of service tax knowledge at 1% level of significance.

The coefficient of attitude of service tax assesses is -1.037 which represents negative partial effect on the problems faced in the

compliance mechanism of service tax provisions, holding the other variables as constant. The estimated negative sign implies that

increase in such effect would lead to a decrease by 1.037 for every unit in the difficulties faced by the service tax assesses in

compliance of their service tax provisions at 1% level of significance. Similar situations could also be observed by the other two

key enablers namely coefficient of Administrative measures with -0.588 and coefficient of Service tax knowledge with -0.818

on Compliance of service tax provisions at 1% level of significance.





Hence the above table vividly brings to light that more attention on these three enablers namely ‘Attitudes of service tax assesses’,

‘Administrative measures’ and ‘Service tax knowledge’ along with ‘Service tax awareness’ and ‘Service tax education’ would

definitely serve as a solution in minimizing the difficulties or problems faced by the service tax assesses in compliance of their of

their service provisions, thereby leading to effective compliance of service tax provisions. The probability levels indicated that the

five key enablers are statistically significance at 0.01 levels and it showed that the relationship among the variables fitted with the

model.

Overall Model Fit

The last step is to test the model fit. The overall goodness-of-fit is assessed to assure that the model is correctly specified.

Structural equation modeling evaluates whether the data fit a theoretical model. In order to evaluate the model, emphasis was

given to Chi-square/degrees of freedom (x2/d.f.), Comparative Fit Index (CFI), Goodness-of-Fit Index (GFI), Adjusted Goodness-

of-Fit Index (AGFI), Normed Fit Index (NFI), Root Mean Square Error of Approximation (RMSEA) and Root Mean Square

Residuals (RMR). The model fit determines the degree to which the sample data fits the structural equation model.

The chi-square test is considered as an absolute test of model fit. If the probability is below 0.05, the model is accepted. The other

measures of fit are descriptive. The smaller the value of RMSEA, the better the fit is. GFI varies from 0 to 1 and value greater than

0.90 indicates a good fit. AGFI is a variant of GFI, which uses mean squares instead of total sums of squares in the numerator and

denominator of 1. The AGFI varies from 0 to1. NFI values vary from 0 to 1, if NFI value is equal to 1 it resembles a perfect fit.

CFI close to 1 indicates a very good fit and values above 0.90 are considered to be an acceptable fit Ritika Saini (2013).

Goodness-of-fit measures and their acceptable levels for structural equation model are exhibited in Table 4.

Table-4: Model Fit Summary

Fit Indices Value Suggested Value

Chi-square value 6.614 -

P value (Probability Value) 0.085 >0.05

GFI ( Goodness-of-Fit Index) 0.970 >0.90

AGFI ( Adjusted Goodness-of-Fit Index) 0.938 >0.90

CFI ( Comparative Fit Index) 0.971 > 0.90

NFI ( Normed Fit Index) 0.969 >0.90

RMR (Root Mean Square Residuals) 0.039 < 0.08

RMSEA (Root Mean Square Error of Approximation) 0.073 < 0.08

Sources: Primary Data Computed

The above table throws to light that the calculated P value is 0.085, which is greater than 0.05, which indicates perfectly fit. Here

GFI (Goodness of Fit Index) value and AGFI (Adjusted Goodness of Fit Index) value is greater than 0.9 which represent it is a

good fit. The calculated CFI (Comparative Fit Index) is close to 1 and greater than 0.90 which means that the model is a perfectly

fit model and also it is found that NFI (Normed Fit Index) value is 0.969 which is greater than 0.90 which also signifies the model

to be a fit model it could be also observed that the RMR (Root Mean Square Residuals) and RMSEA (Root Mean Square Error of

Approximation) value is 0.039 and 0.073 which is less than 0.10 which indicate a good absolute fit of the model. Goodness of fit

indices support the model fit and these emphasized indices indicate the acceptability of this structural model.

CONCLUSION

The aim of this research was to carry out an empirical analysis in identifying the factors which could serve as key enablers in

reducing the problems or difficulties faced by the service tax assesses in meeting their tax liability by the using a structural

equation modeling. This study affirms that the awareness level of the service tax assesses and gaining tax education on service tax

related areas could create positive impact in acquiring knowledge on service tax which in turn leads in minimizing the difficulties

faced in the compliance mechanism together with attitudes of service tax assesses and effective administrative measures that play

a critical role in enhancing effective compliance of service tax provisions. Thus, the study provides an indicator for tax

administrators of the relative importance of tax knowledge in assisting with the design of tax education programmes, simplifying

tax systems and developing a wider understanding of taxpayers' behaviour. The research attempts in contributing to current global

literature in this field of the relative importance of key enablers in affecting tax compliance, which could make people, pay taxes

in a self-assessment system that would invariably lead in increasing voluntary compliance for further enhancement of service tax

revenues to the government.

REFERENCES

1. Abubakari, Abdul, Razak., & Christopher, J. A. (2013, September). Evaluating taxpayers’ attitude and its influence on

tax compliance decisions in Tamale, Ghana. Academic Journal, 5(3), 48-57.





2. Anderson, J. G., & Gerbing, D. W. (1988). Structural Equation Modeling in Practice: A Review Two Step Approach.

Psychol. Bull, 103, 411- 423.

3. Bentler, P. M., & Bonnet, D. C. (1980). Significance Tests and Goodness of Fit in the Analysis of Covariance

Structures. Psychol. Bull, 88(3), 588-606.

4. Clifford, G. Machogu, & Jairus, B. (2013, August). The effect of taxpayer education on voluntary tax Compliance,

among SMES in Mwanza city- Tanzania. International Journal of Marketing, Financial Services & Management

Research, 2(8),47-49.

5. Diana, D. S. (2006, March 26-29). Exploratory or Confirmatory Factor Analysis Paper No. 200-31. In SUGI 31

Proceedings. California: San Francisco.

6. Hair, J. F., Anderson, R. E., & Tantham, R. L. (2006). Multivariate Data Analysis (10th Edition). New Jersey: Prentice

Hall.

7. Palil., Mohd Rizal, Mohd, Rusyidi Md Akir, & Wan, Fadillah Bin Wan Ahmad. (2013, June). The Perception of Tax

Payers on Tax Knowledge and Tax Education with Level of Tax Compliance: A Study the Influences of Religiosity.

ASEAN Journal of Economics, Management and Accounting, 1(1), 118-129.

8. Peter, T. (2011). Adoption of Mobile Money Technology: Structural Equation Modelling Approach. Eur. J. Bus.

Manage., 3(7).

9. Saini, Ritika. (2013). Model Development for Key Enablers in the Implementation of Knowledge Management. The

IUP Journal of Knowledge Management, XI/2, 47-61.

10. Schumaker, R. E., & Lomax, R. G. (1996). A Beginner’s Guide to Structural Equation Modeling, Lawrence Erlbaum

Associates. Mahwah, NJ.

11. Yu-Kai, H. (2009). The Effect of Airline Service Quality on Passengers Behavioral Intentions Using SERVQUAL

Scores, A TAIWAN Case Study. J. Eastern Asia Soc. Transport. Stud., 8, 4-5.

12. Retrieved from http://etheses.bham.ac.uk/1040

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PRICE EARNINGS RATIOS AND STOCK RETURNS:

A STUDY WITH REFERENCE TO BSE LISTED STOCKS

Prathibha Shetty28 Dr. Kushalappa S.29

ABSTRACT

The present study focuses on the impact of P/E ratio on the performance of the stocks in the stock market. The study attempts

to identify the correlation between the P/E ratio of the company and their performance in the stock market. The sample is

selected from the BSE listed companies and the study is purely based the secondary data. The study period is 2019-10 to

2013-14.

KEYWORDS

Announcement, Earnings, Returns, Stock etc.

INTRODUCTION

Information level is one of the most important factors, which determine financial market efficiency. If the market is efficient, there

is no scope for an investor to make abnormal profit. Since it is inefficient, investors are able to make profit by depending upon the

publicly available information. Publicly available information includes internal and information related to a company. One such

publicly available information is the market based financial ratios. Investors can forecast the real value of stocks by using market

based ratios such as price to earnings ratio, earnings per share etc. The price to earnings ratio (PE Ratio) is the measure of the

share price relative to the annual net income earned by the firm per share. PE ratio shows current investor demand for a company

share. A high PE ratio generally indicates increased demand because investors anticipate earnings growth in the future.

OBJECTIVES OF STUDY

The main objective of the study is to analyze the impact of PE ratio on stock returns. The specific objectives are:

To study the relationship between the P/E ratio and Stock returns.

To evaluate the performance of portfolios constructed based on PE ratio.

To determine empirically whether the investment performance of common stocks is related to their P/E ratios.

To offer meaningful suggestions to the investors based on the study.

SCOPE OF STUDY

The study examines the impact P/E ratios on stock returns. Six portfolios are constructed based on the P/E ratios of the companies.

Based on the P/E ratio, five companies are selected randomly for each portfolio. The study period is from 2009-10 to 2013-14.

METHODOLOGY USED

The study is purely based on secondary data collected various source like, books and websites. Six portfolios are constructed

based on the P/E ratios of the companies under study. The Various portfolios constructed are Portfolio with 0-20 PE ratios,

Portfolio with 20-40 PE ratios, Portfolio with 40-60 PE ratios, Portfolio with 60-80 PE ratios, Portfolio with 80-100 PE ratios and

Portfolio with 100 and above PE ratios. The risk and return of each portfolio is calculated and then a comparison is made between

the returns of each portfolio, to identify the best portfolio for investment, in terms of returns.

TECHNIQUES OF ANALYSIS

Actual Return

Actual returns for each company has been computed for the study period as under

𝐫𝐢 = 𝐩𝟏 − 𝐩𝟎

𝐩𝟎

Where, ri is return on individual security, P1 = Market price (closing) of security and P0 = Market price of security on day (t-1).

28Student (IInd Year MBA), A.I.E.T., Karnataka, India, [email protected] 29Senior Assistant Professor, Department of MBA, A.I.E.T., Karnataka, India, [email protected]







Standard Deviation

𝑺. 𝑫 = √(𝒙 − �⃛�)𝟐

𝒏

Coefficient of Variance

𝑪𝑽 (%) = 𝑺𝒕𝒂𝒏𝒅𝒂𝒓𝒅 𝑫𝒆𝒗𝒊𝒂𝒕𝒊𝒐𝒏

𝑴𝒆𝒂𝒏∗ 𝟏𝟎𝟎

DATA ANALYSIS AND INTERPREATION

Table-1: Average Returns, Standard Deviation and Coefficient Variance of Portfolio 0-20 P/E Ratio

Year Canara bank Wipro B P C L Kohinoor Foods NTPC Mastek

2014 49.229406 5.990701 108.838747 6.83453237 2.9562044 67.532874

2013 -43.19782 41.749049 -2.3712642 41.8367347 -12.4320 14.521334

2012 36.323731 -1.053424 49.1628296 -2.970297 -2.735467 63.86604

2011 -44.79363 -18.83969 -27.430134 -46.795435 -19.83553 -53.68707

2010 69.839228 20.404412 3.59368116 -1.1284722 -14.85253 -55.94053

Average 13.480180 9.6502088 26.3587719 -0.4445874 -9.379884 7.2585277

SD 53.815452 22.83431 53.7584458 31.6067387 9.2859279 60.412423

CV (%) 399.21909 236.61985 203.948977 7109.23024 98.998323 832.29583


It is found in Table 1 that among the companies come under the portfolio 0 -20 P/E ratios, BPCL has the highest average annual

returns and NTPC has the lowest average annual returns. It also shows that Kohinoor Foods has the highest variance in returns

and NTPC has the lowest variance in returns. Among the stocks under this portfolio, the best stock based on return is BPCL and

the best stock as per risk is NTPC.


Year Merck IndusInd Bank FDC Hero Motocorp Indian Metals

2014 50.4540598 87.1404802 17.9822873 53.56815 8.70936439

2013 -13.6863136 0.87519482 36.9725738 9.19183416 -22.5333584

2012 8.795251233 84.6579588 13.1940299 -0.23882634 16.0017441

2011 -16.700327 -14.7253162 -25.256582 -4.17473531 -62.4631751

2010 24.579212 84.6287905 74.3968872 15.7448914

Average 10.68837645 48.5154216 23.4578392 14.8182646 -15.0713563

SD 27.93794655 50.9198775 36.3519495 23.0299788 35.7431868

CV% 261.3862514 104.956065 154.96717 155.416167 237.159723


Table-2 reveals the fact that among the companies come under the portfolio 20-40 P/E ratio, Induslnd Bank has the highest

average annual returns and Indian Metals has the lowest average annual returns. It also shows that Merck has the highest variance

in returns and Induslnd Bank has the lowest variance in returns. Under the current portfolio, the best stock according to risk and

return is Indusland Bank.


Year Kotak Mah. Bank Cipla Energy Devl. Co. Emami Godrej Consumer

2014 70.326124 61.501996 33.3333333 64.18099357 16.769643

2013 12.029844 -3.2468316 -37.623762 18.04033865 18.784186

2012 50.981303 29.4935917 -17.48366 75.72416207 87.279564

2011 -5.092031 -13.49378 -37.101747 -15.4963949 -0.336004

2010 12.434321 10.3715863 -20.245902 64.3573382 46.664139

Average 28.135912 16.9253124 -15.824348 41.36128752 33.832306

SD 31.272862 29.6657643 29.0117359 38.75250697 34.301309

CV% 111.14927 175.274545 183.336063 93.69269985 101.38626






It is shown in Table 3 that among the companies come under the portfolio 40-60 P/E ratio, Emami has the highest average annual

returns and Energy devl.co has the lowest average annual returns. It is also true that Energy Development Co has the highest

variance in returns and Emami has the lowest variance in returns. Therefore, under this portfolio, the best stock as per risk and

return is Emamai.

It is found in Table 4 that among the companies come under the portfolio 60-80 P/E ratio portfolios, Dabur India has the highest

average annual returns and Crest Ventures has the lowest average annual returns. It is also shows that Kilitch Drugs has the

highest variance in returns and Dabur India has the lowest variance in returns. According to risk and return, the best stocks under

this portfolio are Dabur India.

Table-4: Average Returns, Standard Deviation and Coefficient Variance of Portfolio 60-80 P/E ratio

Year Take Solutions Dabur India Kilitch Drugs Crest Ventures Info-Drive Software

2014 67.3381295 42.88230114 96.71772429 22.17898833 71.6216216

2013 28.7037037 32.15671063 -34.1498559 -26.5014299 -53.164557

2012 26.7605634 29.61287079 -15.3658537 3.96432111 12.8571429

2011 -33.9534884 -0.79800499 -56.8421053 -30.0762301 -68.6800895

2010 -2.71493213 26.25944584

-18.5665914

Average 17.2267952 26.02266468 -2.41002264 -9.8001884 -9.34147049

SD 37.9171858 16.23397539 68.22617387 22.24313727 64.5221805

CV% 220.10586 62.38398561 2830.934983 226.9664252 690.706892



Year I O B Celestial Biolab Eicher Motors JP Power Ven.

2014 20.271581 121.098266 205.746757 -31.53439

2013 -39.813193 11.6129032 71.1914264 -49.73404

2012 16.7689162 -6.0606061 95.3360215 6.8181818

2011 -49.965894 -37.262357 20.4614451 -33.52219

2010 32.8500227 -12.913907 88.5446081 -28.00816

Average -3.9777134 15.2948597 96.2560516 -27.19612

SD 37.9928526 61.6886722 67.8630702 20.763128

CV% 955.143037 403.32944 70.5026531 76.345918


It is clear from Table 5 that among the companies comes under the portfolio 80-100 P/E ratio portfolios, Eicher Motors has the

highest average annual returns and JP Power Venture has the lowest average annual returns. It also shows that IOB has the

highest variance in returns and Eicher Motors the lowest variance in returns. The best stocks as per risk and return is Eicher

Motors.

Table-6: Average Returns, Standard Deviation and Coefficient Variance of Portfolio 100-Above P/E Ratio

Year Dynacons Tech. Excel Infoways Accel Frontline 20 Microns Bajaj Finserv

2014 725 23.232323 176.450116 -2.572347 71.00444

2013 -69.23077 -22.35294 36.3924051 -60.37207 -17.802

2012

50 -14.594595 152.10408 114.2231

2011

-62.55507 -26.368159 37.865368 -7.26033

2010

-23.44013 -26.802622 -1.953973 33.92621

Average 327.88462 -7.023164 29.0154291 25.014212 38.81827

SD 561.60596 44.032224 86.42372 79.208751 54.94283

CV% 171.2816 626.9571 297.85436 316.655 141.5386


It is found in Table 6 that among the companies come under the portfolio 100-above P/E ratio portfolios, Bajaj Finserv has the

highest average annual returns and Dynacons Tech. has the lowest average annual returns. It is also shows that Bajaj Fin. service

has the highest variance in returns and Dynacons Tech the lowest variance in returns. Among the stocks under this portfolio, in

terms of return, Bajaj Financial service is the best stock and in terms of risk, Dynacons is the best stock.





Table-7: Return Profile of Various Portfolios

Portfolio / Year 2009-10 2010-11 2011-12 2012-13 2013-14 Average

0-20 13.48018 9.650208 26.35877 -0.4445 -9.379 7.933132

20-40 10.6883 48.5154216 23.4578392 14.8182646 -15.071 16.48177

40-60 28.135912 16.9253124 -15.824348 41.36128752 33.832306 20.88609

60-80 17.2267 26.022664 -2.4100 -9.8001884 -9.341470 4.339541

80-100 -3.97771 15.2948597 96.2560516 -27.19612 -3.977713 15.27987

100-above 327.88462 -7.023164 29.0154291 25.014212 38.8182 82.74186


According to Table-7, it is clear that portfolio with 100 and above P/E ratio offers highest returns compared to all other portfolios

and portfolio with 60-80 P/E ratios has the lowest return.

FINDINGS AND CONCLUSION

Under the portfolio 0-20 P/E ratios, BPCL is the best security for investment as it offers highest return and lowest risk. This

portfolio has obtained 5th position in terms of return compared to all other portfolios under study.

Portfolio 20-40 P/E ratio, in terms of return, compared to other portfolios under study, it has obtained 3rd position. Under this

portfolio, Induslnd Bank has the highest average annual returns and has the lowest variance in returns. Therefore, it is the best

stock for investment.

Among the stocks of portfolio 40-60 P/E ratio, Emami has the highest average annual returns and lowest variance in returns.

Therefore, it is ranked as the best security, among the securities under this portfolio. This portfolio has obtained 2nd position in

terms of return and therefore, it is the second best portfolio.

Under the portfolio 60-80 P/E ratios, Dabur India is the best security in terms of return and risk as it has highest return and lowest

variance in returns. This portfolio has obtained the last position among the various portfolios under study.

Among the stocks of portfolio 80-100 P/E ratios, Eicher Motors has the highest average annual returns and the lowest variance in

returns and therefore, it is the best security. This portfolio has obtained 4th rank in terms of returns of various portfolios under

study.

Under the portfolio 100-above P/E ratio, Bajaj Finserv has the highest average annual returns and therefore is the best security in

terms of return. Since, the variance of returns of Dynacons Tech stock is the lowest it is the best stock according to risk. Among

the various portfolios, it is the best portfolio, because, it has highest return compared to all other portfolios under study.

REFERENCES

1. Avadhani, V. A. (2011). Security Analysis and Portfolio Management. Himalaya Publishing House.

2. Balla, V. K. (2002). Portfolio Analysis and Management. New Delhi: Sulthan Chand and Company Limited.

3. Bhat, Sudhindra. (2008). Security Analysis and Portfolio Management. New Delhi: Excel Books.

4. Booie, Zvi, & Kane, Alex. (et. al.). (2006). Investments (6th Edition). New Delhi: Tata McGraw Hill.

5. Chandra, Prasanna. (2008). Investment Analysis and Portfolio Management (3rd Edition). New Delhi: Tata McGraw

Hill.

6. Fisher, E. Donald, & Jordan, J. Ronald. (2006). Security Analysis and Portfolio Management. Pearson Prentice Hall.

7. Retrieved from http://www.bseindia.com/markets/equity/EQReports/StockPrcHistori.aspx?flag=0&expandable=7

8. Kevin, S. (2008). Portfolio Management (2nd Edition). New Delhi: PHI Learning Private Limited.

9. Nagarajan, K., & Jayabal, G. (2011). Security Analysis and Portfolio Management. New Age International.

10. Pandian, Punithavathy. (2004). Security Analysis and Portfolio Management. New Delhi: Vikas Publishing House

Private Limited.

http://www.bseindia.com/markets/equity/EQReports/StockPrcHistori.aspx?flag=0&expandable=7





11. Vadapalli, Ravindhar. (2007). Mergers, Acquisitions and Business Valuation. Excel Books.

12. Reilly, K. Frank, & Brown, C. Keith. (2006). Investment Analysis and Portfolio Management (8th Edition). New Delhi:

Cengage Learning India Private Limited.

13. Sudi, Sudarsanam. (2002). Value Creation from Mergers and Acquisitions. Pearson Education.

14. Weston, Mitchel, & Mulceril. (2003). Takeovers, Restructuring and Corporate Governance. Pearson Education.

15. Retrieved from http://pezzottaitejournals.net/index.php/IJEBEP/article/view/1708

16. Retrieved from http://ycharts.com/companies/GOOG/pe_ratio

17. Retrieved from http://pezzottaitejournals.net/index.php/IJTGBP/article/view/1680

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PERFORMANCE EVALUATION OF BANKING SECTOR IN INDIAN CAPITAL MARKET:

A COMPARATIVE STUDY

Prasanna30 Dr. Kushalappa S.31

ABSTRACT

Banks are key financial intermediaries or institutions that serve as “middle man” in the transfer of fund from servers to those

who invest in real assets as house, equipment and factories. In performing this function, financial intermediaries improve the

wellbeing of both saver and investor. By improving economic efficiency, they raise living standard of the society. The

banking sector is considered an important source of financing for most businesses. They play a very important role in the

effort to attain stable prices, high level of employment and sound economic growth. They make funds available to meet the

needs of individuals, businesses and the government. In doing this, they facilitate the flow of goods and services and the

activities of governments. Banking sector plays an important role in the Indian Capital Market. Due to ever-increasing demand

for banking products in India, banking industry plays a significant role in the growth and development of Indian Capital

Market. The current study is an attempt to compare the performance of private sector banks with the performance of public

sector banks in Indian Capital Market. The sample is selected from the banks listed in BSE. The study period is One year from

1st April, 2013 to 31st March, 2014.

KEYWORDS

Banks, Capital Market, Performance, Returns etc.

INTRODUCTION

Banking sector is the most prominent sector of the financial system in India. Remarkable progress has been made with respect to

the banking sector in the post liberalization period. The financial health of the commercial banks has improved manifolds with

respect to capital adequacy, profitability, and asset quality and risk management. Further, deregulation has opened new

opportunities for banks to increase revenue by diversifying into investment banking, insurance, credit cards, depository services,

mortgage, securitization, etc.

Liberalization has created a more competitive environment in the banking sector. Banking has helped in developing the vital

sectors of the economy. It has translated the hopes and aspirations of millions of people into reality. Today, Indian banks have

developed to such an extent that, they can confidently compete with modern banks of the world. Banks are key financial

intermediaries or institutions that serve as “middle man” in the transfer of fund from servers to those who invest in real assets as

house, equipment and factories. In performing this function, financial intermediaries improve the wellbeing of both saver and

investor. By improving economic efficiency, they raise living standard of the society.

The banking sector is considered an important source of financing for most businesses. They play a very important role in the

effort to attain stable prices, high level of employment and sound economic growth. They make funds available to meet the needs

of individuals, businesses and the government. In doing this, they facilitate the flow of goods and services and the activities of

governments. Banking sector plays an important role in the Indian Capital Market. Due to ever-increasing demand for banking

products in India, banking industry plays a significant role in the growth and development of Indian Capital Market. The current

study is an attempt to compare the performance of private sector banks with the performance of public sector banks in Indian

Capital Market. The sample is selected from the banks listed in BSE. The study period is One year from 1st April, 2013 to 31st

March, 2014.

OBJECTIVES OF STUDY

The core objective of this study is to compare the performance of public sectors banks with private sector banks in Indian Capital

Market. However, in order to achieve the main objective, the following specific objectives have been framed:

To make a comparison between the performance of public sector banks under study,

To compare the performance of private sector banks under study,

To rank the banks under risk and returns,

To offer meaningful suggestions to the investors based on the findings of the study.








SCOPE OF STUDY

The study examines the stock returns of 10 private sector banks and 10 public sector banks listed in BSE. The study period is from

March, 2013 to April, 2014. The performance of the public sectors banks are compared with the performance of the private sector

banks based on actual returns, abnormal returns, expected returns, and based on variance in the returns of banks under study. The

study excludes foreign banks operating in India.


The study is purely based on secondary data collected from various sources like, books and websites. The sample size is 20. It

includes 10 public sector banks and 10 private sector banks. Under each sector, the sample is selected randomly. The monthly

share prices have been collected for each of the bank under study from February 2013 to April 2014. This data is used to calculate

actual return, CAPM return and abnormal return of each of the 20 banks.


Actual Return

Actual returns for each company have been computed for the study period as under:

𝐫𝐢 = 𝐩𝟏 − 𝐩𝟎

𝐩𝟎

Where, ri is return on individual security, P1 = Market price (closing) of security for the month and P0 = Opening market price of

the security for the month.

Similarly, the actual returns of the market for the study period are also computed as:

𝒓𝒎 =𝑷𝟏−𝑷𝟎

𝑷𝟎

Where rm is return on market, P1 is closing market return and P0 market return in the beginning of the month.

In the next step, average actual returns of individual stocks and market return is computed.

CAPM Return

CAPM return is calculated by applying the following formulae.

𝒓𝒊 = 𝑹𝒇 + 𝜷𝒊(𝑹𝒎 − 𝑹𝒇)

Where, 𝑹𝒇= Risk free rate, 𝑹𝒎= return on market, 𝜷𝒊 = beta of individual security and 𝒓𝒊 is return on individual security.

Beta of the security is calculated with the help of the following formula:

𝜷𝒊 = 𝒓𝝈𝒊

𝝈𝒎

Here, 𝒓 is correlation between individual security return and market return, 𝝈𝒊 is standard deviation of individual security and 𝝈𝒎

is standard deviation of market return.

Abnormal Returns

Abnormal return is the excess of the actual return over the expected return. It is calculated as under:

Abnormal Return = Actual Return – CAPM Return

LIMIATIONS OF STUDY

Every research has its own limitations. The current research is not an exception to it. The following are the limitations of the

present study:





The study period is limited to only one year, which is very short period to draw a proper conclusion about the

performance of private and public sector banks.

The comparison is made between the companies only based on risk and returns. There are so many other factors, which

will have an influence on the buying behaviors of the investors in banking sector.

DATA ANALYSIS AND INTERPRETATION

This part of the study deals with the analysis of data collected for the study.

Table-1: Ranking of Public Sector Banks on the Basis of Risk and Returns

M/B BOB SBI Sy B BOI UBI Co. B BOM IOB Dena Canara

Apr-13 2.05 8.30 5.22 6.38 11.68 -3.40 13.31 -4.93 -0.93 6.24

May-13 -6.40 -9.56 6.63 -12.21 -10.16 2.46 -4.68 -7.07 -7.14 -0.88

Jun-13 -12.15 -4.60 -14.63 -19.35 -15.28 -9.61 -2.69 -15.64 -17.46 -12.30

Jul-13 -2.43 -12.48 -19.48 -20.48 -28.62 -18.09 -16.56 -15.83 -23.30 -23.82

Aug-13 -17.42 -11.43 -26.92 -22.86 -23.54 -12.84 -14.25 -5.83 -18.22 -26.25

Sep-13 6.63 6.66 5.22 11.00 8.02 -2.42 -0.66 11.63 4.23 9.34

Oct-13 30.31 11.16 20.21 32.93 12.48 17.23 6.16 15.06 17.98 16.56

Nov-13 0.22 1.45 9.42 3.48 -2.63 -6.36 -3.66 1.67 0.46 -3.70

Dec-13 0.18 -3.07 6.47 9.37 8.48 -2.63 -5.76 -0.39 12.40 13.56

Jan-14 -14.99 -13.59 -10.62 -19.32 -17.17 -4.52 -3.33 -10.11 -11.36 -21.57

Feb-14 0.31 0.40 -4.61 -10.59 -4.67 -9.26 -15.37 -1.08 -4.09 -7.48

Mar-14 31.00 25.24 19.65 33.59 33.20 22.46 32.26 11.48 17.23 22.30

Average 1.44 -0.13 -0.29 -0.67 -2.35 -2.25 -1.27 -1.75 -2.52 -2.33

Rank 1 2 3 4 9 7 5 6 10 8

SD 15.45 11.56 15.00 20.04 17.83 11.69 13.61 10.30 13.80 16.40

CV (%) 1071.05 9126.35 5232.41 2984.36 758.54 519.75 1072.28 587.39 548.15 702.99

Rank 6 10 9 8 5 1 7 3 2 4


Table 1 show the fact that Bank of Baroda has highest actual returns and Dena Bank has lowest returns compared to other banks

under study. Except Bank of Baroda, all other banks have earned negative returns during the period of study. From the risk point

of view, Corporation bank has lowest risk and State Bank of India has highest risk.

It is clear from Table 2 that Indusind Bank has highest average actual returns and Federal Bank has lowest average actual returns.

In terms of risk, Federal bank ranked first and Dhanlakshmi bank has obtained the last rank. Out of ten banks, only three banks

have negative returns during the study period.

Table 3 show the fact that out of twenty banks under study, Indusind Bank has obtained the first rank in terms of average actual

returns and it is followed by Axis Bank, ICICI, ING Vyshya Bank, Kotak Mahindra Bank, HDFC Bank and Yes Bank. The top

seven banks in terms of actual returns are the private sector banks. Similarly, Federal Bank, a private sector bank has earned the

lowest return among the twenty banks under study.

Table 4 shows that expected returns from Axis bank are the highest and it is followed by ING. Vyshya, Kotak Mahindra Bank,

ICICI, HDFC, Yes Bank, Indusind Bank and then Corporation Bank. Therefore, it is clear that the expected returns from private

sector banks are higher than the expected returns from the public sector banks.

Table-2: Ranking of Private Sector Banks on the Basis of Risk and Returns

M/B HDFC Axis ICICI Kotak Yes B. ING Indus Dn. L Federal Laxmi. Vl

Apr-13 9.34 13.58 10.59 8.35 16.19 12.13 12.34 -7.29 -6.09 -0.18

May-13 2.68 -4.18 -0.76 10.91 -2.78 7.03 10.92 -10.74 -1.62 -8.11

Jun-13 -4.56 -7.52 -7.32 -7.84 -5.43 -7.11 -10.06 -20.47 -8.94 -8.76

Jul-13 -8.80 -21.81 -15.00 -9.74 -29.76 -14.97 -16.75 -15.13 -14.69 -7.90

Aug-13 -2.61 -19.21 -11.55 1.24 -24.88 -14.24 -8.03 9.74 -26.34 -6.90

Sep-13 -0.02 20.53 10.03 2.78 18.19 21.74 3.33 35.85 10.83 -0.33

Oct-13 14.44 21.40 26.68 10.81 28.28 9.85 20.91 8.14 -71.18 21.55

Nov-13 -2.69 -5.53 -4.74 0.79 -0.03 -3.12 -5.29 -5.93 -4.08 -3.94

Dec-13 0.69 12.49 2.86 -3.64 0.38 7.23 -0.56 -1.45 6.73 -0.64





Jan-14 -5.54 -13.86 -10.01 -9.89 -16.79 -13.73 -8.64 -15.62 -5.77 -9.96

Feb-14 6.14 13.07 5.58 4.00 -1.04 3.32 3.56 -12.97 -3.28 -1.19

Mar-14 12.19 15.37 19.33 13.88 35.68 15.20 26.10 21.11 24.59 13.84

Average 1.77 2.03 2.14 1.80 1.50 1.94 2.32 -1.23 -8.32 -1.04

Rank 6 3 2 5 7 4 1 9 10 8

SD 7.35 15.72 12.86 8.27 20.14 12.40 13.14 16.89 23.54 9.59

CV (%) 415.13 775.44 600.47 458.43 1342.22 637.71 566.45 1373.55 282.88 919.38

Rank 2 7 5 3 9 6 4 10 1 8


Table-3: Ranking of Banks under Study, on the Basis of Actual Returns

S. No. Banks Avg. Returns Ranks S. No. Banks Avg. Returns Ranks

1 Indusind Bank 2.32 11 11 Bank of India -0.67 11

2 Axis Bank 2.03 12 12 Lakshmi Vilas bank -1.04 12

3 ICICI 2.03 13 13 Dhanalakhsmi Bank -1.23 13

4 ING. Vyshya 1.94 14 14 Bank of Maharashtra -1.27 14

5 Kotak Mahindra Bank 1.8 15 15 Indian Overseas Bank -1.75 15

6 HDFC 1.77 16 16 Corporation Bank -2.25 16

7 Yes Bank 1.5 17 17 Canara Bank -2.33 17

8 Bank of Baroda 1.44 18 18 Union Bank of India -2.35 18

9 State Bank of India -0.13 19 19 Dena Bank -2.52 19

10 Syndicate Bank -0.29 20 20 Federal Bank -8.32 20


Table-4: Ranking of Banks under Study, on Basis of CAPM Returns

S. No. Banks CAPM Returns Rank S. No. Banks CAPM Returns Rank

1 Axis Bank 2.69499 1 11 Bank of Maharashtra -0.38525 11

2 Ing.vysya 2.178424 2 12 Syndicate bank -0.54098 12

3 Kotak Mahindra Bank 1.20304 3 13 State bank of India -0.58459 13

4 ICICI 1.04955 4 14 Bank of India -0.65204 14

5 HDFC 0.963223 5 15 Lakshmi.vilas -0.71835 15

6 Yes Bank 0.110704 6 16 Dena Bank -1.12299 16

7 Indusind Bank -0.08443 7 17 Bank of Baroda -1.41247 17

8 Corporation Bank -0.32882 8 18 Dhanlakshmi Bank -1.75853 18

9 Canara Bank -0.36355 9 19 Indian Overseas Bank -1.94965 19

10 Union bank of India -0.37009 10 20 Federal Bank -8.97919 20


Table-5: Ranking of Banks under Study, on the Basis of Abnormal Returns

S. No. Banks Abnormal

Return Rank S. No. Banks

Abnormal

Return Rank

1 Bank of Baroda 2.85247 1 11 Indian Overseas 0.19965 11

2 Indusind Bank 2.404429 2 12 Syndicate bank -0.12902 12

3 Yes Bank 1.389296 3 13 Ing.vysya -0.23842 13

4 ICICI Bank 1.09045 4 14 Lakshmi.vilas -0.32165 14

5 HDFC 0.806777 5 15 Axis Bank -0.66499 15

6 Fedral Bank 0.659187 6 16 Bank of Maharashtra -0.88475 16

7 Kotak Mahindra 0.59696 7 17 Dena Bank -1.39701 17

8 Dhanlakshmi 0.528526 8 18 Bank of India -1.69796 18

9 State bank of India 0.294592 9 19 Corporation Bank -1.92118 19

10 Union bank of India 0.24009 10 20 Canara Bank -1.96645 20


Table-5 shows that abnormal returns of Bank of Baroda are highest and it is followed by Indusind Bank, Yes Bank, ICICI Bank,

HDFC and as on. Even at abnormal returns, private sector banks are dominating the public sector banks.





Table-6: Ranking of Banking Securities Based on Risk

S.

No.

Banks Coefficient of

Variance

Rank S.

No.

Banks Coefficient of

Variance

Rank

1 Federal 282.88 1 11 Union bank of India 758.54 11

2 HDFC 415.13 2 12 Axis 775.44 12

3 Kotak Mahindra 458.43 3 13 Lakshmi.vilas 919.38 13

4 Corporation bank 519.75 4 14 Bank of Baroda 1071.05 14

5 Dena 548.15 5 15 Bank of Maharashtra 1072.28 15

6 Indus ind 566.45 6 16 Yes bank 1342.22 16

7 Indian overseas 587.39 7 17 Dhanlakshmi 1373.55 17

8 ICICI 600.47 8 18 Bank of India 2984.36 18

9 Ing.vysya 637.71 9 19 Syndicate Bank 5232.41 19

10 Canara 702.99 10 20 State bank of India 9126.35 20


It is clear from Table6 that Federal Bank has the lowest coefficient of variance, followed by HDFC, Kotak Mahindra, Corporation

Bank, Dena Bank, Indusind bank and so on. State Bank of India has highest variance in the returns of its stocks.

FINDINGS AND CONCLUSION

It is found in the study that among the public sector banks, Bank of Baroda has highest actual returns and Dena Bank

has lowest returns. Except Bank of Baroda, all other banks have negative returns during the period of study.

As it is, clear from the study that from risk point of view, Corporation bank has lowest risk and State Bank of India has

highest risk.

It is clear from the study that among the private sector banks, Indusind Bank has highest average actual returns and

Federal Bank has lowest average actual returns.

It is fact from the study that Federal bank is the least risky security and Dhanlakshmi bank is the most risky private

sector security.

It is found from the study that among the various public and private sector banks, Indusind Bank has earned highest

actual average returns and it is followed by Axis Bank, ICICI, ING Vyshya Bank, Kotak Mahindra Bank, HDFC Bank

and Yes Bank. The top seven banks in terms of actual returns are the private sector banks. Similarly, Federal Bank, a

private sector bank has earned the lowest returns.

It is clear from the study that the expected returns from Axis bank are the highest and it is followed by ING. Vyshya,

Kotak Mahindra Bank, ICICI, HDFC, Yes Bank, Indusind Bank and then Corporation Bank. Therefore, it is clear that

investors’ expectation from private sector banks is higher than the public sector banks.

It is fact from the study that even at abnormal returns; private sector banks have dominated the public sector banks.

Finally, it can be concluded that the performance of private sectors banks is better than the performance of public sector banks.

Seventy percent of the private sector banks have earned positive returns during the study period, whereas, only one bank out of 10

public sector banks have earned positive returns. One of the interesting findings of the study is that the investors expect more

returns from private sector banks than from public sector banks. It would be because of the reason that it is private bank, which is

not so secured like a public sector bank. The study highlights the fact that during study period, compared to the public sector

banks, most of the private sector banks have performed extremely well.

REFERENCES


2. Balla, V. K. (2002). Portfolio Analysis and Management. New Delhi: Sultan Chand and Company Limited.



Hill.



7. Retrieved from http://www.rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=15232

http://www.bseindia.com/markets/equity/EQReports/StockPrcHistori.aspx?flag=0&expandable=7%20

http://www.rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=15232






9. Khan, M. Y., & Jain, P. K. (2010). Financial Management (5th Edition). New Delhi: Tata McGraw –Hill.

10. Chandra, Prasanna. (2008). Financial Management (7th Edition). New Delhi: Tata McGraw –Hill.

11. Pandey, I. M. (2004). Financial Management (9th Edition). New Delhi: Vikas Publishing House.

12. Sudi, Sudarsanam. (2002). Value Creation from Mergers and Acquisitions. Pearson Education.

13. Retrieved from http://en.wikipedia.org/wiki/Banking_in_India

14. Retrieved from http://www.studymode.com/essays/Introduction-Of-Banking-Sector-408575.html

15. Retrieved from http://www.scribd.com/doc/28033622/project-report-on-the-HDFC-BANK-LTD


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IMPACT OF ACQUISITION ANNOUNCEMENT ON STOCK RETURNS: A STUDY

Lavita Fernandes32 Dr. Kushalappa S.33

ABSTRACT

This paper uses an Event Study Methodology to test whether an M&A have an impact on a firms’ stock price, and to

investigate the informational value for M&A announcements to the shareholders to earn abnormal returns. The focus of this

paper is to examine the effect of Acquisition announcements on Indian Stock Market. An attempt is made here to compare the

reaction of capital market during post-merger announcement period and pre-merger announcement period.

KEYWORDS

Acquisition, Announcement, Merger, Stock Return etc.

INTRODUCTION

With increased industrialization and development, it is essential for companies to gain a positive image in the eyes of the various

potential investors. One way of achieving this is by registering positive stock performance. In order to obtain and retain a positive

image on the investors, company managers perform comprehensive planning and create effective strategies in order to increase the

value of the company’s stocks. A few of these strategies include mergers and acquisitions. Mergers and acquisition is a method

for enterprises to develop and increase their assets and their financial values. Most of the economic sectors witnessed a large

number of mergers and acquisitions. Multinational enterprises start taking place in energy sector, willing to add financial values

and improve their market position. Local energy firms tried to expand, but high competition did not allow them to develop as

much as they expected. Big players acquired many "small" companies trying to enter new markets and expand.

OBJECTIVES OF STUDY

To study the impact of Acquisition Announcement on stock market:

To identify changes in the performance of companies.

To compare the performance of acquiring companies in the stock market before and after acquisition announcement.


SCOPE OF STUDY

The study examines the reaction of capital market for acquisition announcement. The study period is 2013-14. The study covers

only five acquired companies and one acquisition announcement of each company is covered.


In this study, data have taken on the acquisition announcements made by acquiring companies included in the BSE SENSEX

index from 2004 to 2014. The effects of acquisition announcements of the companies on equity share prices was examined by

taking daily adjusted market price data for the sample stocks 15 days before and 15 days after the merger announcement date. The

study is purely based on secondary data extracted from various sources like books and websites. The sample size is five acquiring

companies selected randomly.

Techniques of analysis:

Daily returns for each sample company have been computed for the estimation period and for the event period as:

Rit =𝑴𝑷𝒊𝒕−𝑴𝑷𝒊(𝟏−𝒕)

𝑴𝑷𝒊(𝟏−𝒕)

Where, MPit = Market price (closing) of security ‘i’ on day t and MPi(1-t) = Market price of security on day (t-1).









Every research has its own limitations. The following are the limitations of this study.

The study covers only few companies which are taken for the studying the impact of acquisition.

This study is restricted only to Indian companies.

ANALYSIS AND INTERPRETATION

This part of the study deals with the analysis of the data collected on the topic of research.

Table-1: Returns before Acquisition Announcement

Days/Co. Sun Pharma TCS Jindal Steel Fortis GHC Tata steel

-1 -2.20178372 -7.0180538 0.14392631 2.02742993 1.972983

-2 6.21669627 -5.7155907 -1.836677027 2.28728271 5.774247

-3 3.113553114 -2.1162444 0.539772727 -0.6062443 3.628747

-4 -0.69718096 1.2432857 -0.845070423 2.45341615 -1.402329

-5 -3.16994423 6.9554272 -1.662049861 -0.6785935 0.771911

-6 4.830769231 -8.3966532 -5.497382199 2.59493671 -1.672655

-7 -0.36787247 -1.9907273 -4.260651629 -1.0644959 -1.704944

-8 1.810237203 -3.2601688 -1.481481481 -1.3893177 0.321438

-9 1.520912548 -1.0128198 -0.135618296 -0.6746397 -0.710525

-10 -0.81709617 -5.9060052 0.732737208 -0.3057169 3.914401

-11 1.628872565 0 0.624843789 0.55333538 1.257476

-12 0.675241158 6.3741147 -4.499343597 -0.1841056 2.043573

-13 1.733725875 -1.1937431 0.395398994 -2.220222 -0.776829

-14 0.559210526 -2.7696248 -0.095762509 -0.4480287 -1.693261

-15 -1.39474538 -1.6067209 2.465350178 0.96501809 -1.045414

Average 0.89604 -1.7609 -1.02747 0.22067 0.711921


It is found in Table 1 that among the companies under study, sun pharma, Tata steel, and Fortis global health care have positive

returns and TCS and Jindal steel have negative returns. During pre-acquisition period, sun pharma has the highest return

compared to all other stocks. It is found in Table-2 that during among the companies comes under post-acquisition Jindal steel,

sun pharma and TCS and Tata steel have positive returns and only Fortis GHS has negative average return. Among the companies

under study, Jindal Steel has the highest return, during after the acquisition announcement period.

Table-2: Returns after Acquisition Announcements

Days/Co. Sun Pharma TCS Jindal Steel Fortis GHC Tata Steel

1 -0.45909 -0.92903 1.372151 2.341555 0.679732

2 -1.38482 0.370028 -6.14782 -1.14198 0.196366

3 2.038043 8.752515 4.32243 -1.51976 2.488918

4 1.826231 1.387189 7.537688 -0.60423 0.06883

5 1.802817 -10.4592 0.759494 0.730371 0.394134

6 -1.98785 0.201332 0.381194 0.489297 0.729569

7 1.884669 -2.62698 4.626429 -0.87905 1.539186

8 -0.14045 12.86105 8.386167 -0.93093 -2.59313

9 0.764223 9.468029 0.638051 -0.2994 -2.09446

10 0.22695 -8.28756 2.925373 0.059916 -1.809

11 -5.64775 -8.6448 -2.27538 -1.15487 -0.58243

12 -0.77025 -8.46055 0 -0.29525 -0.19215

13 2.309783 2.841264 -1.692 -1.93978 -1.00169

14 1.405346 10.0956 -0.37143 1.260627 1.500635

15 3.656098 -4.3176 3.550296 -1.58684 1.137038

Average 0.368263 0.150086 1.600843 -0.36469 0.03077






Table-3: Average Returns before Acquisition Announcement and After Acquisition Announcement

Days/Co.

Average Returns before

Acquisition Announcement

Average Returns after

Acquisition Announcement

1 -1.01258 0.601064

2 0.78766 -1.62165

3 0.259931 3.216429

4 -0.54131 2.043142

5 -0.46387 -1.35448

6 -2.35683 -0.03729

7 -2.73145 0.908851

8 -1.99988 3.516541

9 -1.66878 1.695289

10 -2.06361 -1.37686

11 -1.15591 -3.66105

12 -1.26509 -1.94364

13 -2.51028 0.103515

14 -3.07458 2.778156

15 -2.60275 0.487798

Average -1.49329 0.357055


Table 3 shows the fact that returns before the acquisition announcement is negative and returns after acquisition announcement is

positive and therefore the acquisition announcement of the companies under study induced the investors to buy the stocks and

therefore market has reacted positively.

Table-4: Correlation of Co-Efficiency between Post-Merger and Pre-Merger Acquisition

Days/Co. Coefficient of Variance of Returns

Before Announcement (%)

Coefficient of Variance of Returns

Before Announcement (%)

Sun Pharma 282.6221 282.6221

TCS 246.1945 5018.426

Jindal steel 216.5837 235.4766

Fortis GHC 687.3232 321.6456

Tata steel 330.1002 4681.485

Average 352.5647 2107.931


It is clear from the above table that the variance in the return is high during post-acquisition announcement period than the pre-

acquisition announcement period.

FINDINGS OF STUDY

Capital market may react positively or negatively for every information. One such publicly available information is acquisition

announcement. The aim of this study is to identify the reaction of capital market during acquisition announcement. It is found in

the study that during pre-acquisition announcement period, sun pharma has the highest return compared to all other stocks. During

post-announcement period, Jindal Steel has the highest return. One of the important findings of the study is that the returns during

pre-acquisition announcement are much lesser than returns during post-merger announcement period. It clear indicates that the

investors are motivated by the acquisition announcement of the company. Acquisition indicates the growth of the acquired

company and it indicates that a company with high performance and growth opportunities would go for acquiring other

companies. This is the reason; people are interested in the stocks of the acquired companies.

CONCLUSION

This paper examines whether firms involved in M&A activities experience favourable return during M&A announcement periods

and tests if average return on the stock holdings of these firms would be affected by the t acquisition, the modes of payment or the

types of target companies by using the data of five companies. We find that there exists significantly positive average return for

target firms around the Acquisition announcement period. This indicates that market reaction of target firms to takeovers is

positive. Thus we can conclude that the terms and conditions of the takeovers are in favour to the shareholders of target firms.





REFERENCES





Hill.


6. Retrieved from http://www.nseindia.com/products/content/equities/equities/eq_security.htm

7. Retrieved from http://www.rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=15232



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QUARTERLY EARNINGS ANNOUNCEMENT AND ITS IMPACT ON STOCK RETURNS

Hemaraja M. Shetty34 Dr. Kushalappa S.35

ABSTRACT

The current study deals with an analysis of impact of quarterly earnings announcement on the stocks, which are traded in

capital market. The entire study is based on secondary data extracted from various sources like, books, journals, websites etc.

The sample is selected from NSE listed top 30 companies. The main objective of the study is to have a look upon the impact

of earnings announcement on performance of the respective stock in the stock market.

KEYWORDS

Announcement, Earnings, Returns, Stock etc.

INTRODUCTION

Earnings typically refer to after-tax net income. Ultimately, a business's earnings are the main determinant of its share price,

because earnings and the circumstances relating to them can indicate whether the business will be profitable and successful in the

long run. Earnings are perhaps the single most studied number in a company's financial statements because they show a

company's profitability. An earnings announcement is typically made on a specific date during earnings season and is preceded by

earnings estimates issued by equity analysts. When the company has been profitable leading up to the announcement, their share

price will usually increase after the information is released. Because the earnings announcement is the official statement of a

company's profitability, the days leading up to the announcement are often filled with speculation.

OBJECTIVES OF STUDY

The core objective of this study is to identify the reaction of stock market on corporate quarterly earnings announcement.

However in order to achieve the main objective, the following specific objectives have been framed:

To compare the performance of various stocks before and after earning announcement.

To compare the impact of Earnings Announcement among various stocks under study


SCOPE OF STUDY

The study examines impact of earning announcement on stock returns of top 30 NSE listed companies on 11/06/2014. The study

period is from April 2013 to March 2014. This study is an attempt to understand the reaction of stock market on corporate

quarterly earnings announcement. In this study 15 days before and 15 days after the earnings announcement have been taken and

accordingly a comparison is made between the returns of various stocks before the earnings announcement and after the earnings

announcement.

METHODOLOGY USED

The study is purely based on secondary data collected from books and internet sources. The sample size of the study is 30

companies and the sample is selected from top (based on market capitalization) 30 NSE listed companies. Daily closing prices and

annual earnings announcement dates were obtained for a sample of firms listed on the NSE. We use daily data and set the event

window at fifteen (15) days before and fifteen (15) days after the earnings announcement day. The announcement day is

represented by day zero (0).

-15, -14, -13, -12, -11... -2, -1, 0, +1, +2... +12, +13, +14, +15.


Daily returns for each sample company have been computed for the estimation period and for the event period as:

Rit =𝐏𝐢𝐭−𝐏𝐢(t−1)

𝐏𝐢(t−1)








Where, Ri=Actual daily stock return, Pit = closing price of security ‘i’ on day t and Pi (t-1) = closing price of stock on day (t-1

Average Return (AR’s) for each relative day is calculated by:

ARt = ∑𝑹𝒊𝒕

𝑵

𝒏∑𝒕=𝟏

Where, i = the number of securities in the study

N = Total number of securities

t = the days surrounding the event study.


Every study has its own limitations; similarly, the current has the following limitations:

The study assumes all other factors had been normal.

Dividend returns are excluded from the study

The study covers only one year covering all the four quarters.

This study is restricted only to 30 top NSE listed companies.

RESULTS AND DISCUSSION

Table-1: Return and Correlation of NSE 30 Companies for the Quarter 1

S.

No. Company

Quarter First

Pre

Announcement

On the Date

of Announcement

Post

Announcement Correlation

1 ACC -0.028005 -0.212653 0.122919 -0.0778

2 Ambuja Cem 0.571557 1.177415 0.311742 -0.3568

3 Asianpaint 0.168485 1.639167 0.479575 0.0839

4 Axis Bank -0.134981 1.780863 -0.741884 0.1933

5 Bajaj-Auto 0.630210 -0.054575 0.222515 0.3501

6 Bank Of Baroda -0.870998 2.917356 0.032854 -0.2167

7 Bharti Airtel 0.242529 1.508141 0.865295 -0.2251

8 BHEL -0.359150 2.869440 -0.639117 -0.3081

9 BPCL 0.041772 2.016624 -0.495964 -0.2366

10 Cairn 0.030032 1.241379 0.307337 0.4364

11 Cipla 0.335382 1.479781 0.231354 -0.2139

12 Coal India -0.380363 0.809784 -0.094624 -0.0320

13 DLF -0.503000 4.331034 -0.669826 0.5697

14 GAIL 0.242977 3.702522 0.115885 0.0544

15 Grasim 0.143665 -0.952297 0.012974 0.3334

16 HCL Tech 0.224067 -2.268041 1.088022 0.2512

17 HDFC 0.240438 1.205847 -0.437514 0.1798

18 HDFC Bank -0.049960 -0.112024 0.148784 -0.1715

19 Hero Moto Corp 0.101873 2.137639 0.358987 0.4192

20 Hindalco 0.020733 2.104208 0.181192 0.1440

21 Hindustan Unilvr -0.090617 0.384517 1.179761 0.2750

22 ICICI Bank -0.286294 -0.266169 -0.590890 0.0142

23 IDFC -0.824040 1.092470 -0.205252 -0.0962

24 Indusind Bank -0.372364 0.962670 -0.136209 0.2148

25 Infosys 0.048732 -1.914881 1.113627 -0.4561

26 ITC -0.265728 0.493294 0.834508 0.0028

27 Jindal Steel -1.281942 2.851230 -0.349403 -0.1649

28 Kotak Bank -0.273477 0.242315 -0.191875 0.2595

29 L&T 0.035358 3.107465 -2.712485 -0.1371

30 Lupin 0.199646 -0.550259 0.922697 -0.0227

Average Return -0.081449 1.124142 0.042166






As per the Table No.1; in the quarter first, Baja Auto has highest return in the period of pre-announcement days but in the post

announcement days Hindustan Uni-Liver yield highest return. In the pre-announcement days: Ambuja cement, Asian Paint, Baja

Auto, Bharti Airtel, BPCL, CAIRN, Cipla, GAIL, Grasim, HCL, HDFC, Hero motor, Hindalco, Infosys, L&T and Lupin stocks

have positive returns and in post-announcement days; ACC, Ambuja cement, Asian paint, Bank of Baroda, Bharti Airtel, CAIRN,

Cipla, GAIL, Grasim, HCL Tech, HDFC, Hero motor, Hindalco, Hindustan, Infosys, ITC and Lupin have positive returns.

In the pre-announcement days, Jindal steel has highest negative return but in post announcement days, L&T has highest negative

return. In the pre-announcement days; ACC, Axis Bank, Bank of Baroda, BHEL, Coal India, DLF, HDFC, Hindustan Unilever,

ICICI Bank, IDFC, Indusind Bank, ITC, Jindal steel and Kotak Mahindra Bank have negative return. However, in the post

announcement days; Axis Bank, BHEL, BPCL, Coal India, HDFC, ICICI Bank, IDFC, Indus India Bank, Jindal steel, Kotak Bank

and L&T have negative return.

In the first quarter; Asian Paint, Axis Bank, Baja Auto, Cairn, DLF, Grasim, GAIL, HCL Tech, HDFC, Hero Moto, Hindalco,

HUL, ICIC Bank, Indusind Bank and Kotak Bank shown positive correlation between the returns of pre and post earnings

announcement returns. Whereas ACC, Ambuja Cement, Bank Of Baroda, Bharti Airtel, Bhe , BPCL, Cipla, Coal India, HDFC

Bank, IDFC, Infosys, Jindal Steel, L&T & Lupin shown negative correlations. A return on the date of earnings announcement is

higher than returns before and after the earnings announcement.

As per Table-2, In the second quarter, BPCL has the highest return in the pre-announcement days but in the post announcement

days, Axis bank has the highest returns. In the pre-announcement days; ACC, Bajaj Auto, Bank of Baroda, BPCL, Coal India,

Gail, Grasim, HCL Tech, Hindalco, ITC and Lupin have positive return. Whereas in post announcement days; Ambuja Cem,

Asianpaint, Axis Bank, Bajaj Auto, Bank of Baroda, Bharti Airtel, Bhel, Cairn, DLF, Gail, Grasim, HDFC, HDFC Bank, Hero

Moto Corp, ICICI Bank, IDFC Indusind Bank, Infosys, ITC, Jindal Steel, Kotak Bank, L&T And Lupin have positive return.

When we look at the pre-announcement days; Ambuja Cem, Asianpaint, Axis Bank, Bharti Airtel, Bhel, Cairn, Cipla, DLF,

HDFC, HDFC Bank, Hero Moto Corp, Hindustan Unilvr, ICICI Bank, IDFC, Indusind Bank, Infosys, Jindal Steel, Kotak, Bank

and L&T have the negative return. However, in the post announcement day following stocks are having negative return;

Asianpaint, Axis Bank, Bajaj Auto Bharti Airtel, Bhel, BPCL, HCL Tech and Hindustan Unilever.

In The Second Quarter; ACC, Ambuja Cem, Bank Of Baroda, Cairn, Cipla, Coal India, DLF, Grasim, HDFC, HDFC Bank,

Hero Moto Corp, ICICI Bank, Indusind Bank, Kotak Bank And L&T Stocks showing Positive Correlation and remaining stocks

showing negative correlation. Most of the stocks are showing negative correlation between returns before the earnings

announcement and after the earnings announcement. When we compare the average returns of all industries taken together of pre,

post and on date of announcement, returns on the date earnings announcement is higher than other two returns.


S.

No. Company

Quarter Second

Pre

Announcement

On the Date of

Announcement

Post


1 ACC 0.612408784 -1.1286 0.3371 0.1402

2 Ambuja Cem -0.12319044 -1.3969 0.5220 0.3244

3 Asianpaint -0.13065009 0.3445 0.9731 -0.6398

4 Axis Bank -1.801046353 3.7637 1.3613 -0.0799

5 Bajaj-Auto 0.033191119 1.6378 0.2140 -0.0286

6 Bank Of Baroda 0.26254581 0.9827 1.2487 0.2670

7 Bharti Airtel -0.402938735 1.2396 0.5474 -0.2983

8 BHEL -0.180669693 2.7293 -0.0359 -0.3394

9 BPCL 0.803563684 -1.4792 0.6161 -0.3451

10 Cairn -0.203565618 -0.3450 0.1527 0.3598

11 Cipla -0.129054946 -0.1387 -0.1762 0.0090

12 Coal India 0.174715573 1.0358 -0.4016 0.3951

13 DLF -0.666518666 6.9114 1.0458 0.0446

14 GAIL 0.594811367 -0.9152 0.5482 -0.5636

15 Grasim 0.432559027 -0.7105 0.1916 0.4625

16 HCL Tech 0.191361345 -1.4809 -0.0665 -0.3054

17 HDFC -0.385103682 2.8328 0.2257 0.0883

18 HDFC Bank -0.494572895 3.1363 0.6195 0.4973

19 Hero Moto Corp -0.203791346 -0.5052 0.2795 0.3075

20 Hindalco 0.145252407 -1.2511 0.2689 -0.2490

21 Hindustan Unilvr -0.265937999 -1.3148 -0.1019 -0.7106





22 ICICI Bank -0.61789372 3.0668 0.7857 0.3542

23 IDFC -0.284090091 3.1800 0.9941 -0.1219

24 Indusind Bank -0.691614697 3.8780 0.7680 0.5181

25 Infosys -0.334267061 0.0664 0.6337 -0.1838

26 ITC 0.10802637 0.7638 0.0043 -0.3458

27 Jindal Steel -0.024350592 -1.2739 0.2697 -0.1115

28 Kotak Bank -0.274155055 1.0323 0.2265 0.0555

29 L&T -0.126562656 1.4263 1.2948 0.3097

30 Lupin 0.189974749 -0.5024 0.4211 -0.0804

Average Return -0.12638547 0.852832797 0.45891617



S.

No. Company

Quarter Third

Pre

Announcement

On the Date of

Announcement

Post


1 ACC -0.255283907 -0.0271 -0.524680551 -0.2750

2 Ambuja Cem -0.248736085 0.5475 -0.459119572 -0.2492

3 Asianpaint -0.205831071 1.9898 -0.365568304 -0.4238

4 Axis Bank 0.301057584 -0.5656 -0.545396299 -0.1020

5 Bajaj-Auto -0.264509359 0.3428 0.11467011 -0.1331

6 Bank Of Baroda -0.63017174 1.8279 -0.236557838 0.3310

7 Bharti Airtel -0.093844491 2.2710 -0.653897911 -0.0555

8 BHEL 0.504491695 -0.8479 -0.19503512 0.0429

9 BPCL -0.188814124 0.3737 -0.084384033 0.4794

10 Cairn 0.030003488 -0.2004 0.009773499 0.4700

11 Cipla 0.230148942 0.2370 0.349458642 0.1235

12 Coal India 0.037567559 0.7586 -0.673639568 -0.1591

13 DLF 0.302707649 2.0396 -0.432660991 -0.0998

14 GAIL -0.13450206 0.1893 -0.01854756 -0.3423

15 Grasim -0.02557508 -0.0018 -0.319754866 0.2232

16 HCL Tech 0.645073225 -0.3208 0.940875242 -0.0009

17 HDFC -0.110684841 -0.1447 0.394647402 -0.3246

18 HDFC Bank -0.301257044 -0.1051 0.087664851 -0.1738

19 Hero Moto Corp -0.401233793 0.5084 -0.080193599 -0.0276

20 Hindalco -0.133239968 -0.6525 -0.361692522 0.3350

21 Hindustan Unilvr 0.097252296 0.2979 -0.064066268 -0.3904

22 ICICI Bank -0.362342832 -0.0956 -0.042195784 -0.2440

23 IDFC -0.113182614 0.1369 -0.550870498 -0.1659

24 Indusind Bank -0.508000904 0.6299 0.180169621 -0.3261

25 Infosys 0.246471312 -0.5064 0.559915078 0.0408

26 ITC 0.090636697 0.1709 0.107404851 0.1307

27 Jindal Steel -0.149272332 0.5939 -0.016563289 -0.0613

28 Kotak Bank -0.411206467 -0.7827 -0.103850313 -0.3202

29 L&T -0.188717294 -0.1588 -0.394371169 -0.3874

30 Lupin 0.082326389 0.9195 -0.015784652 -0.2129

Average Return -0.071955639 0.314168568 -0.113141714


As per Table-3; in the third quarter, DLF has highest return during pre-announcement days, whereas, in the post announcement

days, HCL Tech has the highest earning days. The following stocks have the positive returns; BHEL, Cairn, Cipla, Coal India,

DLF, HCL Tech, Hindustan Unilever, Infosys, ITC and Lupin. When compare the pre-announcement days with post

announcement days, following stocks shown positive return; Cairn, Cipla, HCL Tech, HDFC, HDFC Bank, Indusind Bank,

Infosys and ITC.

In the pre-announcement days; ACC, Ambuja Cem, Asianpaint, Bajaj Auto, Bank of Baroda, Bharti Airtel, BPCL, GAIL,

Grasim, HDFC, HDFC Bank, Hero Moto Corp, Hindalco, ICICI Bank, IDFC, Indusind Bank, Jindal Steel, Kotak Bank and L&T

stocks having negative return. However, in post announcement days; ACC, Ambuja Cem, Asianpaint, Axis Bank, Bank Of





Baroda, Bharti Airtel Bhel, Coal India, DLF, GAIL, Grasim, Hero Moto Corp, Hindalco and Hindustan Unilever have negative

returns.

In the third quarter, the following stocks have positive correlation between returns of pre and post earnings announcement date:

Infosys, ITC, Bank of Baroda, Bharti Airtel, BHEL, BPCL, Cairn, Grasim and Hindalco and remaining most of the stocks have

negative correlation. In the third quarter also returns on date of returns announcement has the highest average return.

As per the Table No.4; in the fourth quarter, the average return is positive for the following stocks; ACC, Ambuja Cem,

Asianpaint, Axis Bank, Bajaj-Auto, Bank of Baroda, Bharti Airtel, BHEL, BPCL, Cairn, Cipla, Coal India, DLF, Grasim, HDFC,

Hero Moto Corp, Hindalco, Hindustan Unilever, ICICI Bank, Indusind Bank, ITC, Jindal Steel, Kotak Bank And L&T. But in the

post announcement days; ACC, Ambuja Cem, Axis Bank, Bank of Baroda, Bharti Airtel, BPCL, Cairn, Cipla, Coal India, Gail,

HCL Tech, HDFC, Hero Moto Corp, Hindalco, ICICI Bank, Kotak Bank, L&T and Lupin stocks are having positive return.

In the pre-announcement days; GAIL, HCL Tech, HDFC Bank, IDFC, Infosys and Lupin stocks have negative returns. Whereas,

in the post announcement days, the following stocks are showing negative return; Ambuja Cem, Bank Of Baroda, Bharti Airtel,

Cipla, DLF, Grasim, Hindustan Unilever Jindal Steel, Kotak Bank and Lupin.

In the fourth quarter; Acc, Asianpaint, Axis Bank, Bajaj-Auto, Bhel, Bpcl, Cairn, Coal India, GAIL, HCL Tech, HDFC, HDFC

Bank, Hero Moto Corp, Hindalco, ICICI Bank, IDFC, Indusind Bank, Infosys, ITC and L&T are showing positive correlation and

remaining stocks are showing negative correlations. In the fourth quarter also, on the date of announcement, has the highest

average return.


S.

No. Company

Quarter Fourth

Pre

Announcement

On the Date of

Announcement

Post


1 ACC 0.477257051 1.5191929 0.1335312 0.594095846

2 Ambuja Cem 0.518602897 3.1929166 0.7535816 -0.10628171

3 Asianpaint 0.788394578 1.8805519 -0.0203492 0.627228188

4 Axis Bank 0.227052654 0.5477576 0.1616354 0.462801229

5 Bajaj-Auto 0.299265432 1.6057070 -0.2235792 0.053613403

6 Bank Of Baroda 0.720023044 2.4449518 0.8063041 -0.23990382

7 Bharti Airtel 0.326309323 4.0696701 0.5174425 -0.16086693

8 BHEL 0.894643014 1.1761698 -0.3571533 0.09827637

9 BPCL 0.77863019 2.1116478 0.4239122 0.254232487

10 Cairn 0.027607338 0.4509244 0.5771653 0.207479572

11 Cipla 0.141488501 -0.1808318 0.1793373 -0.03307221

12 Coal India 0.646994321 -0.2671416 0.4453976 0.051787485

13 DLF 1.079174923 -0.1712329 -0.6846880 -0.18666693

14 GAIL -0.175126847 1.5129201 0.0063744 0.19303442

15 Grasim 0.287336946 0.9895970 -0.2601283 -0.40097552

16 HCL Tech -0.4396581 -0.5690359 0.3090491 0.672627473

17 HDFC 0.246594733 1.0041551 0.0083328 0.251667247

18 HDFC Bank -0.420096274 3.9759530 -0.2695530 0.155823726

19 Hero Moto Corp 0.586128471 3.1916357 0.0561984 0.226919206

20 Hindalco 0.296548088 0.0000000 1.0137384 0.161600632

21 Hindustan Unilever 0.537749592 1.3946412 -0.0323225 -0.37042973

22 ICICI Bank 0.751819718 0.1989654 0.1764150 0.067184839

23 IDFC -6.405529366 5.2128584 -0.1017970 0.355453407

24 Indusind Bank 0.338035859 1.9932879 -0.0282150 0.729820954

25 Infosys -1.144245548 -0.5494167 -0.1607690 0.126518857

26 ITC 0.511813185 0.2367358 -0.1659111 0.274505448

27 Jindal Steel 0.717384728 1.0229720 -0.0966068 -0.0625076

28 Kotak Bank 0.850556172 0.0453632 0.2591804 -0.22858553

29 L&T 0.807801219 0.6113811 0.3327680 0.106245712

30 Lupin -0.236873782 1.4240591 0.2898319 -0.02282955

Average Return 0.134522735 1.335879 0.134971






FINDINGS AND SUGGESTIONS

It is true that share market is the most sensitive parameter of the economy. It responds immediately, even to the negligible

changes. It is obvious that the earnings, economic policy-making decision shall have significant impact on the sensitive parameter,

stock market.

This study examines the impact of earnings announcements on stock market. In the most of the quarters the actual returns is

highest on the date of earnings announcement than pre and post earnings announcement date. Investors are not sure about the

industry or the companies that are going to be benefitted from the coming earnings, they would be less interested to buy the shares

during the pre-earnings period and similarly, the investors who have already invested in those companies which are going to be

punished by the earnings will dispose all their holdings before the earnings. This leads to more pressure on sale of shares than

purchase of shares during pre-earnings period. After the earnings, the trend would be different.

The investors are getting information about the industries, which are benefitted from the earnings, and they start investing in the

companies of such industries and it makes the market to move upward direction during the post-earnings period. Since the post-

earnings risk is less and return is high, the study concludes that post-earnings period best investment.

REFERENCES





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Private Limited.



9. Retrieved from www.bse.com

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14. Retrieved from http://financial-dictionary.thefreedictionary.com/Earnings

15. Retrieved from http://financial-dictionary.thefreedictionary.com/Company+Earnings

16. Retrieved from http://quizlet.com/6450541/stock-flash-cards

17. Retrieved from https://stockmarketcollege.wordpress.com/2011/04/05/what-does-earnings-announcement-mean-for-

listed-...

18. Retrieved from http://financial-dictionary.thefreedictionary.com/Earnings

19. Retrieved from https://books.google.de/books?id=hnT5hL5YdCYC

20. Retrieved from http://www.investopedia.com/terms/e/earnings-announcement.asp

*****

http://www.bse.com/

http://www.rbibulletin.com/

http://www.ivteme.ru/en/glossary/financial-en/stocks/earnings-announcement.html



http://financial-dictionary.thefreedictionary.com/Earnings

http://financial-dictionary.thefreedictionary.com/Company+Earnings

http://quizlet.com/6450541/stock-flash-cards

https://stockmarketcollege.wordpress.com/2011/04/05/what-does-earnings-announcement-mean-for-listed-...

https://stockmarketcollege.wordpress.com/2011/04/05/what-does-earnings-announcement-mean-for-listed-...

http://financial-dictionary.thefreedictionary.com/Earnings

https://books.google.de/books?id=hnT5hL5YdCYC

http://www.investopedia.com/terms/e/earnings-announcement.asp





IMPACT OF FINANCIAL SOLVENCY ON STOCK RETURNS

Nethra N.36 Dr. Kushalappa S.37

ABSTRACT

Every investment is characterized by risk and return. For a common man, the term ‘risk’ means a situation in which something

unpleasant/unexpected may happen. In other words, risk is a situation involving exposure to uncertainty. If the actual return

obtained is same as the expected return, such an investment could be considered to be risk free, if the actual return obtained is

less than the expected return, such an investment could be considered to be risky. Risk of an investment depends upon many

factors. Risk would be avoidable or unavoidable. An investor by properly analyzing the company could reduce the company

specific risks. Therefore, he has to study the strengths and weaknesses of the company in terms of its profitability, liquidity

position, financial soundness, turnovers etc. The focus of the present research is to identify the impact of financial soundness

of the companies on its stock returns. Here the financial soundness of the companies is measure by using Althman’s Z

formula.

KEYWORDS

Return, Risk, Solvency etc.

INTRODUCTION

Investment is a conscious act of an individual or any entity that involves deployment of funds in securities or assets issued by

financial institution with a view to obtain target returns with specified period of time. Investment is characterized by risk and

return. For a common man, the term ‘risk’ means a situation in which something unpleasant/unexpected may happen. In other

words, risk is a situation involving exposure to uncertainty. If the actual return obtained is same as the expected return, such an

investment could be considered to be risk free, if the actual return obtained is less than the expected return, such an investment

could be considered to be risky. Risk can be broadly classified into two categories: Systematic risk and Unsystematic risk.

Systematic risk is an uncontrollable risk, whereas, unsystematic risk or company specific risk is a controllable risk. The types of

unsystematic risks are: business risk and financial risk. A business risk arises due to operational inefficiency of the firm and

financial risk arises due to improper debt equity mix. Financially unsound company suffers from huge financial risk. Financial

soundness of the company plays an important role in the investment decisions. Investors usually do not like stocks of financially

weak companies.

An attempt is made here to study the reaction of investors on companies with different financial soundness position. The focus of

the research is to identify the impact of financial soundness of the companies on its stock returns. Here the financial soundness of

the companies is measured by using Althman’s Z formula. Altman- Z is the output of a credit-strength test that gauges a publicly

traded manufacturing company's likelihood of bankruptcy. The Altman Z-score is based on five financial ratios that can be

calculated from data found on a company's annual report. The Altman Z score can be calculated by the using this formula, Z =

1.2T1 + 1.4T2 + 3.3T3 + 0.6T4 + 0.999T5. Here, T1 = (Current Assets − Current Liabilities) / Total Assets, T2=Retained Earnings /

Total Assets, T3=Earnings before Interest and Taxes / Total Assets, T4=Book Value of Equity / Total Liabilities, The coefficients

were estimated by identifying a set of firm’s solvency position. Altman Z-score, can be used to evaluate both public and private

companies, both manufacturing and nonmanufacturing companies. Investors can use Altman Z-scores to help determine whether

they should buy or sell a particular stock if they are concerned about the underlying company's financial strength.

OBJECTIVES OF STUDY

The main objective of the study is to evaluate the impact of financial soundness of the corporate on stock returns. In order to meet

the main objective, the researchers have framed the following specific objectives:

To create investment portfolios based on the Altman Z score of the companies.

To measure the performance of various portfolios constructed based on Altman Z score.

To identify the relationship between financial soundness of the companies and their performance in the stock market.








SCOPE OF STUDY

The study period is one year from March 2013 to April 2014. The companies chosen for the study are two companies each for

each of the four portfolios. The companies are selected for each portfolio, based on the Z scores of the companies. The impact of

the financial soundness on investors’ attitudes is measured only by risk and returns of the securities. The conclusion is being

drawn only based on these two attributes.

METHODOLOGY USED

The entire study is based on secondary data extracted from various sources like books, websites and other sources. The sample is

selected from the BSE listed companies randomly. Then the AltmanZ score is calculated for the sample companies. Then the

portfolio of two companies each is constructed based on the Z scores of the companies.

The portfolios constructed are 0.5 to 1 Z score portfolio, 1 to 1.5 Z score portfolio, 1.5 to 2 Z score portfolio, 2 and above Z score

portfolio. For each stock under each portfolio, the monthly returns are calculated from March 2013 to April 2014. Then the

average return, standard deviation and coefficient of variance returns of each stock are calculated. Finally, the returns of each

portfolio are calculated and then a comparison is made between the performances of each portfolio.


Since the entire study is based on secondary data, the study is not free from the limitations of secondary data.

Altman Z score is calculated based on various financial ratios, which are derived from financial statements of the

companies under study. Therefore, the study also suffers from the limitations of financial statement.

It is assumed that financial stability is the only factor affects the risk and returns of stocks under study

DATA ANALYSIS AND INTERPRETATION

Table-1: Risk-return profile of stocks of portfolio with 0 to 1 Z value

Month Neogem India Ansal Housing

Mar-14 -21.9417 3.560831

Feb-14 -26.5335 6.309148

Jan-14 -49.6408 -17.6623

Dec-13 7.656613 4.054054

Nov-13 -9.58042 8.695652

Oct-13 -9.49367 19.94362

Sep-13 1.935484 -5.08361

Aug-13 0 1.70068

Jul-13 -4.90798 -11.7117

Jun-13 -4.95627 -10.2426

May-13 -3.65169 6

Apr-13 -13.8015 5.740181

Average -11.243 0.941993

Standard Deviation 15.46133 10.37196

Coefficient of Variance 137.52 1101.065


It is found in Table 1 that among the stocks of 0 -1 z score portfolio, Ansal Housing has positive return and Neogem India has the

negative return. Even though the standard deviation of Neogem India his higher than the standard deviation of Ansal Housing,

Ansal Housing has more coefficient of variance in the returns of the stocks. Therefore, it is concluded that Ansal Housing has

more return and more risk compared to Neogem India.

It is clear from Table 2 that among the stocks of 1 -1.5 z score portfolio, Dynamic industries has positive return and Chromatic

India has the negative return. Even though the standard deviation of Dynamic industries is higher than the standard deviation of

Chromatic India and Chromatic India has more coefficient of variance in the returns of the stocks. Therefore, it is concluded that

Chromatic India has more risk and Dynamic industries has more return.





Table-2: Risk-return Profile of Stocks of Portfolio with 1 to 1.5 Z value

Month Chromatic India Dynamic Industries

Mar-14 -0.526315789 69.19934641

Feb-14 -23.69477912 27.89968652

Jan-14 -28.24207493 -26.38461538

Dec-13 40.48582996 14.63844797

Nov-13 4.219409283 67.75147929

Act-2013 4.635761589 -8.027210884

Sep-13 -17.78584392 3.521126761

Aug-13 31.50357995 -25.80982236

Jul-13 -0.238095238 9.621993127

Jun-13 -4.545454545 -4.590163934

May-13 -64.94023904 5.53633218

Apr-13 -52.55198488 2

Average -9.30668389 11.27971664


Co-efficient of Variance 328.9056432 273.0185295

Source: Authors Compilation

Table-3: Risk Returns Profile of Stocks of Portfolio with 1.5 to 2 Z Value

Month Flawless Diamond DCM

Mar-14 -7.692307692 -3.94444

Feb-14 -13.33333333 29.40331

Jan-14 50 -0.71378

Dec-13 42.85714286 2.487198

Nov-13 -51.72413793 -1.01376

Oct-13 26.08695652 1.172161

Sep-13 228.5714286 0.367647

Aug-13 -41.66666667 -2.78771

Jul-13 -50 -5.98118

Jun-13 -7.692307692 10.22222

May-13 -10.34482759 0.821509

Apr-13 -19.44444444 9.039088

Average 12.13479188 2.757029


Co-efficient of Variance 624.5800305 336.263


As shown in Table 3 that among the stocks of 1.5-2 z score portfolio, both the stocks have positive returns and Flawless Diamond

has higher return than the returns of DCM. DCM has the lowest standard deviation and coefficient of variance. Therefore, it is

concluded that high returns of Flawless Diamond is accompanied by high risk also.

Table-4: Risk-return profile of stocks of portfolio with 2 and Above Z value

Month Classic Diamond Amal

Mar-14 -1.380670611 0.421053

Feb-14 2.382875606 -8.06452

Jan-14 24.86132123 20.15504

Dec-13 -3.362573099 0.15528

Nov-13 65.88520614 -10.8651

Oct-13 35.19125683 41.25122

Sep-13 8.669833729 6.23053

Aug-13 50.35714286 -4.1791

Jul-13 -11.39240506 -4.73934

Jun-13 26.4 -10.2128

May-13 -8.256880734 -2.08333

Apr-13 0.553505535 -6.25

Average 15.8257177 1.818251


Co-efficient of variation 156.1456217 825.4605






As shown in Table 4 that among the stocks of 2 and Above z score portfolio, both the stocks have positive returns and the returns

of Classic Diamond is higher than the returns of Amal. Even though the standard deviation of Classic Diamond is higher than the

standard deviation of Amal and Amal has more coefficient of variance in the returns of the stocks. Therefore, it is concluded that

Amal has more risk and Classic Diamond has more return.

Table-5

Portfolio Returns of Company 1 Returns of Company 2 Portfolio Return Rank

0 – 1 -11.243 0.941993 -5.1505 4

1 – 1.5 -9.30668389 11.27971664 0.986516 3

1.5 – 2 12.13479188 2.757029 11.70725 2

2 and above 15.8257177 1.818251 8.821984 1


Assuming equal proportion of investment each of the stock of each portfolio, the returns of the portfolios are calculated and

presented in the above table. The table shows the fact that portfolio with least Z score has earned the least returns and portfolio

with high Z score has earned highest returns. It is also clear that there is a positive correlation between the Z score values and the

portfolio returns.

FINDINGS AND SUGGETIONS

It is found in the study that among the stocks of 0 -1 Z score portfolio, Ansal Housing has positive return and Neogem

India has the negative return. Under this portfolio, Ansal Housing has more return and more risk compared to Neogem

India.

It is clear from Table 2 that among the stocks of 1 -1.5 z score portfolio, Dynamic industries has positive return and

Chromatic India has the negative return. Dynamic Industries is the best security, both in terms of risk and returns.

It is clear from the study that among the stocks of 1.5 - 2 Z score portfolio, both the stocks have positive returns and

Flawless Diamond has higher return and risk than the returns of DCM. D

It is found in the study that among the stocks of 2 and Above Z score portfolio, both the stocks have positive returns and

the returns of Classic Diamond is higher than the returns of Amal.

One of the most important findings of the study is that among the various portfolios constructed based on the financial

soundness of the companies, portfolio with highest Z score has obtained the highest returns and a portfolio with lowest

Z score has obtained the lowest returns.

Finally, it can be concluded that the financial strengths and its soundness plays a vital role in the decisions of an investor.

Investors prefer stocks of financially sound company. The study proves that the companies with sound financial position will

perform better in the stock market than the stocks of financially weak companies. Therefore, it is suggested to the investors that it

is better to pick up the stocks of financially sound companies to have higher returns for lesser risk in their investment.

REFERENCES

1. Agrawal, N. P. (1983). Analysis of Financial Statements. New Delhi: National Publishing House.




5. Brigham, E. F., & Gapenski, L. C. (1991). Financial Management: Theory and Practice (6th Edition). Orlando. Fl: The

Dryden Press.


Hill.

7. Chandra, Prasanna. (2010). Fundamentals of Financial Management. New Delhi: Tata McGraw Hill Education

Private Limited.






9. Retrieved from http://en.wikipedia.org/wiki/Altman_Z-score


11. Retrieved from http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/altman-z-score-5188

12. Retrieved from http://www.investopedia.com/terms/r/risk.asp


14. Khan, M. Y., & Jain, P. K. (2010). Financial Management (5th Edition). New Delhi: Tata McGraw –Hill.

15. Kuchhal, S. C. (1985). Financial Management. Allahabad: Chitanya Publishing.

16. Kulkarni, P. V., & Sathya, Prasad B.G. (1999). Financial Management. Bombay: Himalaya Publishing.

17. Maheshwari, S. N. (1996). Management Accounting and Financial Control. New Delhi: Sultan Chand & Sons.

18. Nagarajan, K., & Jayabal, G. (2011). Security Analysis and Portfolio Management. New Age International.

19. Pandey, I. M. (2004). Financial Management (9th Edition). New Delhi: Vikas Publishing House.


Private Limited.

21. Van, Horne J. C., & Wachowicz, J. M. (2004). Fundamentals of Financial Management (12th Edition). New York:

Prentice Hall Publishers.

22. Retrieved from http://www.abebooks.com/book-search/author/prasanna-chandra/

23. Retrieved from http://shodhganga.inflibnet.ac.in:8080/jspui/bitstream/10603/24251/8/08_chapter-3.pdf


25. Retrieved from

https://www.coursehero.com/file/p7o79d5/4-Return-on-Assets-ROA-Return-on-total-Assets-often-called-t...

26. Retrieved from http://connection.ebscohost.com/c/articles/92611759/financial-leverage-impact-stock-return

27. Retrieved from https://www.easycalculation.com/statistics/altman-z-score.php

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http://www.investopedia.com/terms/r/risk.asp

http://www.abebooks.com/book-search/author/prasanna-chandra/

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EXIGENCY OF BACKGROUND VERIFICATION PROCESS

IN SMALL AND MEDIUM-SIZE ENTERPRISES: A STUDY

Hans Sadhu38 Niranjan L. R.39

ABSTRACT

The purpose of this study is to understand how much importance is being given to Background Verification of employees in

Small and Medium-size Enterprises from both, the industry as well as Background Verification firms.

KEYWORDS

Background Verification, Employees, Small and Medium Enterprises etc.

OBJECTIVES OF STUDY

There are four broad objectives of this study:

To understand the importance of Background Verification in Small and medium size enterprises.

To find out whether background verification depends on the number of employees in small and medium size enterprises.

To find out if companies which conduct background verification know there employees better

To find out the gap between the market price of background verification services and the price companies are willing to

pay.

To understand if the government should maintain a centralized database for the working population.

HYPOTHESIS OF STUDY

H1: There is no significant link between conducting background verification and the number of employees working in

the organization.

H2: Conducting background verification and knowing your employees well does not have any relation.

SCOPE OF THE STUDY

Small and Medium-size enterprises and Background Verification companies in India. Owners of the companies were contacted

and asked to fill the surveys. A variety of states was chosen to understand how background verification is perceived in different

parts of the country.

Graph-1: Showing the Scope of Research


38Graduate (BBA), Department of Management Studies, Christ University, Karnataka, India, [email protected] 39Assistant Professor, Department of Management Studies, Christ University, Karnataka, India, [email protected]

12

1 1 1 1

3

12 2

12 2

1

0

2

4

6

8

10

12

14







SUMMARY OF FINDINGS

Background verification process is a growing concept in India and after conducting this research; the following findings have

been made:

Number of employees in an organization does not have much bearing upon conducting background verification of

employees. The general notion is that the more employees you have, the better should be your management and

background verification can help to know your employees better for proper management.

The best way to know your employees better is to have a sense of their past and that can only be possible through

background verification.

Background verification firms believe that small and medium size enterprises prefer outsourcing the Background

verification process.

Graph-2: Graph Showing Preference of Companies for Performing Background Verification Process


The importance of Background verification is growing but companies are in two minds, whether to outsource or conduct

it themselves. If they conduct it themselves, they do not know how to approach the matter.

There is a gap between the price at which Background verification firms offer their services and the amount small and

medium size companies are willing to pay for Background verification

66% of the companies believe that the government should have a centralized database of the working population in

India, in the same way maintained in the United States. This is a better approach, since every organization will have to

update details about their employees, creating a pool of the working population in India.

Documents that are considered the most important and are collected at the pre-joining stage are:

Table-1: Documents that are collected from Prospective Candidates at the Pre-Joining Stage


27% companies feel that they do not want to outsource the Background verification procedure.

Table-2: Preference between Outsourcing Background Verification Process and Conducting It Themselves


S. No. Documents

1 Ration Card

2 Passport

3 Voter ID Card

4 Mobile bill

5 Driving license

6 Bank Statement

S. No. (X) Respondents (Y) %

1 9 27%

2 4 12%

3 7 21%

4 5 15%

5 6 18%





RECOMMENDATIONS AND CONCLUSION

Recommendations

Background verification of employees has been given maximum importance in today’s world. We can see how corporate India is

spending enough time and money on conducting background verification of their employees. Small and medium size industries

too need to start investing in Background verification. Considering the recent Uber case, with so much importance given to

background verification, still could not prevent what happened. Following are a few recommendations to background verification

companies and small and medium size enterprises.

Companies nowadays know the importance of Background verification but do not know how to approach the matter.

Inculcating background verification in the form of collecting certain documents and getting police verification is the

basis all companies should follow.

There is a gap between the rate at which background verification is offered and the amount companies are willing to

pay. Bridging that gap can help India to safeguard there working environment.

The government should maintain a database of the working population that is only possible if they make it compulsory

for all companies to update the database with the names of the employees working in the company. This will help India

in knowing their employees better.

Conclusions

The objective of this study was to find out whether background verification is considered important in Small and

medium size enterprises in India and through detailed research, we can see enterprises value background verification

and are willing to invest.

The need of the hour is for the background verification companies to bridge the gap between the demand and supply and

market the importance of background verification.

We can also conclude the fact that 66% of the companies find it important and believe government intervention is the

most important in the form of a database of a working population, as followed in the US.

Mandatory Background verification can help safeguard the employees and make the work environment friendlier.

Small and medium size enterprises that conduct background verification feel they know their employees better.

Background verification companies are battling forged resumes, fake credentials, fake references, outdated or smudged

identity proof which can logically only be tackled by a centralized database of the working population.

REFERENCES

1. Anonymous. (2004). How to Do Background Checks Properly. Proquest , 81, 11.

2. Burns, K. P., Frank-Stromborg, M. E., JD, Y. T., & Herren, J. D. (2004). Criminal Background Checks: Necessary

Admission Criteria? Proquest , 43, 125-129.

3. Doty-Navarro, S. C., & Kleiner, B. H. (2000). How to effectively check references and perform background

investigations of job applicants, 23, 56-62.

4. Don, E. L. (2013). Background Checks: When and How to Use Them, 9, 17-20.

5. Fiesta, J. (1999). Greater need for background checks. Nursing Management , 30, 26.

6. Lapidus, L. E. (2013). Criminal Background Checks Can't Remain in the Background Anymore, 215, 16-17.

7. (2014). New background check survey reveals security issues in the screening process. Cygnus Business Media, Inc.

Retrieved from www.SecurityInfoWatch.com.

8. Schwartz, K. D. (2005). The Background-Check Challenge. InformationWeek , 59-60,62.

9. Steinbach, S. E. (2005). Background Checks: A Useful Tool, to Be Used with Care. Proquest , 8, 12.

10. Retrieved from

http://www.researchgate.net/publication/236984285_MEASURING_THE_EFFICIENCY_OF_SERVICE_DELIVERY

_PROCE...

11. Retrieved from http://www.srmuniv.ac.in/sites/default/files/files/mba_summer_training_format_2012(1).pdf

12. Retrieved from http://www.studymode.com/essays/The-Impact-Of-Development-Induced-Displacement-1810941.html

*****

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http://www.researchgate.net/publication/236984285_MEASURING_THE_EFFICIENCY_OF_SERVICE_DELIVERY_PROCE...

http://www.srmuniv.ac.in/sites/default/files/files/mba_summer_training_format_2012(1).pdf

http://www.studymode.com/essays/The-Impact-Of-Development-Induced-Displacement-1810941.html





PERILS OF AUTOCRATIC LEADERSHIP:

A CASE ON PRIVATE LIMITED COMPANY IN JAMMU & KASHMIR

Dr. Shahid Amin40 Dr. Shilpy Singh41 Dr. Rakhi Chauhan42

ABSTRACT

The case is based on ongoing approaches at one of the Private Limited Companies in the J&K State. The company frequently

advertises for the different profiles, selects the promising lot and proceeds with the terminations. The company although a ten

year old set up does not have any fixed policy in place. The arrogant leadership on part of COO adds to frustrations not least

for the best and hardworking employees. Moreover, the company based on the market feedback could have been more

promising and successful if worked on its rough and tough attitude. The employees feel more than happy in leaving the

company. This poses a bigger challenge for the company to sustain.

KEYWORDS

Peril, Terminations, Frustrations, Dictatorial, Attrition etc.

INTRODUCTION

Leadership is a social influence process in which the leader seeks the voluntary participation of subordinates in an effort to reach

organization goals, a process whereby one person exerts social influence over other members of the group, a process of

influencing the activities of an individual or a group of individuals in an effort towards goal achievement in given situations, and a

relational concept involving both the influencing agent and the person being influenced. Effective leadership is the extent to which

a leader continually and progressively leading and directing his/her followers to the agreed destination which is defined by the

whole group. Leadership style is the pattern of behaviors engaged in by the leader when dealing with employees. Lewin, Lippit

and White (1939) identified three leadership styles, which are Autocratic, Democratic and Laissez-faire.

Schwartz (1987) found a high submissiveness among workers in democratic organizations, but those in autocratic organizations

expressed frustration and anger. Hayers (2000) found that workers who fell under pressure reported autocratic supervision on the

part of their leaders. The leaders rarely allowed them to participate in the decision-making. It was also reported that workers who

were under stress also reported harsh supervision and control on the part of their leaders (Hayers, 2000).On these lines of study,

we did a case study on shortcomings of autocratic leadership based on personal observation at one of the private limited firms in

the state of Jammu and Kashmir.

HIRING BY THE COMPANY

The company called applicants for interviews for various posts. The company is a ten-year-old family business controlled by the

COO (son of the family). The company deals in processing of food products and claims to have bagged many awards for its

business excellence. One among the applicants on interview date with others began to share some vital information about the

company. The discussion related the applicant’s relative, an existing employee with the company and had suffered at the hands of

employer and the high attrition in the company. The discussion was also held that the company had gone for mass firing with its

previous employees. The group members kept calm, hopeful, and trying to motivate themselves by one or the other support views.

The group who was engaged with the company related discussion were all selected and given different roles and asked to appear

for induction. The Induction ended up with the other round of interview by the COO. Some of the applicants were selected with

their interested profiles while others were given different roles with the first time experience. Some of the selected ones were

ousted in few days’ time after failing in their market assignment presentations and supported by deductions in their promised

salaries.

PROMISES AND WORK SPIRIT WITH THE NEW EMPLOYEES

The company was being reshuffled and different roles were assigned to the employees. The newly team was hired for both

internal as well as the external functions of business. The mangers appointed were Manager Administration, Manager HR,

Manager MIS, Production Manager, Sales Managers, Sales Officers and Executives. The company had appointed Area sales

managers (ASM’s) for the first time who were assigned total charge of sales teams of different regions of Jammu and Kashmir.

The new managers were called frequently by the COO for meetings and given hope that if they perform will fetch best rewards in

the industry. The managers were told that they have to treat the company as a newly startup when it was already a ten year old

40Assistant Professor, School of Business, ITM University, Madhya Pradesh, India, [email protected] 41Assistant Professor, ITM School of Business, ITM University, Madhya Pradesh, India, [email protected] 42Assistant Professor, ITM School of Business, ITM University, Madhya Pradesh, India, [email protected]








setup. No records and policies were at the support and thus new managers were required to formulate new policies for the

successful and transparent operations of business. Meetings became the routine of the day with the managers trying their

smartness for their dominance. The new employees being hopeful for their good career started work with enthusiasm and on a

high note.

ORGANIZATION: MORE OF A PRISON

The COO started claiming high market share and dominance in the market and thus began to press for more and more sales with

no compromise. Few among the old surviving and disgruntled employees started dictating terms to new employees and leading

further to their demotivation. The employees throughout the day used to be deeply attached to their work and with no time to

relax. The organization gradually turned into a prison place for the employees who were even required to seek a pass to move

outside the factory gate. The weekly holiday cancellation became the routine and employees used to absorb the frustrations to hear

the cancelled holiday. The office timings were strict from 9 A.M to 6 P.M but in extra, the employees routinely were taken to task

and forced to sit even more lately. The managers at times ended up meetings at late nights and hardly anyone at the recuing side to

offer them shelter. The words from Horse’s mouth (COO’s) use to be company policies and at times sustained for seconds’ time

and defeated the good works of the employees. The employees dictated to give business a priority and deviate from other aspects

of social life had begun to feel the heat.

INTERNAL ISSUES: DEFEATING THE GOOD INTENTIONS OF NEW EMPLOYEES

The internal issues slowly were exposed and the old employees tried their tactics to backbite others. The old employees were

never supportive and defeated the good intentions of the new ones. The COO no less a curser discussed their replacements with

the new managers. However, the same old employees marked their demanding presence at the decision-making policies. It was

also leaked that few of those old employees were many times terminated and called back by the COO himself.

FAITH AND SPIRIT LOST

The COO well known in the State for his firing employee habits continued the trend. The terminations were very well supported

by foul play of the seniors. The COO openly began to criticize the employees he felt underworked which in reality was the

opposite. The employees having hardly any say in the decisions lived a life of fear. The Area sales managers who were recruited

to control entire sales teams were never given the authority. In addition to the key HR issues, research and market feedback for

products was never taken valid and employees cursed thoroughly.

The State then witnessed a disastrous flood, which massively affected some of the company’s main distributors. The company

functioning was also hit and added further to its losses. The COO began with a pomp show to help the flood affected and covered

by the media. The employees of the company who were extremely hit by floods never received any support and even had to be

thankful for their earned salaries. The COO’s intentions were exposed and left a dent on the spirits of employees. The employees

whispering frustrations began to wish for a good time to leave the company with faith and spirit lost.

POST FLOOD: TOUGH WORK SCENARIO

Post flood scenario led to the more tough time for the employees. They had to work at stretch with no break for a month. The

volatile policies and targets further added to chaos and confusions. Employees were not even speared on grand festival days’ and

dictated to leave the factory at late when there was no work to perform. Two of the newly promising mangers were again given a

notice to leave with one held guilty for the other manager’s small and avoidable mistake. The executives were also not speared

and asked to wind up the department. The managers handed over the company possessions with a good feel to leave the company.

The terminations were again smelled a foul play on part of seniors who were unwilling to tolerate the honesty of new employees.

The employees leaving were congratulated by the colleagues on witnessing the pathetic situations in the company. The company

again made recruitments and within a months’ time is again going through the cycle of terminations. It may have been the same

story for the newly hired to treat the company as a new setup and ultimately firing within a months’ time.

CHALLENGES TO SUSTAIN

Although one among the brands of the company is doing well in the market, but other brands is a proven failure. The continuous

firing policy of company has started reaping and limits it to attract productive manpower. The company frequently comes out with

the advertisements for the same profiles and then proceeds with the terminations. The dictatorial leadership and volatile policies

on part of COO adds to frustrations for the employees. Moreover, the company based on the market feedback could have been

more promising and successful if worked on its rough and tough attitude. All this promises a bigger challenge for the company to

sustain.





TEACHING NOTES

This teaching note is intended to assist instructors teaching the case “Perils of Autocratic Leadership: A case on Private Limited

Company in Jammu and Kashmir”. It includes abstract, teaching objectives, the methodology that was followed to collect data.

The note also provides indicative lead questions that the instructor can ask with possible answers. However, the instructor is free

to use his/her own set of lead questions.

LEARNING OUTCOME

Understand the nature and challenges of small businesses.

Understand perils of autocratic leadership.

Understand the challenges of family run businesses.

Understand the implications of politics and volatile policies within the small businesses.

METHODOLOGY

The case is prepared based on the personal observations.

TARGET AUDIENCE

Management and commerce Students

Executives from MNCs

Business school administrators etc.

LEAD QUESTIONS

Reflect on your role in the position of Entrepreneur.

Comment on the ethical issues present in the case.

Is Entrepreneurial dictatorial nature always destructive? Discuss the good and bad of the dictatorial nature of

entrepreneur.

Discuss strategies to counter the volatility and the employee frustrations.

Discuss to which extent a company must advertise related to its job openings. Also, discuss implications of continuous

hiring and firing in the company.

TIME FRAME FOR CASE DISCUSSION

Cumulative Time Topic Content

0-10 Minutes Introduction Discuss the nature of the company and its hiring process.

10-30 Minutes Decision Point

questions

Discuss the sustainability of entrepreneur decisions /

volatile policies and its implications.

30-45 Minutes Stakeholder Analysis Discuss how the overall company and the society are influenced.

45-60 Minutes Conclusion Conclude the case study with major takeaways.

REFERENCES

1. Bass, B. M. (1985a). Leadership and performance beyond expectation. New York: Free Press.

2. Burns, J. M. (1978). Leadership. New York: Harper & Row.

3. Bhatti, Nadeem. (2012).The Impact of Autocratic and Democratic Leadership Style on Job Satisfaction. International

Business Research, 5(2).

4. Retrieved from http://www.justanswer.com/multiple-problems/6vpdz-fivestarlaw.html

5. Retrieved from http://in.linkedin.com/pub/dr-shahid-amin/24/882/563

6. Retrieved from

http://www.studymode.com/essays/Establishing-Ground-Rules-And-Promoting-Appropriate-1531114.html

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