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Serci Group Plc Cultural Expansion into India

ABSTRACT

The Serco Group is ranked 99th number in the stock exchange market of the UK with market capitalization of ?4,646.4m in 2011. The financial crisis of 2008 had no impact on the company and recently Serco acquired an Indian outsourcing company “Intelenet”. The paper is focusing on the use of Hofstede’s framework to assess how the cultural differences may hinder or promote the potential growth of Serco group in obtaining sustainable competitive advantage within the territory of India. The findings suggests that it is favourable for Serco Group to carry out its operations in emerging markets such as India where culture is flexible in accepting changes.

1. INTRODUCTION

The Serco Group plc is a service based multinational organization that was formed in 1929 in the United Kingdom and now has its subsidiaries all around the World including Europe, North America, Middle East, and the Asia Pacific. The company’s core segments include transportation, defence, science, civil government, and private sector where different types of services are provided such as information and communication, Business Process Outsourcing (BPO), home affairs, health and educational, and detention centres and prison services (Serco group, 2012). The paper aims to focus on the use of Hofstede’s theory to assess how the cultural differences may hinder or promote the potential growth of Serco group in obtaining sustainable competitive advantage within the territory of India.

2. The Process Model of Internationalization

Internationalization can be defined as “…the process of increasing involvement in international operations” (Welch and Luostarinen, 1988, p. 36). The first process model ‘Uppsala model’ so-called U-model, was formulated by Johanson and Wiedersheim-Paul (1975) which describes the “factors distributing the flows of information between firms and markets on the basis of language, culture, education, system, and industrial development” (Buckley and Ghauri, 1999, p. 29).

The model explained that it is necessary for any company to assess the target company on the basis of above stated factors in case of takeover, acquisition, or merger especially in the foreign markets. Undoubtedly, Serco has a successful experience of international investments but Indian market is different from other markets especially in terms of culture. Therefore, it is the best practice to assess Indian market using an appropriate cultural model.

3. THE IMPACT OF CULTURAL DIFFERENCES

There is no doubt that Indian market is one of the highly emerging markets in Asia but there are many cultural differences between developed (e.g. UK, USA, and Europe) and developing markets (e.g. India and China) that may hinder or promote the growth of sustainable competitive advantage within the region. Among few well-known cultural theories such as Usunier (1998) and Hofstede (1980), Geert Hofstede’s theory has great significance in the literature in terms of reviewing cross-cultural dimensions. The Hofstede cultural theory is based on five fundamental principles such as Power Distance, Individualism, Masculinity, Uncertainty avoidance, and Long-term orientation.

The power distance measures “the extent to which the less powerful members of the company accept and expect the unequal distribution of power” (Samovar et al., 2011, p. 24). India has quite high power distance index (i.e. 77) that shows the inequality of power and wealth within the region. It also indicates a centralised and bureaucratic organizational hierarchy where subordinates follow the instructions of bosses. The growth of any company depends on the spread of information throughout the hierarchy of the organization and in case of India Serco may face problems in sharing information due to a strong organizational hierarchy and bureaucratic styles which may lead to unawareness and even radical breakthroughs (Williams and McGuire, 2005). Similarly, Herbig and Dunphy (1998) and Seleim and Bontis (2009) argued that high level of power distance and bureaucracy demonstrate high level of corruption that causes to reduce creative activities and also affects the growth of the company.

India has low individualism level (i.e. 48) so-called collectivism that shows the flexibility of Indian people in joining a large group on the basis of profession, religion, and other collectivistic traits (Hofstede, 2001). Sinha (1997) pointed out that individualism exists in the Indian corporate culture due to the Western management that is resulting in to promote the Western work culture in the country. Therefore, Indian business culture has same traits and practices as Western businesses. On the basis of individualism level, it can be said that Serco group plc can get considerable success in the future whilst working in India.

India is a masculine based economy and Indian people like to be successful in terms of performance and ambition of the work. In fact, India has 3rd highest ranking in Hofstede’s dimensions (i.e. 56) against the world average 51 (LeFebvre, 2011). Shane (1993) and William and McQuire (2005) proved that masculinity has no impact on the growth of the company but Song and Parry (1993) argued that the formalised roles are important in lessening the negative practices and reducing the conflicts that results in prominent growth. However, it depends on Serco’s policies to keep balance between assertiveness and modesty.

The uncertainty avoidance index of India is not far high (40) that shows a medium or low preference to avoid uncertainty. It means that Indian people are mostly flexible in accepting imperfections and their tolerance level is high (Samovar et al., 2011). Shane (1993) and Williams McQuire (2005) explained that the growth of the company could be affected from the cultures with strong uncertainty avoidance where people are reluctant to accept changes. In contrast, it is also known that “cultures with strong uncertainty avoidance have strong tendency to defend intellectual property with patenting” (Kaasa and Vadi, 2008, p. 8). This must be understandable to Serco group’s regional managers that thought-process gap towards future is not enough between Indian and UK employees. Therefore, working together on difficult problems could be much easier for Serco management in achieving growth.

The long-term orientation level of India (61) is very high because the country follows a religious concept “Karma” which states a cause-and-effect relationship between all that has been done and all that will be done (Siddiqui, 2008). This is in fact the remarkable characteristic of Indian culture which is making grounds to attract international investments. For Serco, this must be the most critical point because establishing long-term relationship is always very important for any company in terms of achieving strategic objectives. But on the other hand, Seleim and Bontis (2009) believe that the societies with high long-term orientation score typically neglect the lack of punctuality.

4. CONCLUSION

Serco group plc is already providing services in Europe, North America, Middle East, and Asia but the cultural differences always matter in obtaining competitive advantages when a company invest internationally. By applying Hofstede’s framework on India, it can be said that Serco may face few challenges due to high power distance and bureaucratic styles in the organizational hierarchy of Indian corporate culture. But on the other hand, Serco may adjust themselves to carry out their operations in terms of low levels of uncertainty avoidance and individualism. In addition, the long-term orientation level of India is the strongest point for Serco in order to achieve long-term objectives and short-term goals.


REFERENCES
Buckley, P. J. and Ghauri, P. N., (1999). The internationalization of the firm, 2nd edition, Cengage Learning EMEA
Burns, R. (1998). Doing business in Asia- a cultural perspective. Melbourne: Longman
Herbig, P., Dunphy, S. (1998). Culture and Innovation. Cross Cultural Management, 5(4), pp. 13–21
Hofstede, G., (1980). Culture’s Consequences: International Differences in Work related Values. London: Sage Publications
Hofstede, G., (2001). Culture’s consequences: comparing values, behaviors, institutions, and organizations across nations. 2nd edition, Sage Publications
Johanson, J. and Wiedersheim-Paul, F. (1975). The Internationalization process of the firm – for Swedish cases, Journal of Management Studies, 12(3), pp. 305 – 322Kaasa, A. and Vadi, M., (2008). How does culture contribute to innovationEvidence from European countries, Master Thesis, Tartu: University of Tartu
LeFebvre, R., (2011). Cross-Cultural Comparison of Business Ethics in the U.S. and India: A Study of Business Codes of Conduct, Journal of Emerging Knowledge on Emerging Markets, 3, pp. 391 – 409London Stock Exchange, (2012). The key fundamentals, [online], Available from: www.londonstockexchange.com [Accessed: 05 April 2012]
Samovar, L. A., Porter, R. E. and McDaniel, E. R., (2011). Intercultural Communication: A Reader, 13th edition, Cengage LearningSeleim, A. and Bontis, N., (2009). The relationship between culture and corruption: a cross-national study, Journal of Intellectual Capital, 10(1), pp. 165 – 184

Serco group, (2012). Markets, [online], Available from: http://www.serco.com/markets/index.asp [Accessed: 04 April 2012]
Shane, S., (1993). Cultural Influences on National Rates of Innovation, Journal of Business Venturing, 8, pp. 59 – 73Siddiqui, M. H., (2008). Philosophical & Socio. India: APH PublishingSinha, J. (1997). Indian perspectives on leadership and power in organizations. In H. Kao & D. Sinha (Eds.), Asian perspectives on psychology (pp. 218-235). Thousand Oaks: SageSong, X. M. and Parry, M. E., (1993). R&D – Marketing integration in Japanese high technology firms: hypothesis and empirical evidence, Journal of marketing academic science, 21(2), pp. 125 – 133

Stock Challenge, (2012). The FTSE ranking, [online]. Available at: www.stockchallenge.co.uk/ftse.php[Accessed: 05 April 2012]Taylor, S. J., (2005). How do Hofstede’s Dimensions correlate with the World’s ReligionsInternational Business Centre, 2(1)
Usunier, J-C., (1998). International and cross-cultural management research, Sage Publications
Welch, L. and Luostarinen, R., (1988), Internationalization: Evolution of a Concept, Journal of General Management, 14 (2), pp. 36 – 64
Williams, L. K., McGuire, S. J. J. (2005) Effects of National Culture on Economic Creativity and Innovation Implementation. The Institutions of Market Exchange. Conference Proceedings, Barcelona

APPENDIX I

Figure 1 – Comparing India with UK and USA

Source: http://geert-hofstede.com

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Colonialism and freedom struggle in India

Introduction:

Khilafat Movement (1919-24) was a religious-political campaign launched by the Muslims for having possession of the Ottoman Caliphate or Khilafat-e-Usmania and for not letting the Muslim holy places go under the control of the Non-Muslims. ‘Khalifa’ is an Arabic word derived from the root ‘Khalafa’ which means ‘to follow’ or ‘to come after’.

During the 1st World War Turkey supported Germany as the country was facing massive problems. But Germany started losing its territory and so does Turkey. Turkey had lost most of its territory in 1918 by the end of the 1st World War. During that time the main dilemma was how the allied powers would treat Turkey, the Ottoman Empire or the Khilafat-e-usmania as most of its territory had been occupied in this Movement.

Turkeybeing a Muslim country, the Indian Muslims realized their religious duty to help them. The other reason for supporting them was that the Indian Muslims considered Ottoman Caliphate a symbol of unity of the Muslim world as Ummah.

Ottoman Caliphate:

‘Caliph’ is an Arabic word which means “a successor” or “a representative” which emphasizes religious authority for the head of state. The Islamic system of governance in which the state rules under Islamic law is known as Caliphate.

To protect the Ottoman Empire from the Western countries and to overcome the Western democratic opposition inTurkey, Ottoman emperor Abdul Hamid II had launched a Pan Islamic program. This program expressed religious passion and sympathy amongst Indian Muslims.

Goals:

Following were the goals of the Movement:-

Ottoman Caliphate should be kept secured.
Turkey’s territorial harmony should be preserved.
Not letting the Muslim holy places go under the control of the Non-Muslims.

Effects:

InIndia, this was the first religious-political Movement which gathered the common man. The Indian Muslims demanded certain safeguards from the British and they started interacting with the other communities and the Congress Party. But during that time from 1906 to 1919 politics was restricted to only educated people and also people who had enough money to spare the money involved in the politics.

However it was due to Khilafat Movement where common man gathered or the ordinary Muslims were involved, people were on streets protesting. This was the 1st Movement inIndia to get common people involved in the politics.

Mobilization Capacity of Islam:

Khilafat Movement also showed the mobilization capacity of the Islam amongst the Muslims. It also conveyed how Islam and Islamic institutions are precious to the Indian Muslims. Thus it clearly indicated that Islam had had a lot of mobilization capacity and appeal for the common man inIndiaand elsewhere.

Extra-territorial Attachments:

Another characteristic of this movement is that it points out the extra-territorial attachment of the Muslims of India based on Islam. The meaning of extra-territorial is that people feel attached to a certain institutions, ideologies, beliefs that may be beyond the territorial boundaries of their own countries. And these extra-territorial attachments have always been very strong in Muslims which are based on Islam.

Concept of Ummah:

The concept of Ummah is that Muslims residing in any part of the World belongs to an ideological brotherhood of Islam. It is a community based on the beliefs, teachings and principles of Islam. And therefore the concept of Ummah had a lot of Muslims coming forward during the Khilafat Movement.

The Institution of Khilafat:

The Indian Muslims paid much more attention to Khilafat-e-Usmania whose primary seat was inTurkeywhich had continuity from the original institution of Khilafat in Islam. Institution of Khilafat was the second aspect which created extra-territorial sentiments amongst the Muslims.

The Balkan wars:

If you go back in the history to 1911-12 you will find the Balkan Wars. This war clearly signifies the strong sentiments of the Indian Muslims for other countries. During that period there was a war between Turkey and Italy and Italy was also attackingLibya.Turkeywas facing massive problems therefore the Indian Muslims sent medical delegation to provide medical assistance to the people affected by war. And now the Indian Muslims in 1919 are showing the same sentiments on the bases of Ummah. Therefore there were a lot of emotions and a lot of support for the possession of Khilafat Movement. These were some of the reasons why Khilafat Movement is so important.

Dimensions:

The writers and poets in Indiawere focusing on themes such as the generation and the decline of the Muslims, this all happened during the first three decades of the 20th century. And their writings clearly portray the feelings for the preservation of Khilafat and the possession of the Muslims holy places. The key role was played by the journalism which steer the direction of the struggle. There were many other themes by the writers and the poets which shaped the movement and recovered the problems faced by them.

Zamindar of Zafar Ali Khan, Comrade and Hamdard of Maulana Muhammad Ali Jauhar, and Al-Hilal of Maulana Abul Kalam Azad etc. were the prominent newspapers and magazines which performed their duties to express their hatred. When these newspaper and magazines were pleading the cause of the Muslims, the Allies imposed humiliating terms on vanquished Turkey.

After the 1st World War ended,Turkey had lost many of its territories, it was in this context the Indian Muslims started a movement that is known as the Khilafat Movement.

Protests in India:

All India Khilafat Committee was formed at Bombay now known as Mumbai in July 1919 which shaped the activities of the Muslims regarding the Khilafat Movement. Their first Khilafat Committee conference was held in Delhiin 1919 where they used to discuss the issues occurring in the movement. In the first conference Congress leaders like Gandhi and Nehru also participated. It was due to Congress participation, the other major political parties join hands to assault the injustice with the Muslim community.

Following were the steps announced:

No Participation in Victory Celebrations: This was the first step taken by the participants of this Conference. As the British and the Allies had won the 1st World War they were celebrating their victory everywhere,India being a part of theBritish Empire was on the British’s side. So they decided in the Conference to boycott the victory celebration to show anger on the state of affairs and to express their point in more affective way.
Boycotting British Goods: The second step which they took is to boycott British goods, the purpose of doing this was to affect their economy. By adopting this British economy would drop drastically.
Non-Cooperation with the Government: This was the third step which they took during that time, the purpose of this was not at this stage but at the later stage they may also launch Non-Cooperation Movement.

The second Khilafat Conference which was an important one was held inAmritsarin December 1919. All the major political parties participated in this but the highlight of this Conference was that Maulana Muhammad Ali and Shaukat Ali, who were held behind bars for breaking British law in protest of British policies, also joined the Conference after their release from prison.

Without Maulana Muhammad Ali and Shaukat Ali contributions one cannot discuss the Khilafat Movement. They used to work with Congress party and also played a significant role in mobilizing the masses. They were well known as Ali brothers. The Ali brothers with several other leaders went to jail quite a few times due to shape up the Khilafat Movement and lead the Muslims. This procession happened whenever they were released.

At the end of the Khilafat Conference the Congress party decided to work together as there were similar problems inIndiawhich all of them were facing. For Muslims the Khilafat Movement was their priority compared to the other issues. Congress thought of combining up with the Muslims as they were also having problems against the British for the possession of theOttoman Empire. Congress and Muslims would have more effective movements together rather than working separately as their aim is to eliminate the British from their country. One of the issues which were faced during that time was Rowlett Act, 1919.

The Rowlett Act – 1919:

This was a kind of black law, whereby the government had the power to arrest anybody they wanted without giving them any legal facility and the right to appeal. This law was meant for any criminal activities which took place, but actually they were intern for the people involved in political activities. This act was protested by both the Hindu and Muslim communities.

The Jallianwala Bagh Incident, April – 1919:

The Jallianwala Bagh was a place inAmritsarwhere many people of different classes and societies came in order to protest against the Rowlett Act. To this protest the British government got extremely agitated and ordered the army to kill everyone present there. The gates were shut and many rounds were fired by the British. This massacre was one of the greatest tragedies thatIndiasaw. This allowed different political parties to challenge the British authority.

The Non-Cooperation:

In the December of 1920 the famous Congress session was held atNagpurby Congress leader Mahatma Gandhi. Here Gandhi adopted the non-violent and non-cooperation movement. The first movement adopted by Gandhi was the non-cooperation movement and subsequently a couple of other movements were launched. The general agreement was that:

People with British titles to their names had to return those titles, for example Sir which was given to the Indians had to be returned.
The educational institutions and courts had to be boycotted.
Anyone whose job was under the British people had to resign.
Taxes should not be paid to the British Government.
People resigning from military and police jobs would be decided at a later stage. This was not launched but could be thought about later on.

The Khilafat Conference- Karachi- July 1921:

In July 1921, the Khilafat conference was held atKarachiwhere there were mainly Muslim participants who expressed their loyalties towards the Turkish Sultan and the Khilafat. At that time they had been removed from their territory by the British powers. To dislodge foreign forces from the mainland they welcomed the efforts of the Ataturk. At that time the Ataturk was taking various steps to remove the foreign forces from their mainland ofTurkey. They felt that something new needed to be encouraged.

The Hijrat Movement 1920-21:

The main reason of why the Hijrat movement took place was that the Indian Ulama or religious leaders thought ofIndiaas ‘Darul Harab’ where the Muslims were not safe. A certain place or a country where the Muslims are not allowed to perform their religious practices and activities is known as a ‘Darul Harab’. The Muslim heads (Ulama) said that the Muslims should move to the nearest safe place that was from ‘Darul Harab’ to ‘Darul Islam’. This caused a panic amongst the Muslims in India and as suggested the nearest ‘Darul Islam’ was Afghanistan which was Hijrat. A very large number of lower class people of society left India either on foot or with the help of bullock carts as the routes to Afghanistan were not developed. The properties were sold at very cheap rates as they were moving from their place to a place in search of Islam; a large scale of migration of people was seen. At first the Indians were welcomed. Later on the border was closed as the increase in the number of people could not be sustained due to Afghanistan being a poor nation and its own problems it told the Indian migrants to move back to its own country. Due to this there were loss of lives and belongings of several Muslims. Many Muslims died during this mission. Many of the people moved to Russia(Soviet Union) as they had nothing left in India. This was the way in which the Hijrat movement ended as it was all emotion based and not planned based.

The End of the Khilafat Movement:

This was a movement where the Muslims of British India supported the Ottoman Empire to control their holy places but gradually the movement died out. The first thing which affected the movement was the Moplah revolt in Kalicut.

The Moplah Revolt-at Malabar Coast- Kalicut:

The Moplah revolt started in 1921.The descendants of Arab Muslims were called as Moplahs. In the August of 1921 there was a revolt against the Hindu landlords because of their brutal treatment towards them. This wasn’t a religious issue. The Moplahs were suffering by the actions of the landlords so they revolted against them, but the police supported the landlords. This was projected as a Hindu Muslim issue by the local Hindu Unions. Due to this there was a lot of issue against the Muslims. These issues resulted in a bitter relationship amongst the Hindus and Muslims. A negative impact was seen in the Hindu Muslim unity because of the uprising. This was a reason for the end of Khilafat movement.

The Increase in Violence – 1921:

The second reason to why the movement did not last was an increase in Violence. The Non- cooperation movement started by Gandhi was a peaceful and non violent movement. Seeing an increase in violent activities like the Chora Chori incident in Uttar Pradesh, Gandhi decided to end the Non-cooperation movement. This affected the Khilafat movement as Gandhi’s decision to end the Non-cooperation movement was not consulted with Khilafat movement leaders which thus created distrust between the two operative parties. This was another incident which weakened the Khilafat movement.

The Developments in Turkey:

This was the third reason to why the Khilafat movement ended. The Ataturk who controlled the military service emerged as leader. The powers of the Sultan were restricted. The chief of the Grand assembly was the Ataturk. Turkey abolished the Khilafat system. The Indian Muslims were fighting made no difference as the leadership had changed. This weakened the Khilafat movement in India.

Conclusions:

The Hindu Muslim unity phase was extremely short.
It was seen that religion was a way to mobilize forces and organize masses.
Extra- territorialism was the basis of the start of the movement.
The Muslims suffered in the Khilafat movement.

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Banking industry of India consists of foreign and domestic banks.

ABSTRACT

The main purpose of this thesis is to measure the market concentration of Indian banking industry after the implementation of the reforms in financial sector and also to measure the financial performance of the top five foreign banks that are operating in India. After the reforms were implemented the foreign banks are allowed to operate more freely compared with the pre-reform period. Herfindahl-Hirschman Index (HHI) method is used to measure the market concentration and accounting ratios like ROA, NIM and C/I are used to measure the financial performance.Since the entry of foreign banks in India after the reforms process, it is observed that the banking system of India is highly concentrated and the market share of public sector banks reduced from 90 % to 60%.At the same time there is increase in the market share of foreign and new private banks. In terms of ROA, NIM and C/I it is observed that the foreign banks are performing better when compared with the other banks that are present in India.

CHAPTER-1

Aims, Objectives and the Structure of the Dissertation

1.1 Introduction

The financial system of India is huge with different financial institutions and instruments. Banking industry of India consists of foreign and domestic banks. There is strict control on expansion of business for the foreign banks that are operating in India by the regulators before the reform process. After the reform process the foreign banks are allowed to expand without much control. Now there are 34 foreign banks that are operating in India. ‘The rise of Indian economy is one of the most important economic forces in the world. Since two decades the Indian economy is growing twice as fast as the rest of the world. India’s economy can surpass the Japan’s economy if the same trend continuous for another two decades’. (Morgan Stanley 2004)

Astrong banking sector is required to India to maintain rapid and consistent growth. Based on the observed results it is proved that the reason for financial crises that took place between 1980s and 1990s is because of weak banking sector. To create consistency in the financial system of India it is important to have efficiency in the banking sector. Banking system in India is strong and well developed. The visionaries and entrepreneurs of India have started most of the banks in India during the pre-independence to offer financial support to industrialists and traders of India. Banks in India have played a major role by lending finance to Indian industry thereby they helped in the growth and development of economy of India.

1.1.1 Development of Indian Banking System

Financial system of India is vast with different financial institutionsand instruments. Bery (1996) stated that banking industry in India includes domesticbanks and foreign banks. Calcutta is the place where banking in India started. Since 1858 there were foreign banks that were present in India and the first foreign bank was founded in Calcutta. Active trading port for the British Empire was Calcutta.

In 1786 the first bank was founded in India which is General Bank of India. After that the Bengal Bank and Bank of Hindustan were set up. The banks that were set up by the East India Company are Bengal Bank in 1809, in 1840 it was Bank of Bombay and in1843 it was Bank of Madras. All the three banks were called presidency banks which later merged to form private shareholders bank called Imperial Bank and most of the shareholders were European. The bank that was completely owned by the government of India is Allahabad Bank which was set up in 1865. Punjab National Bank was founded in 1894 and Bank of India, Central Bank of India, Bank of Baroda, Indian Bank and Bank of Mysore are some of the banks that were set up between 1906 and 1913. In 1935 Reserve Bank of India was established. Credit Lyonnais was the first foreign bank that was established in Calcutta in 1850s to carry out operations in Calcutta which was also an important trade port for British Empire. ABN Amro Bank, Citibank and Standard Chartered bank are other foreign banks that were setup later.

Many bank failures have been witnessed by India during American civil war and all this was becauseof few banks that were open to finance industriesand also to approximate trades in cotton. There is no supply of cotton to Lancashire by America at the time of warbecause of the huge exposureby banks in speculative trades in cottonthey could not carry on and lead to the failure of banks. There is loss of deposits and interest on deposits by the people. Public has lack of confidence in banks during this period and to make the banks efficient, the government of India initiated The Banking Companies Act 1949 and later on it is changed as Banking Regulation Act 1949. Reserve Bank of India acts as a Central Banking Authority whichhas taken strong powers for supervision of banking system in India. Imperial bank of India later on changed as State Bank of Indiathat operates as an official agent to Reserve Bank of India. It also carries out banking transactions for Union and state governments in the country.

1.1.2 Nationalisation of Banks

State bank of India is the first bank that got nationalised in 1955 while the other banks started to get nationalised later on in 1955. In the same period 14 other large banks got nationalised which resulted in rising of public sector banks share from 31% to 86%. The primary motive behind nationalising banks was to rapidly expand the branch network and secondly for channelling of credit in line with a five year priority plan. In order to achieve these targets, the banks which got nationalised were given their own targets of branch expansion and credit extension to specified groups at 33.33%. In the later years, six more banks got nationalised which increased the public sector bank share again to 92%. The second target was set in order to have a control over the banking sector, as the branch expansion should reach the poor people and also fund rising deficit. The target for priority sector lending was increased to 40% after the nationalisation of six other banks. However, there were inefficiencies in Indian banking system due to the newly introduced policies for promoting equal distribution of funds. The first phase of liberalisation took place in 1980’s to neutralize this effect. The policy changes that were introduced include preface of treasury bills, establishing money markets and finally deregulation of interest rates. The government took control over bank funds by increasing the statutory liquid ratio (SLR) to 38.5% from 25% and Cash Reserve Ratio (CRR) to 15% from 2% before 1991, which is a massive increase. Indian banking system had become an important part of the government’s spending policy by then. Along with all these, the government also took the control over the funds and interest rates on loans and deposits. There was a change in this mechanism during the early 1990’s due to the triggering of balance-of-payment crisis.

1.1.3 Banking Reforms in 1991

The Indian banking systems faced drastic problems in the late 1980’s along with the economy going down. Banking sector seemed to get very low in profit, inefficient and was not financially good. Though they saw a drastic increase in the deposits, they still were unprofitable. The return on equity was higher at the rate of 9.5% but the return on assets was very low at the rate of 0.15%. At this time Indian capital reserves were seen at 1.5% when compared with other Asian countries which were 4-6%, which was greater. The first phase of banking reforms took place under the chairmanship of M Narasinham during 1991. This committee was working on liberalisation of the banking sector. The committee worked on lessening the financial repression in the Indian banking sector by lowering the SLR and CRR rates. The committee also identified the major cause for the unprofitability as the priority sector lending and further recommended for cutting down the target to 10% from 40%. However, it was not implemented and the targets for domestic banks were 40% and foreign banks were 10% remained the same. The trouble of priority sector lending was then reduced by introducing the IT companies under them. The deregulation of interest rates was the primary component of the banking sector reforms that expected the growth in the financial savings and the financial system. Another important reform that took place in the banking industry is the liberalisation of the entry of foreign and private banks. Till the late 1990’s reforms had taken place, the Indian banking sector was uncompetitive. Due to this liberalisation seven private banks and twenty foreign banks were allowed to start their operations in India after 1994. By early 2004, the new banks that entered had collaborated and had combined share constituting 20% share of the total assets.

However, the elimination of entry barriers has brought a lot of benefits in the form of specialised skills, new technology, greater portfolio diversification and better risk management practice. Under the chairmanship of Narasimham, the committee strengthened the prudential norms and the supervisory framework.

After the reforms in the banking industry, the sector has tremendously grown and there seem to be a good competitive market in the current scenario. Hence, financial reforms have directly increased the financial performance of the banks over a period of years.

1.2 Aims and Objectives

To calculate thefinancial performance of foreign banks and their impact on the market concentrationin India is the key aim and objective of this paper. Utilisation of accounting ratios like ROA, ROE is used to calculate the financial performance and the method used to measure the market concentration is Herfindahl-Hirschman Index (HHI)

1.3 Motivation of Research

There is consistency in the economic growth of India after the 1991 banking reforms. Liberalising the foreign banks entry barrier and also the diversification is one of the major aspects of the banking reforms. Ever since the reform process is implementedthere are so many banks that started their operations in India and there were many banks that were waiting for the approval of Reserve Bank of India. There are not many papers that worked on measuring the financial performance of foreign banks and their market concentration in India. Taking into consideration these two features, have preferred to calculate the financial performance and their impact on market concentration in India.

1.4 Data and Methodology

For data and methodology the financial statements of thebanksthat are published in the particular banks websitesand also Reserve Bank of India website will be used to measure the financial performance of foreign banks and their market concentration in India. Market share of the banks is known with the financial statement which is used to measure the market concentration. Secondary data is used to collect data which is by books and online.

1.5 Structure Summary of the Dissertation

Dissertation structure is divided into five chapters .The first chapter of the dissertation is the brief introduction of the banking system of India that is followed by the aims and objectives of the research. Literature review where the theories of bankingandpast findings on the same topic are discussed in the second chapter. Data and methodology is in the third chapter. Data analysis where the results are taken and are compared with the performance of previous years in graphs where necessary is the fourth chapter. The last chapter of the dissertation is going to be brief summary of the findings, limitations of the paper, policy recommendation on the banking sector, research for the better growth and some suggestions of the research.

CHAPTER 2

Literature Review

2.1 Introduction

The developments of Indian banking system that took place in pre and post independence has been explained in the first chapter. The process of reform process which started in 1990s is also outlined. This chapter explains the economic growth in India since financial reform started in India. The financial system in India and banking reform steps that has supported the strong economic growth is also explained in this chapter. The past finding done on financial performance of banks and the impact on market concentration by foreign banks is followed in the next sectionand the last section is followed by the theories of banking.

2.2 Economic Growth in India

There is significant change in the growth of Indian economy after the financial reforms in India in 1991. India is the fourth largest economic power in terms of Purchasing Power Parity (PPP) and is expected to become third largest economy in terms of PPP by surpassing Japan. India is considered to be one of the few markets which offer high degree of growth and earnings potential in all areas of business. India was very muchsemi-socialist economy until the year 1991.Foreign investments was not welcomed and in establishing new business there were several structural and self-important impediments. The entrepreneurial talent is seen with the opening up of Indian economy in 1991 and in less than two decades India is identified as the next economic superpower of the world. Average annual growth of 7.6% during the tenth plan has been recorded and target of 9% growth for eleventh plan has been set. Service sector which contributes more than 50% of India’s Domestic Product (GDP) is one of the structural changes achieved by the Indian economy.

2.3 Overview of Indian Financial System

Financial system of India consists of insurance companies, capital markets, mutual funds, postal services; developmental financial institutions and banks .To support the growth of the economy financial system should be stable and efficient .So there is need for regular supervision. There are independent regulators for insurance companies, capital markets and banks in India. In the next section there is a brief introduction on these financial institutions and regulatory bodies.

2.3.1 Insurance Companies in India

The system by which the losses faced by few are spread over a large group uncovered to same risk is insurance. For the uncertainties of life insurance policies are considered to be safe heavens. These policies help as financial support to the individual apart from mitigating the risk.

There is long history for insurance companies in India which way back in 1818. Oriental Life Insurance Company was the first company which was established by Europeans in Calcutta. It was a British company and established to serve the needs of the European community. Bombay Mutual Life Assurance Society whichstarted its operation in 1871 was the first Indian insurance company. All life insurance companies were nationalised in 1956 and non-life insurance companies are no different. The first non-life insurance company was Triton Insurance Company started in Calcutta. Non-life insurance companies are nationalised in 1972.Four subsidiaries: the National Insurance, Oriental Insurance, United India Insurance and New India Assurance Company Ltd were formed with General Insurance Corporation of India (GIC) which is a holding company. For over three decades insurance industry is regulated by these companies.

After liberalisation the marketswere opened for private players to set up and provide insurance services. Four insurance companies from GIC were separated by the government to operate independently. New regulatory body called Insurance Regulatory and Development Authority (IRDA) has been set up by the government. Maximum of 26% of foreign equity stake is allowed by IRDA in domestic insurance, reinsurance companies and insurance broking firms.

IRDA specified solvency margin for insurance companies. As specified by IRDA; Required Solvency Margin (RSM)-1 is based on 20% of the higher of gross premiums multiplied by a factor specifies by IRDA and RSM-2 is based on 30% of the higher of gross net incurred claims multiplied by a factor. For non-life insurance and for rural business the statutory requirement in the first financial year is 2% of the gross premium income, 3% in the second year and 5% within the next three years.

2.3.2 Postal Services in India

Postal services in India is considered as the largest network in the world with over 155,000 post offices spread all over the country as on March 2001.Postal services play an important role in rural areas and 89% of the post offices are located in rural areas. Banking services are also provided in these areas. Different kinds of accounts like savings account, recurring deposit account, monthly income account and time deposit account are offered by the post offices. Apart from these services they also offer various types of savings and tax savings instruments like national savings certificate, public provident fund and so on.

2.3.3 Capital Markets in India

One of the important sources for companies to raise capital is the capital markets and this will provide opportunity for the company to be traded publicly. Further capital can be raised by selling the shares of ownership of the company in public markets. There is growth in the capital markets with the establishment of Bombay Stock Exchange in 1875 and Ahmadabad Exchange in 1894 and 22 other exchanges in differentparts of the country.

There are many difficult times that were seen in the Indian stock markets like wealth and expenditure tax imposed by the government in 1957,tax on bonus issue and dividend freeze in 1959 and 1962 china war which led to the increase of domestic prices and ban of commodity trading in 1966.There has been good time apart from the difficult times like participation of retail investors and multinational companies which operate in India were asked to reduce foreign shareholding to a certain percentage. The reforms that took place in 1990s were beneficial for the stock market to move northward directionand retail interest towards capital markets. By removing long term investment gains tax, implementing short term gains tax the reform process was carried. Since then there is steady growth in the market. Even though the Indian markets were notfully developed there have been scams like price manipulation. Securities and Exchange Board of India (SEBI) was set up 1992 to tackle such problems and to regulate and supervise the capital markets in India. Powers were obtained by the SEBI and operations were started in 2000. NSE was set up in 1984, online trading started in 1995, derivative trading in 2000.The major developments seen in the Indian capital markets are the prevention of insider trading act, introduction of fraudulent trade practice act, takeover code and corporate governance norms. With these developments Indian markets have been made safer and also attracted the foreign institutional investors.

2.3.4 Mutual Funds in India

A group of investor’s fund which is operated by a fund manager in order to purchase diversified portfolio of stocks and bonds is called a mutual fund. Mutual funds are considered as instruments of investing money and they protect the common investor who cannot compete and understand the stock market.

UTI which was set up in 1963 is the first mutual fund in India and was a joint initiative of Government of India and Reserve Bank of India (RBI).Before the non-mutual funds have entered, UTI is only institute operated for almost 30 years. It consists of Life Insurance Corporation (LIC), GIC and Indian mutual funds and public sector banks. Entry of private players in mutual fund industry started in the year 1993.According to the changing market environment the mutual fund regulations are revised from time to time. SEBI acts as a regulatory body for mutual funds in India. The formulation of policies for mutual funds is done by SEBI and it also regulates to protect the interest of the Indian investors.

2.3.5 Banking in India

Like many countries, in India too banks play a major role and are the common monetary area. Banks act as financial intermediaries in channelling funds from the savers to the borrowers who are in need of funds. This will help to use the resources in better way and leads to the economic growth of the country. Before 1990s Indian banking sector is considered to be highly concentrated and there is steady decrease after the banking sector reforms in 1991.Indian banking industry is dominated by the public sector banks because of their branch network and their ability to enter into rural areas. Public sector banks have accounts for nearly 90% of total deposits and advances in 1990-1991 but there has been decrease in the percentage share to 80% with the start of the reforms.

Concentration refers to the degree of control of economic activity by large firms. Usually the prices of the financial products are brought down by the competitive markets and it also increases the efficiency of the sector. Growth can be promoted by the concentrated markets by providing credit to the industries but it has impact when the customer is concerned and agency problem, high interest rates and banking costs is caused by the lack of competition.

`2.3.5. 1 Structure of Banking Sector of India

Banking sector of India consists of scheduled and non-scheduled banks and central bank acts as their regulatory body. The banks which do not satisfy the conditions required by the second scheduled of the banking regulation act of 1965 are considered as non-scheduled banks and the banks which satisfy the conditions as per the second scheduled banking act are considered as scheduled banks. The criteria laid down by the second scheduled banking act is :first, to have paid up capital and reserves of not less than RS 500000 and second, to satisfy the central bank that it affects are not affected in a way against the interest of the depositors. Classifications of scheduled banks are into scheduled commercial banks and scheduled cooperative banks. There is further classification of scheduled commercial banks which are into four categories and they are:

Public Sector Banks

History of the Indian banking system is over 200 years and there have been many transformations in the banking industry since independence. Public Sector banks dominate the banking in India. But the competition can be seen with the start of the banking reforms. There are 28 Public sector banks in India out of which 8 are State Bank of India (SBI) and its subsidiaries. List of public sector banks are mentioned in the appendix.

Private Sector Banks

Since the establishment of banking system in India there is public sector banking in India. IndusInd bankis the first public sector banking. The bank which has promoted a world class institute and also considered as the tenth largest development bank in India is IDBI. Housing Development Finance Corporation (HDFC) is the first private sector bank to get principal approval from the central bank of India. For the development of banking industry in India public sector banks have played a major role and also made Indian banks more efficient and customer friendly. There is a list of private sector banks in India given in the appendix.

Foreign banks

Banking industry in India has become more efficient and competitive with the entry of foreign banks. Latest banking technology and practices are brought to India by the foreign banks. Central bank of India controls and supervises the foreign banks. Until the banking reforms period foreign banks were restricted upon opening of new branches in India. There is a list of foreign banks in India given in the appendix.

Regional Rural banks

There are regional rural banks in India since the beginning of the banking system. Regional rural banks focus mainly on the agro sector. They progressed into all the areas of the country and also helped in the economic growth of the country. There are 30 Regional Rural Banks in India under State Bank of India which are called RRBs. The percentage of rural banks that are present in the remote areas is more than 90%. There are only few banks that operate in the rural areas for the development of the areas apart from the SBI and the banks are

National Bank for Agriculture and Development

Sindhanur Urban Souharda Cooperative Bank

Haryana State Cooperative Apex Bank Limited

Syndicate Bank

United Bank of India

2.3.5.2 Central Bank

The central bank of the Indian banking system is Reserve Bank of India (RBI). Most of the central banks are established in the twentieth century. On the basis of the recommendations of Hilton Young Commission Reserve Bank of India (RBI) was set up in the year 1935 in compliance with the provision of the RBI act 1934.Operations have been started by the RBI by taking over from the government. Till then Imperial Bank of India and the Controller of Currency has been performing the functions. Until 1947 RBI acted as central bank of Burma even though Burma was separated from India in 1937 and RBI also acted as Central Bank for Pakistan until the State bank of Pakistan started its operations. RBI which was initially set up as a shareholders bank was nationalised in 1949.

The basic functions of the RBI are explained in the preface of the RBI. They are

‘To regulate the issue of the bank notes and keeping of reserve with a view to securing monetary stability in India generally to operate the currency and credit system of the country to its advantage’.

Following are the main functions of RBI

First function of RBI: It is responsible for formulating, implementing and monitoring monetary policy functions in India to ensure price stability and maximum flow of credit to productive sector. Second function is supervisory and regulatory functions are performed for the Indian banking system. Guidelines of banking operations within which the country’s banking and financial system operates; to maintain confidence in the system, protect depositor’s interest and provide cost-effective banking services to the public is issued by the RBI. Third function is to enhance external trade and payment and promote orderly development and maintenance of foreign exchange market in India, foreign exchange operations in the country is maintained by the RBI. Fourth function is RBI issues currency in India and the last function is developmental functions to meet national objectives is performed by the RBI. Apart from these functions RBI also acts as a banker to the government and merchant banking function is performed by the RBI for the state and central government.

Banking accounts for all scheduled banks is maintained by the RBI.As on June 2010 domestic assets of RBI was RS 3,88,594.36 crores and RS 12,85,971.71 crores was total foreign exchange reserves. RBI net income has decreased to 27,166.12 crores as on Mar 2010 from 33,230.88 crores as on March 2009

2.4 Banking Reforms

To develop a clear and stable environment for banks and to overcome any crises banking reforms were initiated. Interest rates, pre-emption in the form of reserve requirements and allocation of credit to specific sectors are related to the reforms. One of the major parts of the reform process is deregulation of interest rates which has improved the efficiency to resource allocation. The banking reform process is gradual upon the institution of prudential regulation for the banking system.

As part of the reforms capital into public sector banks has been introduced by the government. With equity participation by the private investors there is increase in the capital base of these banks. There is decrease in the share of public sector banks to 75 percent in 2004 from 90 percent in 1991.There is improved accountability and efficiency because of the diversification of ownership.

Enhancing the efficiency and productivity through competition is one of the major objectives of the banking sector. There has been liberalisation in the guidelines forthe entry offoreign banks .Procedures for the establishment of new banks in the private sector have been implemented. There have been restrictions for setting up of new branches by the foreign banks that are operating in India tillthe reform process. To increase the competition in the banking sector there has been allowance up to 74 percent subject to guidelines issued from time to time on the foreign direct investment in private sector. This is one of the major steps in banking sector reforms.

The next step in the banking reforms is the consolidation. The providers of long term funds have been the Development Financial Institutions, while there is no clarity which is increasing over time between the finance providers of long term and short term funds. There isstudy of the difficulties thatare involved in the role and operationsof theDevelopment Financial Institutionsand one of the major initiatives towards the universal banking is the guidelines that are led by the RBI is the reverse merger of a large development financial institution with commercial bank subsidiary. In regard to the banking sector thereare Institutional and legal reforms that were carried out. To exercise good supervision there was establishment ofBoard of Financial Supervision (BFS) in 1994with specific members from the RBI board. There will be board meeting once in a month totake decisions and direction of supervision in definite cases. An integrated approach for the supervision of commercial banks, DFIs, non-banking finance companies, urban cooperative banks is also ensured. There are policies in regard to regulation and supervision and of all types of payment and settlements.

To enhance the transparencies and disclosure standards there are measures that have been carried out. There are certain matters that should be placed in the public domain like the fines that are imposed by the RBI on certain banksand alsodirections thatare issuedon certain mattersthat came up out of inspection.

The minimum capital to risk asset ratio (CRAR) is at 9 percent which is more than international standards norms. The regulatory frameworks and supervisory practices have approximately come togetherwith the best practices in the world.

There has been major impact on the overall efficiency andstability of the banking industry in India after implementation of the banking reforms. There is consistency in thenon-performing assets, return on assets and capital adequacy ratio. The need to review the manpower resources drawing strategies for the requirements and for reducing the operating cost and to increase profitability of banks is emphasized in the reform process.

2.5 Foreign Banks and Their Products and Services

Since 1958 foreign banks were present in India and Calcutta was the first place in India where foreign bank was established. The trading port for the British Empire was Calcutta. Credit Lyonnaiswas the first foreign bankto carry outthe operations of Calcutta port. At present there are 34 foreign banks that are operating in India. There was restriction for the foreign banksthat were operating in Indiatoset up branchesunlike the public sector banks. There were many new foreign banks that entered after the implementation of the banking reforms. Thereis strict control by the regulators on the merger of foreign banks with any private bank. The entry of some of the major foreign banks and the services offered by them to Indian customerswill be explained in the next paragraph.

The bank that enjoysa strong presence as a corporate bank in Indiais ABN AMRO along with wide range of global transaction services. Amro India Corporate Finance facilitates the investment banking services to the customers. Privatebankingservicesthat provides wide range of quality portfolio advisory service with a comprehensive business and carrying out platform complemented by personalised banking and customised serviceshas been launched by the bank. To deliver credit to the poor women in India especially in rural areasthe bank has launched microfinance programme through microfinance institutes.

In view that India is a major trading partner in UAE import trade Abu Dhabi Commercial bank started its business in India in the year 1980.Because of the initiation of technology, highly developed communications, refined transportation and better financial services there has been an improvement in the trade relations between the countries. Opening accounts, dematerialisation, transfer of securities, keeping track of securities, freeze or defreeze the account with respective to customer decision and there will be an option for the customer to pledge his/her securities as a collateral for personal needsare the different kinds of services that are offered by the bank to its customers.

The bank that has long traditionin private banking in India is BNP Paribas. Operations of BNP Paribas bank first started in Calcutta. There is efficient infrastructure forthe bankto provide services like corporate banking and private banking. Metro cash, rapid cash, quick cash are the different kinds of services that are offered by the bankand also customersget advises on planning their cash flows better by the BNPP forecast. Single account operation is enough removing the requirement to open collection accounts at different centres, cash management provides credit confirmation statement on the day of credit, structured MIS report for easier reconciliation, one point reference for all queries, customized MIS report to suit customer needs and also possibility of linkage with all ERP platform such as SAP, BAAN etc .All these are the main advantages for customers holding an accountin BNP Paribas.

Citi bank was set up in India in 1902.Lending actively to individualswas startedby the Citi bank and is considered as the largest consumer financier in the world. The principles that are followed by the bank while dealing with the customersareproviding superiorproducts and services to its customers, truth in lending, to consider lending to customer as a transaction but as a relationship and custodian of public funds, fast and transparent credit decisions. Customers who are holding online banking account can use the facilities like reward points can be redeemed, paying the bills through online, sending demand draft anywhere in India, facility toget statements through emails, mobile banking, registering for instant alerts and suggestions on security investment by Citi online. Shop n’ win points, securing thechild future, immediate cash facility up to three times of one’s salary are the facilities that can be enjoyed by the customers who are holding the holding Suvidah account. There is wide range offlexible and personalizedCiti bank cards that are availableand can be managed online. MTV Citibank card, Indian Oil Citibank car, Citibank silver international card, CRY card, WWF card, Times card and Citibank Cricket Visa card are some of the cards offered by the bank. Citibank direct account is considered as one of the best rates in the market.

The largest bank that is operating in Taiwan is the China Trust Commercial Bank and was set up in many countries including India. Operations of the China Trust Commercial Bank startedin India in 1996 providingthe financial support to the increasing investments of Taiwanese businessman in India. Import services like issuing documentary credits or guarantees, providing loans against import bills, facilitating discount of import bills overseas, import bills for collection, foreign remittance relating to imports using swift or telex and also provide shipping guarantee or delivery orders are different kinds of services that are provided by the bank. Packing credit, export bills negotiations, export bills discounting, confirmations and advises relating to documentary credits and export bills for collection are the export services that are provided by the bank. Foreign inward remittance using swift/telex, foreign outward remittance using swift/telex, advanced remittance relating to imports are the remittance services that are provided by the bank to its customers. Foreign exchange forward contracts, trade information related Taiwan, forex advisory services, credit enquiries of oversees parties are some of the trade services offered.

Deutsche bank is one of the top banks in financial services and is one of the largest banks in Germany. EURO 1,906 billion assets are held by the bank till the first of quarter of 2010. The bank is present in 74 countries. The bank deals with corporate banking, securities, transaction banking, private wealth management and asset management. Private wealth management, DB real estate, DWS investments, Deutsche asset management and Scudder investments are some of the services that are offered byDeutsche bank. Equities, fixed income, foreign exchange, commodities, corporate finance, relationship management, asset finance and leasing, global cash management, global trade finance and trust and securities services are the products and services that are offered to institutional and corporate clients.

The largest bank in Hong Kong is Hongkong and Shanghai Banking Corporation (HSBC). There are branches of HSBC in major cities in India. There is broad range of private and personal banking products are offered by HSBC NRI in India and oversees. The latest technology is developed and implemented by HSBC group to make efficient and easy service of banking and other related services. There is self service banking with more than 150 and many off branch ATMs, 24 hours phone banking, access to centralised database for trade and corporate banking services, transactions between all branches in the country. Treasury dealing system and well developed card system that supports credit and debit cards, master cards, VISA for domestic and international etc.

The largest international banking group in India is the Standard Charted Bank. There is 2.4 million customers in retail banking and corporate customers over 1200. Consumer banking, personal loans, wealth management, mortgages are the main services that are offered by the Standard Charted Bank. Specialisation of bank in terms of cash management, trade, and finance treasury are the services offered for the wholesale banking. Standard Charted Bank is the first bank that issued global credit card in India, photo card, picture card and the bank was the first card issuer that has been awarded ISOcertificate. International debit card, sapnay credit card are some of the innovate products that were offered to the customers in India by the bank. An overdraft is issued against the security of car, smart credit, personal credit issued to the salaried employees.

Foreign exchange services, safety deposit t boxes, providing loans on currency accounts, services to meet customer needs, term deposits, letters of credit, letters of guarantee, collections, balance reporting, wire/swift transfers, metal trading, loans on precious metals, base metals, other currency accounts, retail finance services, investment banking, commercial banking, asset and wealth management and treasury and security service these are all the other services that are offered by the foreign banks.

Since there is strict control by the regulators over the foreign banks, there is no foreign bank that entered the country through merger and acquisition or by taking over the private banks.

The foreign banks that started business in India after 2009 are Royal Bank of Scotland, UBS, GE Capital, Credit Suisse, American Express bank, Societe Generale, JP Morgan Chase bank, Barclays. The bank that has joint venture in the Indian investment banking space is Merrill Lynch. Stakes are held by Goldman Sachs in Kotak Mahindra. GE capital made its presence in consumer finance by GE Capital India.

2.6 Theories of Banking
2.6.1 Financial Stability

The important aspect of any country is the financial stability which received a greater consideration in recent times. The complete functioning of financial markets and institutes in the country without any problems is referred to as financial stability. Due to the changing trends and developments in the financial system there has been pressure on the stability of the financial markets. Greater importance of financial stability is brought by the process of globalisation, implementation of advanced information technology, telecommunication technology and deregulation of the financial sector in emerging markets.

The existence of more complex products has been brought by the great deal of deregulation and liberalisation along with technological developments. Different kinds of risks are raised by the diversification of activities by the institutions. Financial sector compared to the real economy has been expanded at a higher pace with rapid growth especially in equity, debt and derivative markets. There are wide ranges of activities that are started by the financial institutions apart from the traditional banking activities like deposits and lending loans. Financial systems are more included nationally and internationally because of the increased degree of cross-industry and cross-broader integration and also new technological developments in the banking industry. Efficient allocation of economic resources geographically and over time is promoted by the financial stability in the system. Macro economic performance of the economy, monetary stability, regulation and supervision of banking and financial institutions and other risks that influence the financial markets are the various activities that are focused by the financial stability of an economy. To maintain the strong macroeconomic dynamics it is important to have efficient financial system in the country. Financial System Assessment Programme (FSAP) was introduced by the World Bank after the banking crises in 1990s to identify the strengths, risks and vulnerabilities of financial system in member countries and to ensure the development of financial sector. To assess agreement with the international standards and codes in the financial sector including Basel core principles of Banking Supervision is the key aspect of FSAP.

There is a disagreement that less concentrated financial markets face financial risks than the concentrated markets. In general market power is increased by the concentrated banking sector and also improves profit resulting in more stable market. Banking crises is faced by the less concentrated markets and is proved from the empirical results. Because of the intense competition between the banks there was failure of US banking system in 1980s.But there is an argument that banks have higher rents and higher charter value which have market power and have several chances of bankruptcy. Banks have lower charter value and have high risk taking behaviour in competitive market.

In Indian context, RBI act 1934 did not confirm openly that RBI is going to ensure the financial stability. To maintain price stability and to ensure that there is sufficient credit in the system to support growth are the objectives of the monetary policy in India. But recently the major issue in the monetary policy is financial stability due to the institutional atmosphere and integration of domestic financial markets with global markets. To understand and develop strong similarities between the macroeconomic performance and financial stability has become very important.

2.6.2 Technological Innovation in Indian Banks

Over the last two decades there has been major impact on the nature of banking and the manner in which banks and financial institutions are organised because of the importance and development of information technology and telecommunication technology. There is need for technological innovations in the banking sector as banks play an important role in providing finance and mobilising savings especially in emerging markets compared to the matured markets. Transactions costs will be lowered and revenues will be increased with the efficient use of technology in the banking industry. Banks will be benefited to cross market and existing products to customers because of the technology. There will be development of new financial products in the system because of the technological innovation. Bad credit risks can be identified with the technology and it also reduces adverse selection of moral hazard problems. If there is no efficient method of selecting the application for the lending process the balance sheets of the banks will be seriously affected that may expose the banks to external shocks and can lead to serious financial crises.

There will be speediness in financial account reporting and timeless of public disclosures through regulatory reports with the usage of technology in the banking sector. Overall improvements of financial transparency can be ensured by public disclosures. For administrative control like better risk management system technology can be helpful to improve systems that are disclosed in regulatory reports to supervisors and in annual reports to investor, which increases bank transparency and helps the banks to reduce their cost of capital (Basel Committee, 1998). Therefore technology in banking can be competitive edge and industrial survival.

There has been increased competition within the country and outside after the Indian economy opened to foreign banks. Technology was brought to the Indian banking system by thenew foreign banks that entered India. When compared to the public sector banks, the new private banksstarted to operate efficiently after adopting the technology from the foreign banks. There should be implementation of cost savingstrategies in the banking services by the public sector banksto have a better competition both the foreign and private banks. There is an allowance for the use of technology in operations and equipment after the agreement signed by the banks union with Indian Bank Association in 1997.After the securities scandal in 1992 there was also a regulatory pressure to adopt technology. There is productivity advantage for the foreign banks and private banks over the public sector banks because they have adopted the technology early in their banking activities. When public sector banks are compared with the private sector and foreign banks there is major difference of business and profit per employee and this is shown in the below table.

Table 2.1: Indian banks performance as per employee: 1997-2001(in lakhs)

Types Of Banks

1997

1998

1999

2000

2001

Business Per Employee

Foreign Banks

Private banks

Public Sector Banks

453

464

69

649

803

80

677

621

93

571

889

110

553

750

145

Profit Per Employee

Foreign Banks

Private Banks

Public Sector Banks

5.0

7.0

0.357.4

9.0

0.83.0

7.2

0.65

5.8

9.4

0.75

2.9

7.0

0.65

Source: Annual Accounts of Scheduled Commercial Banks

2.6.3 Economic Performance

Banks act as service sector as they contribute to the economic growth of the country not by producing real goods but by allocating funds to the industries .An efficient banking system will play an important role in the economic growth. Credit allocation efficiency and the product efficiency are the two variables that are used to explain the effect of competitive market and one with market power on economic growth. Banks contribute to the growth of the country by supporting capital accretion through the supply of credit. Besanko and Thakor (1992) have observedloan and deposit market for the banks in competitive market and one with market power using theoretical model. The study found that the loan rates are decreased and deposit rates are increased in competitive market when compared with one with market power. Guzman (2000) study found that monopoly in banking tends to decrease in capital accumulation as monopoly banking system will screen credit under conditions whereas banks in competitive market would not. This study used general-equilibrium model. The end result using the model is low deposit rates are offered by thebanks with market powerand charge high lending rates. The theory that market power is damaging to consumer and growth of the country have been proved by both the models. It is also observed that competitive markets have fewer prices when compared to the one with market power. When outputs are produced at minimum cost product efficiency is obtained. In traditional industrial organisation framework this is attained through perfect competition. There are no economies of scale is seen by the perfect competition. We can expect the perfectly competitive markets to maximise productive efficiency if there are no economies of scale. If there are no economies of scale large banks with market power tend to be the product effectiveness.

X-efficiency method is one of the major methods used for measuring product efficiency. It is observed that the competitive market is related with higher efficiency. Angelini, Cetorelli (2000) proved that after the 1993 reform process the banking system of Italy has become more competitive. Schure, Wagenvoort (1999) has proved that after 1993 banking reforms in the Italian banking sector there is improvement in the X-efficiency. It is proved that the competitive market is associated with higher X-efficiency in the US banking sector by Evanoff, Ors (2002)

It is clear from the studies that there is more efficiency in the less concentrated markets than the one with market power.

Sathye, M (2002) observed that the foreign banks in India to obtain whether their presence has made any change in the market concentration and therefore increased the competition. Sathye used regression variables that are derived from prior theories to measure the market concentration and found that there is no impact on market concentration in Indian banking system by the foreign banks.

Rivera (1993) found that there is major impact in Spanish banking because of the foreign banks by using the dummy variables to calculate the market concentration.

2.6.4 Globalisation

Globalisationrevolutionised the banking industry. New technology in the banking industry is brought by the globalisation. On the other hand there are issues like impact on bank performance, banks lending pattern, and bank capitalisation because of globalisation.

There are many studies that proved that there has been improved efficiency of domestic banks because of the entry of foreign banks as they are forced to reduce cost and also decrease the spread between the rates which they charge the lenders and pay rates to depositors. There is positive impact on the corporate governance of banks because of globalisation as the foreign banks does not breakthe lending limits much as they have the fear of getting trouble by the domestic regulators and this has been proved by the studies.

There is no clarity in the lending pattern because of the entry of foreign banks in the Indian banking industry. There are some studies which proved that the performance of foreign banks is good in the developing economies in consumer finance. When business is concerned the studies by the World Bank found that there was less credit provided to the small and medium sized business by the foreign banks in Latin America while Inter-American Development Bank (IDB) found no difference in lending pattern of both domestic and foreign banks. The Financial Authority should consider how foreign banks might affect the capital of banking system. It is not possible for the low capitalised banks to absorb losses and cannot close the business without causing losses to depositors and counterparties. In recapitalising the banking system foreign banks have played an important role. $ 8.8 billion have been brought in to the banking system by the foreign banks in Mexico which is equal to 42% of the entire system. To take over the country’s two largest financial institutions the government of Brazil has taken funds from the European banks and this step made Brazil to escape from the systemic banking crises in 1990and helped in decrease of fiscal pressure.

2.6.5 Corporate Governance

To ensure effective risk management and financial stability the concept of corporate governance has become very important to banks and financial institutions. Corporate governance has become important aspect in the financial system to observe the strength of the financial system and its ability to deal with the financial shocks. The health of the financial systemrelies on identifying the measure, monitoring and controlling the risks. The Reserve bank of India is the responsible body for corporate governance in India. Banks and financial institutions of India as a part of reform process have been given measures and guidelines to improve transparency and disclosure to control risk and asset liability management. Interaction with the participants has been strengthened at both formal and informal levels.

2.6.6 Consolidation

The best way to make the acquiring bank stronger is the bank merger. By bank mergersthe scope and scale of the banks can be achieved. Banks will be benefited by the mergers as it will help them to diversify their operations across different regions and it will also help to diversify the risks. Mergers will result in cost efficiency and also improve the competitive strength when they compete in the open market with other banks. There is an outlook that has been set up by the Indian banking industry to compete with both domestic and foreign banks. Sudesha Das an Indian economist mentioned that if the banks which are on top 10 merges into 3 or 4 banksthere would be lot of difference in the Indian banking sector. Some of the mergers have taken place in India after the financial sector reforms. In order to operate private banking, in 2005 India’s largest financial institution IDBI merged with IDBI bank. Consolidation in banking sector is aimed by the government of Indiaand in addition RBI is acting as a good support. This willhelp in further mergers in banking in India.

2.6.7 Privatisation

Over thelast two decades the privatisation in banking has swept the world. The government has to authenticate privatisation in regard topromoting efficiency,to increase the revenues for the state, reducing the intervention of the government in the economy and supporting wider share of ideas, to support wider share of ownership and to the growth of capital markets is also examined. To promote efficiency in the system is the most important objective. It is also examined that the public ownership is someway likely to be with lower efficiency.

There are many studies by the agency theories onthe superiority by the private sector over the public sector. There is lack of initiativesfor the managers in the public sector as there is poor monitoring. According to the property rights, there is increase in the inefficiency in the public sector because of the failure to allocate property rights. Ultimately managers are not worried about the bankruptcy in the public sector as they expect that they would be bailed out by government.

Public sector banks in India are large and well diversified. Privatisation usually takes place in India through disinvestment of equity. Transfer of control from government to anybody else is not considered as privatisation. Government holds stake in the public sector banks ranging from 1 to 40%.The stake in non-public sector decreased to 51%.Privatisation is relatively new in India and it is part of the economic reform process.

On the data taken from the 10 largest commercial banks in 92 countries, La Porta (2000) states that where there is greater state ownership of banks will see less development in the financial sector, lesser growth and lesser productivity. Borth (2001) found that where the ownership of the banks is greater it is likely to be associated with higher interest rate spreads, lower private credit, and activity on the stock exchange is less and lesser non-bank credit.

Hence, it is understood that when the ownership is greater it is likely to be non-competitive and competition from the banks and non-banks is reduced. When the ownership of the state is greater the bank licenses for the foreign banks will be rejected more and this is proved by Borth

2.7 Financial Indicators of Indian Banking Sector

To maintain the financial stability in the country it is very important to have good and financial soundness of banking and financial institutions. The pressure on the domestic banks and financial institutions is more because of the raise in globalisation of banking as the domestic banks have to forcefully meet the international standards in regard to financial soundness. As there are new private banks that entered the competition in the banking sector is increased and also the number of foreign banks increased. In July 2006 in a report that was submitted by the committee of Fuller Capital Accountant Convertibility examined that the banking system of India will be exposed to higher market volatility. Hence it is vital to support risk management capabilitiesby the banking system of India with higher efficiency in supervision and regulatory system. . Therefore, using different financial indicators there is an effort that is made to benchmark Indian banks with global benchmark in terms of different financial indicators

2.7.1 Capital Adequacy Ratio (CAR)

To estimate the soundness of a bank, capital is used as an indicator because it acts as a final buffer against the loss that is suffered by the banks. National regulatorsspecified the banks about the minimum amount of capital that they should maintain until the successful harmonisation by the Basel Accord 1988. To keep the banks out of difficulty regulatorstried to make sure that the minimum capital requirement is maintained by the banks and financial institutions. This w ill not only help the depositors but also the wider economy. It is observed that there is major impact on the economy of a country because of the failure ofone of banks. The impact of theIndian banking reformshas played an important role on the effectiveness and stability of the Indian banking system. There should be a structure designed by the regulators to make the customers inclined towards the public sector banks. To support the diversified risk profile of banks, the regulators should promote the banks to maintain Capital Adequacy ratio (CAR) more than the supposed requirement which is 8%. To determine the bank ratingthe Capital adequacy ratio acts as an important role. Banks in India are capitalised well as there are above the international norm which is 8%.Indian banks are placed better than the Asian countries and this is because the Basel norms are accepted by the RBI.

Below is the table of t he Capital Adequacy Ratio of Indian banks.

Table 2.2: Capital Adequacy Ratio in Indian Banks as of 2000-2006

Type of Banks

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

Nationalised Banks

10.20

10.90

12.20

13.10

13.20

12.27

State Bank Group

12.70

13.30

13.40

13.40

12.40

11.95

Old Private Banks

11.90

12.50

12.80

13.70

12.50

11.69

New Private Banks

11.50

12.30

11.30

10.20

12.10

12.60

Foreign Banks

12.60

12.90

15.20

15.00

14.00

13.02

Source: Trends and Progress of Banking in India, available at: www.rbi.org.in

2.7.2 Non-Performing Assets
2.7.2 Non-Performing Assets

The main reason for the banking crises in most of the countries is the high amount of non-performing loans (NPL). This has placed the government under pressure to reorganise the banking system as a reason of government face and fiscal cost. In general high amount of non-performing loans needs reorganising the banking system, loss of employment and output besides fiscal cost. Non-performing loans differ from one country to another. The factors that are responsible for NPL in Japan and Thailand is the real estate market failure, declining in business performance of state enterprises in China, there is problem in allocation of credit and control of interest rates in Korea, exchange rate is overvalued and bank directors who are allocating credit to companies lack financial discipline. Political motivated lending is the main reason for non-performing loans in Turkey.

Stock and flow problem are the two aspects of Non-performing loans (NPL).Eliminating NPL of banks and increasing capital is dealt by stock problem. Quality of bank earnings to prevent future weakening ofbank balance sheet is dealt by flow problem. This need specialisation, better technology, cost saving and good credit assessment. Using asset management companies is the most general method used to resolve NPL problems, loan swaps and liability exchange are the other methods used to determine the NPL problem.

After the reform process NPL market of India has seen good development which is still continuing. Securities and reconstruction of financial assets and enforcement of security investment act were implemented in 2002. To improve the asset quality and capital adequacy ratio with regard to remove the bad loans has been allowed to the banks by this act.

Table below shows the comparison between percentage of non-performing assets and percentage of total assets.

Table 2.3: Percentage of Non-Performing Assets to Total Assets in Indian Banks

Type of Banks

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

Nationalised Banks

4.66

3.86

2.96

2.24

1.64

State Bank Group

3.48

2.91

2.49

1.81

1.57

Old Private Banks

4.34

3.64

3.15

2.51

1.85

New Private Banks

3.76

2.42

1.56

0.96

1.07

Foreign Banks

2.44

2.13

1.43

0.97

0.89

Source: Trends and Progress of Banking in India, available at: www.rbi.org.in

Table 2.4: Percentage of Non-Performing Assets to Total Advances in Indian Banks

Type of Banks

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

Nationalised Banks

9.72

8.21

5.82

3.81

2.69

State Bank Group

8.68

6.98

5.32

3.31

2.59

Old Private Banks

8.86

7.59

5.97

4.39

3.13

New Private Banks

7.64

4.99

3.59

1.74

1.93

Foreign Banks

5.25

4.62

2.85

1.95

1.77

Source: Trends and Progress of Banking in India, available at: www.rbi.org.in

In terms of non-performing assets public sector banks have maintained lot of ground after the financial sector reforms which can be observed by the above table. However foreign banks and some new private banks are positioned well in terms of non-performing assets.

2.7.3 Return on Assets (ROA)

The ratio of net profits to total assets is called Return on Assets of banks. One of the key indicators of profitability ofbanks is Return on Assets (ROA). Soundness of a banking system is indicated by higher ROA. It isobserved that the financial markets are placed stable even when there are unexpected shocks by higher ROA. There has been good improvement in ROA year after year by Indian banks.0.9-4.3 is the ROA in international standards. Improvement in ROA over the years is shown in the below table.

Table 2.5: ROA of Indian Banks

Type of Banks

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

Nationalised

0.33

0.69

0.98

1.19

0.89

0.81

0.85

State Bank

0.55

0.77

0.91

1.02

0.91

0.86

0.82

Old Private

0.59

1.08

1.17

1.20

0.33

0.58

0.70

New Private

0.81

0.44

0.90

0.83

1.05

0.97

0.91

Foreign

0.93

1.32

1.56

1.65

1.29

1.54

1.65

Source: Trends and Progress of Banking in India, available at: www.rbi.org.in

ROA of Indian banks shows substantial improvement. However, there should be improvement in ROA to meet the international standards which range between 0.9-4.3 by nationalised and state bank group.

2.8 Conclusion

The financial system in India is goodbut it is observed that the development of capital markets is required. From the theories of banking it is also proved that competitive markets are more efficient than one with market power. Indianbanks are well compared with global standards in terms of capital adequacy ratio, non-performing assets and return on assetsafter implementation of financial sector reforms. When compared to public sector banks foreign banks and private banks are performing in better way. Public sector banks should improve their return on assets. Competition in Indian market has been improved with the presence of foreign banks

Chapter 3

Data and Methodology

3.1 Introduction

The earlier chapter of the paper demonstrated the Indian financial system and the reforms that were undertaken which led to the growth of the Indian economy. There are many theories that led to the enhanced efficiency of Indian banking system but the very same can have detrimental effects if not supervised properly. The paper also discusses the effects of market concentration on the prices of the products and the productivity of the industry. After the liberalisation of Indian economy many foreign players have entered the country and the market share of the public sector banks fell down drastically from up 90% as many new private sector banks have come in. The new private banks also start using the technology brought in by the foreign entrants. It is thus vital to know how foreign players had an effect on the Indian market concentration. Also it is interesting to know the financial performance of the foreign banks since they implemented many technological innovations and even diversified their offerings to the customers.

The later part discusses the data and methodology used for calculating the financial performance of the foreign banks and their impact on the market concentration.

3.2 Methodology

Market concentration means the number firms present in the industry and their relevant market share. It is measured using Herfindahl-Hirschman Index (HHI) method. Here, we consider a sample of top five foreign banks operating in India to calculate the financial performance. For the purpose the study the following ratios are being used:

Return on Assets (ROA),
Net Interest Margin (NIM) and
Cost-income ratio (CIR).

Also Accounting ratios tool by bank managers, equity analysts and shareholders is used for comparing the performance of banks year over year. To measure the efficiency of banks Data Envelope Analysis (DEA) method can also be used.

Herfindahl-Hirschman Index (HHI) is the widely used method for measuring market concentration. Abbreviated as HHI, it is the sum of the squares of the market share of each firm operating in the market and is influenced by 2 factors:

1. The number of the firms present in the market and

2. Their size in the market.

HHI would be lower when: high number of firms in the market and

HHI would be higher when: low number of firms in the market and difference in their size. The formula used for measuring HHI is

Where

si is the market share of each firm

i is the market and

n is the number of firms.

But there are difficulties in using HHI method: and one of which is that one has to calculate the market share of each firm operating in the market. And also smaller firms hardly have an effect on the HHI number because larger firms have higher share. US Department of Justice (DOJ) divides the market into three different categories based on the HHI number.

A market is less concentrated if HHI < 1000, moderately concentrated if HHI range is 1000 – 1800 and highly concentrated if the HHI number is > 1800.

Accounting ratios are calculated the following way:

Return on Assets (ROA) – it is the measure of profitability of firm relative to its total assets. ROA also gives clear indication of how efficiently management is utilising the assets. The higher the ROA the better is the company since it indicates that the company is earning more on less investments and the formula for measuring it is

ROA = Net Income / Total Assets.

Net Interest Margin (NIM) – It is the difference between the interest incomes earned on loans and the interest they pay on deposits by banks to the total assets. It is very important to banks because 75% to 80% accounts for total revenues; any small change on the interest margin has huge impact on the profitability of the bank. Since, it is an integral part of efficiency ratio, any improvement in NIM can improve the efficiency ratio. The formula used for measuring NIM is

NIM= Income Interest – Interest Expenses / Total Assets

Cost-income ratio (CIR) – It is the cost-income ratio which is similar to net-interest margin. And the difference between them is that a bank should have higher NIM and lower CIR to operate efficiently and effectively. The cost/income ratio can be calculated using the formula

CIR = operating expenses / total income.

3.3 Rationale for Choosing This Method

Market concentration elucidates to what extent the top players in an industry control the market. The various methods used for measuring market concentration are:

Concentration Ratio method
Herfindahl-Hirschman Index (HHI) method
Bains measure
Learners measure
3.3.1 Concentration Ratio Method

Concentration Ratio is the percentage of total sales contributed by the top firms in the industry. There are various versions of concentration ratios available like CR4, CR8 and so on and so forth depending on the number of firms controlling the major market share. The CR4 is calculated by summing up the market share of the top four firms in the market and CR8 is calculated by summing up the market share of top eight firms in the industry. But this method has some limitations. There is no specific evidence available anywhere as to why we consider the market share of top four or top eight firms and this method does not give the clear picture of the true market structure. One can say we randomly choose concentration ratio method for measuring market concentration.

3.3.2 Bains Measure

According to Bain the degree of monopoly is calculated based on the super normal profits earned by a firm. The super normal profits are not competed in a market where there is no threat of entrance from new firms into the market. Whereas in a competitive market the super normal profits are competed because of more number of firms in the market, also there is a chance of entry of more number of firms. The biggest limitation of this method is that all super normal profits are not monopoly; there is a chance of windfall gains when the demand and cost conditions change.

3.3.3 Learner’s Measure

According to Learner, larger the difference between the price and marginal cost, greater is the monopoly power. That is the ability of a seller to sell a product much above its marginal cost. In a competitive market the seller does not have monopoly power. The monopoly power depends on the elasticity of demand of the products in the market. The income effect which measures the monopoly power can be positive or negative.

3.3.4 Herfindahl-Hirschman Index (HHI)

As already said in this chapter, HHI is the sum of the squares of the market share of every firm in the market. Usually, HHI is considered to be the best method for measuring market concentration. It gives the picture of entire market structure. The only limitation is that one has to calculate the market share of every firm in the market to get the value of concentration.

Market concentration plays a prominent role in a merger case. According to Competitive Authority a merger can raise the competitive concerns if the number of HHI is increased more than 100 points in a moderately concentrated market and 50 point in a highly concentrated market.

All the above methods have either one or two drawbacks but HHI method can overcome the drawbacks by calculating the market share of each firm. It also gives distinct picture of the entire market structure. Hence we choose HHI method for calculating market concentration.

3.4 Data Collection

The paper will make use of the secondary data which includes Annual Reports of banks for the period of 2002-2006 for calculating the market shares of each bank and for calculating accounting ratios like ROA, NIM and cost-income ratio which are obtained from the website of central bank and also collected from bank scope data base where the results of banks around the world can be found. The data used is absolutely reliable as it accepts the general accounting principles and also meets the regulatory norms and requirements of the Reserve Bank of India.

3.5 Data Analytical Tool

At the end of all calculations the results would be interpreted in a graphical representation which would give a clear picture of year over year financial performance of foreign banks. The result of market concentration gives the picture of how the market is concentrated- high, moderate or low. The results are graphically shown which indicate to a clear picture of how the market is concentrated year over year.

3.6 Conclusion

This chapter suggests that how the market concentration and financial performance of foreign banks are measured. The result expected would be like there is improvement in performance of foreign banks when they are compared every year and also there is gradual decrease in the market concentration because of the entry of foreign banks and the private banks that have adopted the technology after the banking reforms were implemented in their banking services.

CHAPTER-4

Data Analysis and Result

4.1 Introduction

The present chapter tries to find the financial performance of foreign banks and their market concentration in India based on the observed results. In order to do that there is explanation in the earlier chapter on the methods that are going to be used and from the annual reports that are published by the RBI for the period between 2003 and 2007 the data is collected and is used. To measure the financial performance of foreign banks, accounting ratios are used and the most accepted method HHI index is used to measure the market concentration.

In the following section there will be discussion on the performance of foreign banks and also to find out whether there is any impact on the market concentration by the foreign banks as the performance of foreign and private has been better and also private banks performance is better after they implemented the technology in their banking which is adopted from the foreign banks.

4.2 Data Analysis

In this research, the data are gathered from Reserve Bank of India (RBI) website annual reports. On using HHI method to measure the market concentration, the person is suppose to be aware of every single bank’s market share value to derive the precise results. The collected data consist of ag98gregate revenues of the commercial and individual banks which have operations existing in India. Therefore, on utilizing the available data, the researcher will be able to calculate the market share value of every single in India by applying the formula given below.

Market share of each bank = Individual Bank Revenues / Total Revenues

Therefore, the market share of each bank can be derived calculated through HHI method. Based on the HHI score, the market can considered as concentrated, moderately concentrated or low concentrated. The slab rate of HHI score is as mentioned below:

Less than 1000 = low concentrated;

1000 to 1800 = moderately concentrated; and

If Above 1800 = highly concentrated.

The authorization of merging or rejection on merger case is actually based HH scores. The market share value of all the banks is listed in appendix.

In the row, the next entity is performance of foreign banks. To pursue the performance calculation, five foreign banks listed as top five banks are picked and worked out using accounting ratios such as ROA, C/I and NIM. The data used to calculate performance are collected from annual reports published in Reserve Bank of India website. From the obtained data, it will be possible to get the results of C /I, NIM and ROA. However, the data does not contain total asset value of the bank, yet net income of each bank and return on assets is been found. By using these variables, total assets of banks, which will support in finding NIM of each bank.

On the other side, the measurement of scheduled commercial banks is calculated through India Budget and published on websites as well. On reviewing the data, it is found that profitability of scheduled commercial banks has decreased eventually over years.

This proves that there is decrease in the profitability of scheduled commercial banks over the years.

The performance of Banks measured by Deepak Katri and Nitin Kumar have used profitability ratio RAO and after applied regression value and derived that public sector banks are quite not well as private and foreign banks.

4.3 Interpretation of Results
4.3.1 Market Concentration

It is believed based on the empirical results that the banking industry in India is not much concentrated and competitive. The key factor that plays an important role in any sector is the market concentration. The sector is said to be less competitive and have higher profits when there is higher market concentration and in similar method it is indicated that the sector is more competitive and have less profits when the market concentration is lower.

After the financial reforms the banking system of India has witnessed a great competition and there is entry of new foreign banks in India .Besides this technology is adopted by the new private banks from the foreign banks. It is assumed that 90% of the market share was held by the public sector banks of India before carrying out the reform process. At present the market share has come down 70%, 66%, 67%, 63% and 62% for years 2003-2007 respectively. There is substantial increase in the share of foreign and private banks.

The level of market concentration in Indian banking sector from the year 2003-2007 is shown below

Table 4.1: Level of Market Concentration in Indian Banking System

Year

2003

2004

2005

2006

2007

Market Concentration

636

594

601

586

511

Source: Based on the data published by RBI and authors own calculation.

Figure 4.1: Level of Market Concentration in Indian Banking System

For the period between 2003 and 2007 the HHI score ranged between 500 and 600.Except for the year 2005 it is observed that HHI score increased year after year. Based on these figures it is clear thatthe banking system in India has become more competitive. It is general phenomenon that when the HHI value is below 1000 it is said as less competitive. Market has become more competitive from few years.

4.3.2 Financial Performance for Top Five Foreign Banks Operating in India

On basis of NIM, ROA and C/I the foreign banks performance is calculated. For the period between 2003 -2007 the performance is calculated. Performance of foreign banks is given in the following table.

4.3.2.1 Return on Assets

Table 4.2: Return on Assets for Top Five Foreign Banks Operating in India

20032004200520062007
Standard Chartered Bank2.921.741.972.493.06
HSBC0.800.781.271.581.82
Deutsche Bank2.923.170.721.041.23
Citi Bank1.171.401.00.951.02
ABN Amro Bank1.561.841.271.031.37

Source: Based on the data published by RBI and authors own calculation.

Return on Assets is the ratio of net profits to its assets. Using the assets for better profitability by the management is indicated by ROA.As the company earns more on less investment it is better for a company to have higher ROA.

Performance of top five foreign banks in terms of ROA is shown in the above table. There is no consistent increase in ROA by the three banks when they are compared every year but they have shown good ROAapart from HSBC and Standard Chartered Banks which showed consistency. Increase in the net interest income is the reason for increase of ROA for HSBC and Standard Chartered bank.

4.3.2.2 Net Interest Margin

Table 4.3: Net Interest Margin for Top Five Foreign Banks in India

20032004200520062007
Standard Chartered Bank2.961.842.552.693.13
HSBC1.020.841.311.702.17
Deutsche Bank1.300.460.280.751.49
Citi Bank1.281.541.231.241.26
ABN Amro Bank1.942.301.651.271.66

Source: Based on the data published by RBI and authors own calculation.

Foreign banks have better NIM which can be noticed from the above table. In the years 2004 and 2005 NIM is decreased for Deutsche Bank and the reason is that more than the interest income there is increase in other incomes which is important to observe. Nevertheless good net interest margin is maintained by the foreign banks.

4.3.2.3 Cost to Income Ratio

Since lower cost to income ratio gives more profit the cost to income ratio is also considered as efficiency measure. For the efficient operation of banks there should be high net interest margin and low cost to income ratio.

20032004200520062007
Standard Chartered Bank2024292926
HSBC3129313234
Deutsche Bank2419344046
Citi Bank3132393732
ABN Amro Bank3341423832

Source: Based on the data published by RBI and authors own calculation.

Figure 4.4: Percentage of C/I for Top Five Foreign Banks in India

19-46 is the range of cost income ratio for the top five foreign banks that are operating in India. Apart from the ABN Amro bank cost to income ratio is steadily increasedyear after year .In the year 2004there is lowest cost to income ratio and highest cost to income ratio in the year 2007.

4.4 Conclusion

Banking system in India is highly concentrated and even there is increase in level of concentration over the year which is confirmed by the above calculations. Based on ROA, NIM and C/I it is observedthat the .performance of foreign banks is betterwhen they are compared every year. The level of other income earned by the foreign banks is decreasing year after year which is an important observation done while doing the dissertation. In ter2ms of ROA, NIM and C/I it is seen that there is consistent improvement for foreign banks. Because of the increase in competition in the banking sector there is huge pressure on NIM. Banking industry is likely to be more concentrated as there is entry of foreign banks in Indian market.

CHAPTER 5

CONCLUSION

5.1 Introduction

The earlier chapters of this paper have thoroughly elucidated about the banking system in India pre and post independence. It also spoke of the financial system in India. Pre-liberalisation, public sector banks had a market share of 90% and they were literally dominating the Indian banking industry as there were restrictions on the private banks. Post liberalisation, the market share of the public sector banks drastically fell down because there were relaxed rules with respect to the entry of the foreign players into the Indian market. Infact they were allowed to operate more freely. Foreign players used innovative technology and new entrant private players also adopted this technology. The use of technology leads to faster and quicker growth of the new private sector banks. The banks became more efficient in terms of revenues generated per employee and profit earned per employee and this is shown in table 2.1. They have proved to have better ROA and non-performing assets when compared to public sector banks.

The next section deals with the findings of the research, followed by policy recommendations, limitations of this research, suggestion for further research that is not covered and finally the conclusion of the research.

5.2 Summary Findings

The study is predominantly done for two purposes. Firstly, to know the performance of foreign banks in terms of return on assets, net-interest margin and cost to income ratio after the introduction of financial reforms. Secondly, to know and understand how foreign banks had an impact on market concentration. For undertaking the research secondary data is used and the data is collected from the central bank website. There are various methods available for the study. To find out the performance of foreign banks, top five foreign banks operating in India were taken and accounting ratios like ROA, NIM and C/I are calculated to know their performance. Calculation of market concentration is done by using one of the most popular method HHI index. Market share of each and every bank operating in India for the period 2003-2007 is calculated because to use HHI method one should know the market share of each and every firm operating so that the result would be accurate and justified.

After the execution of financial reforms in 1991 the Indian banking industry’s concentration has increased after 1991.The market share of public sector banks drastically fell from 90% to 70%, 66%, 67%, 63% and 62% for the period 2003-2007 respectively. It is because after the execution of reforms many new foreign players and new private players have entered the India and foreign players were allowed to operate more freely and they have been allowed for branch networking which was a distant dream prior 1991. This led to increased revenues and greater market share. Even private players that entered the country have grown faster and quickly. Though there is decrease in market share of public sector banks they still dominate the Indian banking industry because of their huge size and quick penetration into small cities and towns and more surprisingly into rural areas.

It is essential to know how foreign players are performing post liberalisation era. The numbers have proved that they have better ROA as compared to previous years because there was tremendous growth in advances and they also earned more on other income which helped them to be better placed. The NIM of the banks have moved up exceptionally well up the ladder except for Deutsche bank since they have high percentage of other income than interest income. But as time passed by it also showed improved performance in terms of NIM by reducing its percentage of other income when compared to interest income. The C/I is increasing for foreign banks as compared to earlier years because of increase in competition which has put pressure on the margins and increase in operating expenses. Because of high competition in the industry banks were under pressure to maintain low lending rate though the CRR and SLR have gone up in 2006 and 2007 due to higher inflation which is above central bank range.

5.3 Policy Recommendation

History (and theories) has proved that competition in industry increases efficiency. Indian banking sector is highly competitive but public sector banks have to go a long way in implementation of latest technology in their banking services and should provide different kinds of financial products. Government of India has more than 70% stake in almost every public sector bank and even 100% stake in certain banks. A divestment plan by government will do good to these banks. Like, banks will be able to operate more freely and survive in highly competitive environment. There are also restrictions that foreign banks cannot acquire any local private bank unless it is weak. If the restriction is not put by the government small banks operating in India can be merged by the big banks so that further help for the improving efficiency of Indian banking sector can be achieved.

5.4 Limitations of This Thesis

There are certain drawbacks of this study like it does not measure the efficiency of Indian banking industry and how it impacts the profitability of the industry. The financial performances of foreign banks with other groups of banks operating in India were not compared by this study. A slight change in figures from the data collected from central banks when compared to the data released by the individual banks is observed. Another drawback is that the figures can be manipulated by the banks for enhanced look than they actually are and this could affect the accuracy of the study.

5.5 Suggestion for Further Research

People interested in doing research on Indian banking sector can find out the efficiency of the sector and calculate its impact on the profitability. The performance of foreign banks vis-a-vis other groups operating in India using accounting ratios can be further pursued in research.

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Appendix

Nationalized Banks2002-20032003-20042004-20052005-20062006-2007

Allahabad Bank1.71.82.01.91.9
Andhra Bank1.61.51.61.31.3
Bank of Baroda4.24.24.23.73.7
Bank of India4.34.13.93.73.8
Bank of Maharastra1.41.41.41.10.9
Canara Bank4.74.95.54.54.6
Central Bank of India3.23.23.32.62.4
Corporation Bank1.51.41.51.41.4
Dena Bank1.21.21.00.90.9
IDBI– –1.63.02.6
Indian Bank1.71.81.71.71.8
Indian Overseas Bank2.32.42.42.02.2
Oriental Bank of Commerce2.22.12.12.02.0
Punjab & Sind Bank0.91.30.70.61.0
Punjab National Bank5.05.25.24.04.5
Syndicate Bank1.92.02.22.02.4
Vijaya Bank1.11.31.21.11.1

SBI & its Associates

State Bank of Bikaner & Jaipur1.01.11.30.51.0
State of Hyderabad1.41.51.41.01.0
State Bank of India21.020.020.019.616
State Bank of Indore0.70.70.60.70.7
State Bank of Mysore0.70.70.80.70.7
State Bank of Patiala1.21.31.21.21.2
State Bank of Saurashtra0.60.60.60.50.5
State Bank of Travancore1.01.21.21.21.0

List of Banks and their individual Market Share (2003-2007)

Private Banks2002-20032003-20042004-20052005-20062006-2007

Bank of Rajasthan0.30.30.30.20.3
Catholic Syrian Bank0.20.20.21.81.6
Centurion Bank of Punjab0.20.20.20.40.6
City Union Bank0.10.10.10.10.1
Development Credit Bank0.20.20.20.10.1
Dhanalakshmi Bank0.10.10.10.10.1
Federal Bank0.70.80.70.70.7
HDFC Bank1.41.61.92.52.6
ICICI Bank7.26.56.68.310.4
ING Vysya Bank0.70.60.50.60.5
Jammu & Kashmir Bank0.90.90.50.80.7
Karnataka Bank0.60.90.50.50.5
Karur Vysya Bank0.60.90.50.50.5
Kotak Mahindra Bank0.20.30.40.70.9
Lakshmi Vilas Bank0.20.10.10.10.1
Lord Krishna Bank0.10.10.10.10.07
Nainital Bank0.040.040.040.040.04
Ratnakar Bank0.040.040.030.030.03
Sangli Bank0.090.080.090.040.04
SBI Comm. & Int Bank0.030.030.010.020.01
South Indian Bank0.040.040.040.030.03
Tamilnadu Mercantile Bank0.30.30.30.20.2
UTI Bank1.01.11.21.02.0
Yes Bank––0.020.010.02
Indus Ind Bank0.50.70.70.60.
Foreign Banks2002-20032003-20042004-20052005-20062006-2007

ABN Amro Bank0.50.50.60.91.0
Abu Dhabi Bank0.10.080.090.050.04
Amerian Express Bank0.30.20.20.20.2
Antwerp Diamond Bank0.0070.010.010.010.01
Arab Bangladesh Bank0.0040.0040.0040.0030.003
Bank of International Indonesia0.0020.0020.0020.0020.003
Bank of America0.20.10.10.20.2
Bank of Baharain & Kuwait0.040.020.010.010.01
Bank of Ceylon0.0080.0070.0070.0060.007
Bank of Nova Scotia0.10.090.10.10.1
Bank of Tokyo0.070.080.070.050.06
Mitsubishi UFJ0.070.080.070.050.06
Barclays Bank0.070.070.080.10.1
BNP Paribas0.10.10.10.10.1
Calyon Bank0.050.020.070.10.1
Chinatrust Commercial Bank0.0080.0070.0050.0040.004
Citi Bank1.51.61.61.82.0
DBS Bank0.020.010.020.060.1
Deutsche Bank0.40.50.40.50.6
HSBC Bank1.11.21.21.41.7
JP Morgan Chase Bank0.030.030.060.10.2
Krung Thai Bank0.0020.0010.0020.0020.002
Mashreq Bank0.030.010.010.010.005
Mizuho Corporate Bank0.010.010.010.010.02
Oman International Bank0.020.010.010.0070.006
Shinhan Bank0.010.0070.0090.0090.01
Societe General0.020.020.020.050.07
Sonali Bank0.0020.0020.0030.0020.005
Standard chartered Bank1.51.81.51.92.0
State Bank of Mauritius0.020.030.020.020.02

Categories
Free Essays

Emerging business and non-profit partnership in india

Abstract

Purpose- In the steadily increasing stream of CSR, one of the most important issues addressed is the role of external stakeholders. This research involves one aspect of the issue of the external stakeholders, specifically the partnership approach to CSR and more in particular the relational process that underpins social innovation within strategic cross-sector partnership between different types of actors involved in the partnerships (Mailand. M, 2004). Moreover the study aims to discuss the duality of success and failure in strategic collaborations between non-profit and for-profit organizations in an Indian context.

Methodology- The analysis is based on an ongoing social partnership between for-profit organisation (ONGC) and non-profit (Helping hand for cancer care patients). This study includes interviews with managers and other employees along with the use of existing knowledge on social partnership between organisations to support the methodology.

Findings- The findings provide a grounded framework based on previous research that provides a step-by-step approach for implementing corporate social responsibility through social partnership.

Research limitations- The structure developed in this paper provides an opportunity to examine to what extent does social partnership between NPO and BUS has been implemented in organizations as well as alternative approaches for implementation.

Key Words- Non-profit organisation, Business, Partnerships, implementation, NGO, CSR.

Chapter 1. Introduction

1.1. Introduction:

For many years, community development goals were philanthropic activities that were seen as separate from business objectives, not fundamental to them; doing well and doing good were seen as separate pursuits (Kotler P, Lee N, 2005). Companies are now beginning to recognize how greater social and environmental responsibility can improve the firm’s performance (Zadek, 2004). In a market oriented economic structure, corporate sector is the originator of economic growth. According to Wood (1991),” the basic idea of Corporate Social Responsibility (henceforth CSR) is that business and society are interwoven rather than distinct entities.” (Dean, P., 2007).The notion that business has duties to society is firmly ingrained. According to Werther. B. W, Jr., and Chandler. D., 2010, the entirety of CSR can be discerned from the three words: Corporate, Social and Responsibility. CSR defines society in its widest sense and covers the relationship between the corporation and society within which it interacts. The idea of Business looking beyond profits to their roles in society is generally termed as CSR.

The concept of Corporate Social Responsibility has gained increased significance in recent years. While Government is responsible for setting rules and parameters within which society and business operate. On the other hand businesses are largely responsible for creating wealth and driving progress within the society. In addition NGO’s and NPO’s exists to do social good without seeking profits, they reach into areas where profit and politics do not reach. Implementing CSR is facilitated through standards and common codes of conduct. Although firms themselves have set the standards, governments have played a role in defining common rules (Nourick, S., OECD, 2001). It is therefore imperative that corporations come forward & shares the responsibility for inclusive & redistributive growth (CSR, Whitepaper KPMC).The context of CSR is very dynamic due the ideal mix of business goals and societal expectations which is constantly evolving.

CSR is currently characterized by many unsystematic practices which lack transferability (Seitanidi M,Crane A,2008).If CSR is to develop from solid grounds , it is necessary to foster its future development through embedding societal issues and expectations raised by legitimate stakeholders in the day-to-day strategies, policies, and operations of the organization (Nijhof A, Bruijn T,Honders H, 2008). Most CSR scholars and societal actors therefore assume that CSR can only be fully developed in partnership; partnerships in which the exploration of new roles is a central element (Nijhof A, Bruijn T,Honders H, 2008).Over a decade ago, the Committee for Economic Development one group of business leaders advocated the formation of a “government-business partnership for social progress”. It was understood by them that the society’s problems were too complex to be tackled by business alone. Recent developments such as the Millennium Development Goals and Make Poverty History campaign have also raised awareness of the world’s development challenges and increased recognition that no one sector-Government, Business or civil society can solve these challenges alone (Doh and Teegen 2002) (Concern Universal Org.2010).According to Frederick. C. W, 2006 the notion of Social partnership for resolving social problems are a powerful idea and the future of CSR lies in this direction.

Often it has been assumed that the emergency of CSR is a function of economic and social development. For this reason it is been followed by the observation that CSR appears to be faster in Westernized countries than other countries like Asia. However, according to Matten and Moon 2004, CSR is often implicit in Asian countries and more a function of national business systems rather than development per se.

The focus of CSR has changed the attitude of business all over the world. As one of the world’s fastest growing economies, India certainly cannot be ignored in this regard. A survey of global business executives conducted by McKinsey & Company found that Indian executives were “the most enthusiastic proponents” for a wider social role for business, with 90% reportedly endorsing the “public good dimension” (“McKinsey Global Survey,”2006).Historically speaking, social responsibility of companies is a well-established phenomenon in India, and the country has one of the world’s richest traditions of CSR. In its oldest forms, CSR in India included the concept of corporate philanthropy. The philanthropy first practiced by Indian businesses was initially rooted in religious belief and culture, but with the changing times, there has been a significant shift in the approach (Sharma, Seema G, 2009). Indian families such as TATA and Godrej have a significant industry presence and reputation for social responsibility. TATA steel is one of the first companies to produce a corporate sustainability report. In recent years some large Indian companies have started signing up to voluntary international CSR initiatives. There are 87 Indian companies which have signed up the UN Global Compact’s nine principle on Human rights, labor and environment (Hopkins, M., 2007).

1.2. Significance of the study:

India (Mumbai) where the research has taken place has a long rich history of CSR. Companies like TATA and Birla have set an own unique benchmark in the field of CSR in India. In spite of such successful examples CSR is yet in the nascent stage in India. CSR is coming out of the purview of ‘doing social good’ and is fast becoming a ‘business necessity’ (Times internet ltd, 2010). This study moves ahead of CSR stimulus that has previously been dealt with, into an examination of new trends within relatively old frontiers. It will investigate the relationship between ONGC (BUS) and Helping Hand for Cancer Care (NPO). The significance of this study lies in the following:

1) In spite of the long history of CSR in India, there have been not much empirical evidences in terms of implementing CSR through partnership. This study is exclusive, due to the research investigation of a partnership between a Business and an NPO in India with an aim of identifying the kind relationship and partnership they share.

2) To indentify the kind of partnership they share, this study takes into consideration Setanidi and Crane 2008, Cross-Sector Partnership model. Furthermore to classify the level of relationship they share, studies of Selsky and Parker 2005:855 on cross-sector partnership to address social issues (henceforth CSSPs) have been used.

3) Seitanidi’s holistic framework 2010 has been used to set the research questions with some changes for this study. Since there was no scope for the use of quantitative research, this study is based on qualitative research. The use of Semi-structure interview is used to collect the primary data. Furthermore there is a need of closer examination by academicians on long-term relationships as most studies have been focused on examining short-term relationships (Selsky and Parker, 2005).

1.3. Aim of the Research:

The research question for this study address the phenomena of CSR, socially responsible restructuring and firm’s performance and their relationship (L.Zu, 2008). The aim of this research is to evaluate and investigate the relationship of a Social Partnership for carrying out CSR between ONGC (BUS) and Helping Hand for Cancer Care (NPO) in India.

To achieve the significance of this study, it has been divided into a series of guiding questions:

1. The first section examines the context of business and civil society interactions. Which forms of CSR interventions have been formed for promoting community development in IndiaHow has social development been enhanced by CSR?

2. The second section elaborates the Company-Community Collaborations (henceforth CCC). Who are the stakeholders of CCCWhat kind of partnership can be developed between Corporations, community and government in the context of CSR What commitments can they make?

3. The third and the last section explore the role of government in social partnerships, the obstacles and opportunities and to find effective ways to promote such partnerships in India.

1.4. Objectives of Research:

In order to achieve the above aim, the objectives of this research are;

Present and briefly describe the understanding of CSR in India.
To investigate the relationship between ONGC and Helping Hand for Cancer Care in terms of implementing CSR through Social Partnership.
To analysis and evaluate the Social Partnership by employing Seitanidi’s holistic framework (2010) in terms of the three stages of partnership. For each stage of the analysis, all or some of the research questions adopted by Seitanidi (2010) will be utilised at different states.
Explore the findings of the analysis in order to derive the useful information that can help further research the subject matter.
Examine, based on the findings, whether this relationship can be considered a partnership.

1.5. Research Questions:

In order to evaluate the impact of Social Partnership between ONGC and Helping Hand for Cancer Care the following questions arise;

Q1. How is CSR understood in India?

Q2. How is Social Partnership understood in India?

Q3. Can Social Partnership be successful in implementing CSR?

Q4. The level of Commitments between the Partners ?

Q5. Recommendations for implementing CSR in better ways within the Social Partnership context

1.6. Structure of Dissertation:

The dissertation is divided into six chapters. Brief description of these chapters has been presented below.

Chapter 1: Introduction. This chapter covers introduction of the dissertation and significance of study for Implementing CSR through Partnership in India. Research aims and objectives are also covered in chapter.

Chapter 2: Literature review. This chapter covers previous studies conducted in the field of topic. Partnership selections and its stages, meaning of NPO in India and the history of CSR in the Indian context.

Chapter 3: Company Profile. This chapter covers the background and history of ONGC and Helping Hand for Cancer Care on which this study is based.

Chapter 4: Methodology. This chapter contains a description of research methodology involved in this study. Research strategy, methods and context of study are important features of this chapter.

Chapter 5: Data Analysis and Discussions. This chapter summarizes finding from participants’ responses and evaluates the findings of the interview with the literature review.Chapter 6: Conclusion. This is a final chapter of the report and presents final conclusion of the project as well as further research recommendations

Chapter 2. Literature Review

2.1. Introduction:

CSR is a shifting concept and the espousal of CSR has become a matter of attention worldwide. People often talk about it as it was a recent phenomenon, but in reality its core is the ongoing effort to understand what it means to comprehend business as part of society (Ward. H, & Smith. C, 2006). Furthermore that it is an attempt as old as business Endeavour (Ward. H, & Smith. C, 2006).The issue of CSR is a very controversial subject that continues to attract a lot of attention, from those who argue that the whole issue is irrelevant to business (Freeman and Liedtka ,1991) through those who see the relevance, but think it is a bad idea for business(Friedman,1962 cited in Scribd, 2010), to a vast group of writers who think that CSR is of strategic importance of business (Asongu. J. J., 2007).There has been no shortage of history to dwell on to the debate about CSR. CSR is an area which investors, especially institutional investors are showing a growing interest. Academics, Business, NPO/NGO sectors have also gained escalating attention in the subject of CSR, which has resulted in extensive body of academic and practical literature.

With the help of recent development CSR partnership has becomes one of the effective way to meet the challenges a company may face. Despite the volume of writings on both CSR and partnerships, the literature review will focus on those areas most relevant to the research questions (Concern Universal Org.2010).

2.2. The history of CSR: Concepts and Practices

2.2.1. History of CSR:

The history of CSR is as old as the history of business itself, even though the concept was not formally formulated until recently (Asongu. J. J., 2007). The evolution of theCSR constructs established in the 1950s in United States. Until the 1990s publications on CSR came in peaks and troughs, rather than a steady rise (De Bakker, et al.2005). Business practices in the 1900’s that could be termed socially responsible took different forms; philanthropic donations to charity, services to the community, enhancing employee welfare and promoting religious conduct (Banerjee.B.S, 2007). In the early writings on CSR, it was referred to more often as social responsibility (SR) than as CSR. The decade of 1960’s marked a significant growth in the attempt to formalize what CSR means (Carroll.A , 1999 38: 268).

2.2.2. Concepts of CSR:

The first and most prominent writer to define CSR was Keith Davis, who defined SR by arguing that it refers to “businessmen’s decisions and actions taken for reasons at least partially beyond the firm’s direct economic or technical interest” (Davis, 1960, p. 70 cited in Crane, A., et.al 2008). Definitions expanded during the 1960s and proliferatedduring the 1970s. In the 1970’s there was mentioning about the Corporate Social Performance (CSP) and CSR. One of the major writers for CSP was S. Prakash Sethi . Sethi stated that,” whereas social obligation is proscriptive in nature, social responsibility is prescriptive” (Sethi 1975, cited in, Carroll.A , 1999 38: 268). In 1980’s the research of CSR gave way to alternative concepts such as CSP, stakeholder theory and business ethics. In 1991 Archive Carroll revisited the four part definition, he stated that, “For CSR to be accepted by the conscientious business person, it should be framed in such a way that the entire range of business responsibilities is embraced. It is suggested here that four kinds of social responsibilities constitute total CSR: economic, legal, ethical and philanthropic. Furthermore, these four categories or components of CSR might be depicted as a pyramid. To be sure, all of these kinds of responsibilities have always existed to some extent, but it has only been in recent years that ethical and philanthropic functions have taken a significant place” (Carroll.A , 1999 38: 268).

Figure 1 Carrol’s CSR Pyramid: (Source: CSR Quest, 2010)

The pyramid of CSR depicted the economic category as the base (the foundation upon which all others rest), and then built upward through legal, ethical, and philanthropic categories (Carroll, 1991, p. 42). Carroll’s pyramid of CSR (Carroll, 1991) (Cited in Crane and Matten, 2007), CSR can be divided in four categories, in a hierarchical format. This model’s graphical representation implied a hierarchy of responsibilities moving from economic and legal through to more socially oriented ones of ethical and philanthropic responsibilities (Meehan, J., Richards, A., Meehan, K.,2006, cited in, Carroll, 1991)

According to Carroll and Buchholtz (2000:35) (cited in Crane and Matten, 2007) “The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organisations at a given point in time”.

Stakeholder Concept:

The next important concept which made a difference in CSR was the stakeholder theory (ST). The ST concept can be traced back to 1963, where it was first mentioned by name in a Stanford Research Institute Memorandum (Freeman, 1984 cited in Freeman, E., Hitt, M., et al ,2001). Since then ST has gained increasing use in strategy development literature. Its popularity has increased with the seminal publication of Freeman’s (1984) Strategic Management: a Stakeholder Approach (Polonsky.M, 1995). ST is based on the principle that “The firm takes into account all of those groups and individuals that can affect, or are affected by, the accomplishment of organizational purpose” (Freeman, 1984 cited in Polonsky.M, 1995). In one case a stakeholder might have a legal claim on the organization; for example, owners expecting a given level of financial performance. In another case a stakeholder, such as the general public, may simply be interested in how the organization affects the country’s economic growth. As can be seen stakeholder importance can vary, as can the specific organizational issues they are concerned with (Polonsky.M, 1995). Businesses come into regular contact with customers, suppliers, government agencies, families of employees, special interest groups. Decisions made by a business are likely to affect one or more of these “stakeholder groups” (Tutor2u, 2010). A major reason for increasing adoption of a Stakeholder Concept in setting business objectives is the recognition that businesses are affected by the “environment” in which they operate(Tutor2u, 2010) .

Figure 2: Stakeholder Model: (Source: Qwick Step.com, 2010)

Some other definitions: The World Business Council on Sustainable Development (WBCSD), 2010, defines Corporate Social Responsibility (CSR) ,”as the continuing commitment of business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”

Despite the growing awareness and popularity of the term CSR, there is no general consensus as to what it actually means. Plotting the future of CSR presents some basic challenges (Ward, H., Smith, C., 2006). The first is the basic uncertainty over how to define the scope and content of CSR. The lack of a single clear definition of CSR and its objective can often seem like a blockage in building common understanding on how best to move forward (Ward. H, & Smith. C, 2006). CSR as a term varies equally in its meaning across the economic literature as authors understanding of CSR differ regarding the evaluation of corporate purpose and motivation (Crane & Matten, 2004).The concept of CSR encompasses many dimensions of business activity ranging from the social (e.g. community programmes), to economic (e.g. employment) to the environmental (e.g. waste reduction).

The CSR definitions describe observable facts, but fail to present any guidance on how to manage the challenges within this phenomenon (Dahlsurd, A.2006). Therefore, the challenge for business is not so much to define CSR, as it is to understand how CSR is socially constructed in a specific context and how to take this into account when business strategies are developed (Dahlsurd, A.2006). CSR as a term varies equally in its meaning across the economic literature as authors understanding of CSR differ regarding the evaluation of corporate purpose and motivation (Crane & Matten, 2004).The concept of CSR encompasses many dimensions of business activity ranging from the social (e.g. community programmes), to economic (e.g. employment) to the environmental (e.g. waste reduction) (Beril,Z., Burcu, O., 2007).The theoretical approach to CSR is based on the question of what organisations are responsible for and what they are motivated by (Bueble,E. 2008).

2.3. Perceptions and Practices of CSR in India:

A group of Economist and Politicians have given a name to the emerging countries from different continents the ‘BRIC countries’ Brazil, Russia, India and China. The term was first used in the Goldman Sachs 2003. The BRIC’s economic and political context provides a general context for the future of CSR (Mullerat. R., 2010)

The notion of CSR is not new in India. It has a long tradition of paternalistic philanthropy. Corporate Philanthropy and industrial welfare has been put to practices since the late 1800’s in India (Gupta, A.2007). The arrival of the East India Company in 1620 was a milestone in the history of trade and of socio-political in India. Over the subsequent 200 years, the purely trade and business interest of the East India Company changed to social and political management of the country by company executives until 1885, when India came under the British crown. The business leaders of emerging indigenous industry remained rooted in the tradition of philanthropy, which gradually metamorphosed into CSR (Gupta, A.2007). According to Chakraborty, 1997 the strength of Indian traditions and classical literature provides an underlying ethos that reinforces CSR, but also argues that modern business practices are likely to erode this. The market liberalizations process, which began in 1991, heralded a new era of change in India, it promoted a more pragmatic and western –style ethical stances (Fisher et al. 2001; Sharma, S.2009).

A survey by the Tata Energy Research Institute (TERI) called ‘Altered Images: the 2001 State of Corporate Responsibility in India Poll’ Traces Back the History of CSR in India and suggests that there are four models of CSR (TERI, 2010).

1)Ethical model : The origin of the first ethical model of corporate responsibility lie in the pioneering efforts of 19 th century corporate philanthropists such as the Cadbury brothers in England and the Tata family in India. The pressure on Indian industrialists to demonstrate their commitment to social development increased during the independence movement, when Mahatma Gandhi developed the notion of ‘trusteeship’, whereby the owners of property would voluntarily manage their wealth on behalf of the people. Gandhi’s influence prompted various Indian companies to play active roles in nation building and promoting socio-economic development during the 20th century. The history of Indian corporate philanthropy has encompassed cash or kind donations, community investment in trusts and provision of essential services such as schools, libraries, hospitals, etc. Many firms, particularly ‘family-run businesses’, continue to support such philanthropic initiatives.

2)Statist model: A second model of CSR emerged in India after independence in 1947, when India adopted the socialist and mixed economy framework, with a large public sector and state-owned companies. The boundaries between the state and society were clearly defined for the state enterprises. Elements of corporate responsibility, especially those relating to community and worker relationships, were enshrined in labour laws and management principles. This state sponsored corporate philosophy still operates in the numerous public sector companies that have survived the wave of privatization of the early 1990s.

3)Liberal Model: Indeed, the worldwide trend towards privatization and deregulation can be said to be underpinned by a third model of corporate responsibility – that companies are solely responsible to their owners. This approach was encapsulated by the American economist Milton Fried-man, who in 1958 challenged the very notion of corporate responsibility for anything other than the economic bottom line. Many in the corporate world and elsewhere would agree with this concept, arguing that it is sufficient for business to obey the law and generate wealth, which through taxation and private charitable choices can be directed to social ends.

4)Stakeholder Model: The rise of globalisation has brought with it a growing consensus that with increasing economic rights, business also has a growing range of social obligations. Citizen campaigns against irresponsible corporate behaviour along with consumer action and increasing shareholder pressure have given rise to the stakeholder model of corporate responsibility. This view is often associated with R. Edward Freeman, whose seminal analysis of the stakeholder approach to strategic management in 1984 brought stake holding into the mainstream of management literature (Freeman, 1984). Ac-cording to Freeman, ‘a stakeholder in an organisation is any group or individual who can affect or is affected by the achievement of the organisation’s objectives.’ (TERI, 2010).

Corporate India has always boasted a strong tradition of corporate philanthropy, where business leaders have been viewed as leaders of social development (Mohan 2001). Regardless of this strong tradition of philanthropy, CSR research in India in the recent past has primarily focused on identifying the ideal ‘how to carry out CSR,’ often leading to contradictory findings on the related practices (Kumar et al. 2001). According to a survey done by the Teri Foundation, the most apprehensive national problems which Indians are concerned about are Overpopulation, environmental problems, spread of human diseases, and depletion of natural resources.

Using the framework of CSR, the Indian definition of CSR would view the following at descending order of importance (Pratiyogita Darpan Aug 2008):

a)Activities aimed at communities that benefit them in sustainable manner (Philanthropic, Social, Investment, or Commercial initiatives).

b)Basic Business practices that go beyond legal compliance to benefitting the disadvantaged amongst the company’s stakeholders.

c)Advocating change in public policy and laws that benefit disadvantaged people.

2.4. Global Practices of CSR:

Despite of the different definitions and meanings, CSR comprises of six broad set of initiatives and techniques; Responsibility and monitoring framework, Financial SR indexes, International Conventions and the Millennium Development Goals, Principles, standards and norms (United Nations Environment Programme,2009).

2.5. Government Initiatives’ for CSR in India:

India is an emerging economic powerhouse, Indian business has traditionally been socially responsible and some of the business houses have demonstrated their efforts on this front in a laudable manner yet poverty, health problems, environment problems remains the reality for most of the Indian population (Goyal, 1999;Gangrade, 2001; Siddiqui, 2003). The culture of social responsibility needs to go deeper in the governance of the businesses. In order to assist the businesses to adopt responsible governance practices, the Ministry of Corporate Affairs has prepared a set of voluntary guidelines which indicate some of the core elements that businesses need to focus on while conducting their affairs (Ministry of Corporate Affairs Government of India, 2009).

Implementation Guidance:

1) The CSR policy of the business entity should provide for an implementation strategy which should include identification of projects/activities, setting measurable physical targets with timeframe, organizational mechanism and responsibilities, time schedules and monitoring. Companies may partner with local authorities, business associations and civil society/non-government organizations. They may influence the supply chain for CSR initiative and motivate employees for voluntary effort for social development. They may evolve a system of need assessment and impact assessment while undertaking CSR activities in a particular area. Independent evaluation may also be undertaken for selected projects/activities from time to time.

2) Companies should allocate specific amount in their budgets for CSR activities. This amount may be related to profits after tax, cost of planned CSR activities or any other suitable parameter.

3) To share experiences and network with other organizations the company should engage with well established and recognized programmes/platforms which encourage responsible business practices and CSR activities. This would help companies to improve on their CSR strategies and effectively project the image of being socially responsible.

4) The companies should disseminate information on CSR policy, activities and progress in a structured manner to all their stakeholders and the public at large through their website, annual reports, and other communication media.

The above guidelines are cited in Corporate Social Responsibility Voluntary Guidelines 2009, Ministry of Corporate Affairs Government of India.

2.6. Partnership:

According to Waddock (1988:18) social partnership is “A commitment by a corporation or a group of corporations to work with an organisation from a different economic sector (public or nonprofits). It involves a commitment of resources – time and effort – by individuals from all partner organisations. These individuals work co-operatively to solve problems that affect them all. The problem can be defined at least in part as a social issue; its solution will benefit all partners. Social partnership addresses issues that extend beyond organisational boundaries and traditional goals and lie within the traditional realm of public policy – that is, in the social arena. It requires active rather than passive involvement from all parties. Participants must make a resource commitment that is more than merely monetary”. Partnership is a general term that encompasses a board range of types of relationships. It is an activity to do something together, a correlation that consists of mutual or attuned objective and an acknowledged distribution of specific roles and responsibilities among the participants (Mullerat.R, 2010). At the World Economic Forum in 1999, UN Secretary-General, Kofi Annan, presented the Global Compact challenging business leaders all over the world to ‘embrace and enact’ a set of universal principles in the areas of human rights, labour standards and the environment(UNRISD, 2010). The Compact also encourages business to engage in cross-sector partnerships with the public sector and civil society in order to promote development (UN Global Compact, 2010). At the World Summit on Sustainable Development in Johannesburg in 2002 the need for and the importance of collaborative alliances between the three sectors was highlighted further. Partnerships as a new approach to development were put very high on the agenda and during the 9 days of the summit more than 300 partnerships between governments, NGOs and business were announced (Johannesburg Summit, 2010). Since then the partnership model has gained further ground as a new approach to development and an important tool for the realisation of the Millennium Development Goals. The partnership model is not only supported by the development community. It is also widely embraced by the private sector. When the term partnership was employed it was primarily used to refer to partnerships between the Government and Business usually termed as “PPP” (Public-Private Partnership”). According to Googins and Rochlin (2000), “partnerships offer the chance to form a strong arrangement where each party’s distinctive capabilities and resources are combined, complementing and strengthening each other, thus creating results that are a lot better than any results each sector could create on its own”. In the past 25years, collaborative activities are becoming more prominent and extensive in all sectors (Alter & Hage, 1993: 12).Many significant activities by business in society involving CSR require collaboration partnership with others, and particularly public sectors (Selsky and Parker,2005).

2.6.1.Cross-sector Partnership:

Cross-sector partnerships bring together actors from two or more sectors to work on problems whose solutions often require the information and capacities of more than one sector (Brown. D. L., 2005). According to Seitaindi. M, and Ryan, 2007, cross-sector partnerships have been one of the most exciting and challenging ways that organizations have been implementing CSR in recent years. NPO-BUS partnership is one of the four different types of partnerships (Figure 1) that represent what is referred to as ‘social partnerships’ (Waddock 1988; Googins & Rochlin 2000) or as ‘Cross-sector partnerships that address social issues’ (CSSPs) (Selsky and Parker 2005:1).

Figure 3: Cross Sector Partnership (Source Seitanidi.M, 2007)

One type of collaborative engagement is partnerships among business, government, and civil society—the three main societal sectors that address social issues and causes (Austin, 2000; Stone, 2000; Young, 1999). In these cross-sectors social-oriented partnerships, or CSSPs, organizations jointly address challenges such as economic development, education, health care, poverty alleviation, community capacity building, and environmental sustainability. According to Selky and Parker, 2005 CSSP’s is defined as, “Cross-sector projects formed explicitly to address social issues and causes that actively engage the partners on an ongoing basis. Such projects may be transactional– short-term, constrained and largely self-interest oriented or integrative (Austin, 2000 cited in Selky and Parker, 2005) and developmental—long-term, open-ended and largely common interest oriented” (Googins & Rochlin, 2000; Wymer & Samu, 2003 cited in Selky and Parker, 2005).

2.6.2. Selection of Partnership:

Partnership implementation does not begin after a strategy has been planned and designed, but is integral to its selection in the first place. The first phase of partnership implementation is therefore Partnership Selection, which commences with the decision to choose ‘partnership’ as the preferred associational form rather than other forms of community involvement (Seitanidi and Ryan, 2007). The selection of partnership done in this study is influenced by Selky and Parkers (2005) study on CSSP’s and as an operational device for this review, its division into four different grounds,

1)Represents partnerships between non-profit organizations and businesses that encompass social issues and causes. They tend to center on environmental issues and economic development initiatives but also address health, equity, and education issues.

2)Represents partnerships between governments and businesses. The main form here is the public-private partnership (e.g., Rosenau, 2000a). They tend not to concentrate directly on social issues or causes but on infrastructure development and public services such as water and electricity that have important social implications.

3)Represents partnerships between governments and non-profit organizations. This encompasses contracting out of public services and “third way” public policy approaches (Salamon, 1995). Studies in this arena tend to concentrate on job development and welfare.

4)Represents partnerships that involve actors from all three sectors. This arena focuses on large-scale national or international multi sector projects, but sub national projects are also included. Studies in this arena tend to focus on economic and community development, social services, environmental concerns, and health.

5)Represents transactional type of partnership, which may be described as a one way transfer of resources that is being termed as ‘partnership’ (Austin, 2000).

The partnership selection in this study consists of external stakeholder, which is Non-profit organisation in this case. The focus of this study will be only one type of Cross-sector partnership i.e. BUS-NPO Partnership, as described in the above arena no.1 which represent a brief explanation of BUS and NPO partnership.

The criteria employed to select the case were:

1)The scope of activities (international/national);

2)The purpose of the partnership (focusing on an environmental or social issue);

3)Type of resources exchanged across the partner organisations (financial/ nonfinancial);

4)the type of organisational reputation (a combination of three level scales of high–medium–low and positive–neutral–negative was employed based on the media content assessed for the original research)

5)The style of activity among the two organisations which here was constant (collaborative interaction) since the issue under examination was partnership implementation.

2.6.3. Defining the terms:

The focus of this study will be only on one type of partnership, i.e. NPO-BUS partnership with in a developing economy. It is important to discuss the terms that employed within the literature in order to justify their selection.

Non-Profit (NPO): Non-profit organizations are usually classified as either member serving (addressing the needs of only a select number of individuals) or public. The non-profit sector is a collection of entities that are organizations; private as opposed to governmental; non-profit distributing; self-governing; voluntary; and of public benefit. It often referred to as the third sector, independent sector, voluntary sector, philanthropic sector, social sector, tax-exempt sector, or the charitable sector (Learning to give, N.A).

Business (BUS): Business refers to a collection of individuals and structures grouped under the legal form of corporation in order to increase and maintain profit within particular spheres of interest (Seitanidi.M, 2010).

2.6.4. How is NPO/NGO understood in India?

India has a long tradition of volunteerism and charity. Movements for liberalisation, social reforms, welfare and development, and conscientisation per se have taken place in this country and continue to do so. During the latter part of the past century, there has been a tremendous increase in the number of civil society organizations in every part of the world. The growth in non-profit organizations (NPOs) and nongovernmental organizations (NGOs) have experienced exponential increase in the number and scope around the globe.

The long history of voluntarism has provided a plethora of terms to represent such entities: voluntary organisation, voluntary agency, philanthropic organisation, people’s organisation, community-based organisation, non-government organisation, non-profit organisation, etc. There have been efforts to define these terms. These have at least facilitated categorisation of the entire sector under two subdivisions: one is popularly called ‘intermediary organisation’ and the other ‘grass-roots organisation’. There are several theories that have attempted to explain the origin and growth of the voluntary sector. According to Sen (1993), the status of NPOs is described purely on the basis of their structure and operation, and not their purpose or their source of income. However the term NGO is negative and non-explanatory because it includes private sector organisations, development corporations, etc. According to the UN (1968), ‘NGOs are any of those organisations which are not part of a government and which have not been established as a result of an agreement between governments’ (UN, 1968, cited in Ravichandran.N, et.al , 2006).

In India a voluntary non-governmental or non-profit organisation is what the law says it is, it does not recognise the term “non-government” in any sense or context. According to the Indian National Accounts System there are only two sectors: public and private, and within the latter, business enterprises and households. Due to this there are no separate categories for NPO within private sector, which means that there are located in household sector. Hence the Indian National Accounts System prevents the use of definition for NPO, due to the absence of such category ( Ravichandran.N, et.al , 2006).

2.6.5. Stages of CSSP’s:

According to Selsky and Parker (2005: 854), CSSPs can be examined according to ‘chronological stages’. Using several studies done by different researchers the three stages of building a cross-sector partnership between BUS-NPO, under which several studies are incorporated are;

1) Formation

2) Implementation

3) Outcomes.

1). Formation: Trust is one of the formation stages of CSSP and is viewed as an input to collaborative relationship (Hardy, Philips, & Lawrence, 1998; Iyer, 2003). But trust may have different meanings in the corporate world and in the non-profit sectors (Parker & Selsky, 2004). In the corporate world the term trust is traditionally based on controlled contractual exchanges, and in the non-profit sectors it is based on solidarity with the mission or on shared

values (Parker & Selsky, 2004). According to Huxham and Vangen, 1996, there are three motivation levels behind this kind of partnerships:

a)Meta-goals or the common goals,

b)Goals of each partner,

c)Goals of specific individual involved.

Mostly goals of each partner are taken into consideration while doing a research. A frequent topic regarding the partner’s goal is that the goals of a Non-profit tend to be more altruistic (Milne et al., 1996), while the goals of the business may be to enhance corporate image, selling products, gathering social capital ect. (Alsop, 2004).

2. Implementation: Implementing a shared or common vision among independent actors (Gray, 1989) typically means developing a common culture held together by shared values, common interests, and clear communication(Selky and Parker, 2005). The shared meta-goal is one source of CSSP identity building (Hardy, 1994). There may be difficulties often arising while implementing partnership between two different sectors. To overcome these complications Westly and Vredenburg, 1991 suggest on focusing on the meta-goals, by realigning partners expectations. It is also very crucial to develop a clear communication between partners.

3. Outcomes: Outcomes of business-non-profit partnerships have been measured at three levels: direct impact on the issue and its stakeholders; impact on building capacity, knowledge, or reputational capital that can attract new resources; and influence on social policy or system change. Direct impacts are most frequently measured, and more often in businesses than in nonprofits (Selky and Parker, 2005).

2.6.6. Seitanidi’s Holistic Framework:

Most of the literature of cross-sector partnership focuses on its strategic use. Seitanidi’s Holistic Framework diverges the literature by examining if the partnerships can deliver benefits that extend beyond the organisational to the societal level resulting from the intentional combined efforts of the partners (Seitanidi, 2010).

The framework is very essential as it critically examines Selky and Parker’s ‘Chronological stages’ of partnership and allows observation beyond any single stage. Therefore, this study will adopt Seitanidi’s holistic framework (2010), in order to evaluate a relationship in a holistic way.

Chapter 3.

Company Profile

3.1. Company Profile:

ONGC is a Stated-Owned Company, which was incorporated in 1959. Its sale is Rs82.00 billion (US$4.52 billion), and it has 47,757 employees working with it (Reference for Business, 2010).

3.2. Background Information:

The Oil and Natural Gas Corporation (ONGC) is one of Asia’s largest companies involved in exploration and production of oil. It produces more than 77% of India’s domestic petroleum and more than 81% of natural gas. The Petroleum Intelligence Weekly ranked ONGC as the 32nd largest oil company in the world. ONGC has its operations spread all over the country, both on-land and offshore. ONGC has an extensive installed infrastructure of drilling and workout rigs, onshore/ offshore production facilities, well stimulation services, subsea and land pipelines, gas processing and fractionation facilities, refineries, exploration and transport vessels, storages facilities and other infrastructure located throughout the main oil and gas producing regions of India (Mital.A, 2008).

The main objective of ONGC as laid down under section14 of the ONGC Act 1959 reads as “ The commission shall plan, promote, organise and implement programmes for the development of petroleum resources and the production and sales of petroleum and petroleum products produced by it and to perform such functions as the central government may assign to the commission” (Singh. B.A, Singh. A, 2004).

3.3. History:

The importance of petroleum to India’s energy needs cannot be overstated. Currently, oil comprises approximately 34 percent of India’s total energy consumption and has been growing gradually as a share of the country’s energy consumption in recent years.

During the pre-independence period, the Assam Oil Company in the north-eastern and Attock Oil company in north-western part of the undivided India were the only oil companies producing oil in the country, with minimal exploration input. After independence, the national Government realized the importance of oil and gas for rapid industrial development and its strategic role in defence. Until 1955, private oil companies mainly carried out exploration of hydrocarbon resources of India. In Assam, the Assam Oil Company was producing oil at Digboi and the Oil India Ltd. was engaged in developing two newly discovered large fields Naharkatiya and Moran in Assam. In West Bengal, the Indo-Stanvac Petroleum project was engaged in exploration work. The vast sedimentary tract in other parts of India and adjoining offshore remained largely unexplored.

In 1955, Government of India decided to develop the oil and natural gas resources in the various regions of the country as part of the Public Sector development. With this objective, an Oil and Natural Gas Directorate was set up towards the end of 1955.

Soon, after the formation of the Oil and Natural Gas Directorate, it became apparent that it would not be possible for the Directorate with its limited financial and administrative powers as subordinate office of the Government, to function efficiently. The corporate history of ONGC began in 1956, with the mandate for exploration and production (E&P) of hydrocarbons in India. So in August, 1956, the Directorate was raised to the status of a commission with enhanced powers, although it continued to be under the government. In October 1959, the Commission was converted into a statutory body by an act of the Indian Parliament, which enhanced powers of the commission further. The main functions of the Oil and Natural Gas Commission subject to the provisions of the Act, were “to plan, promote, organize and implement programmes for development of Petroleum Resources and the production and sale of petroleum and petroleum products produced by it, and to perform such other functions as the Central Government may, from time to time, assign to it “.The act further outlined the activities and steps to be taken by ONGC in fulfilling its mandate.

In July 1991, the Government of India adopted liberalized economic policy which sought to de-regulate and de-license the core sectors including the petroleum sector. In 1993 after the adaptation of business of the former Oil & Natural Gas Commission to that of Oil & Natural Gas Corporation Limited, the Government disinvested 2 per cent of its shares. ONGC was thereof re-organised as a limited company under the company’s act 1956, in February 1994 (ONGC India Limited, 2009-2010).

3.4. Helping Hand 4 Cancer Care:

Helping hand for cancer care is a non-profit organisation which has grown out of Jaslok hospital. It is an initiative of Dr. Geeta. S.Advani and her husband Dr. Sh.H.Advani, an eminent medical oncologist. The organisation has been in existence from the past 6 years with the collaborative effort of the oncologists, oncology social workers, patients and their families and volunteers from all walks of life. Mobile Mammography breast clinic which aims to detect breast cancer at an early stage is the dream project of helping hand for cancer care. The literacy rate in India is low especially amongst women, which makes them unaware of diseases like breast cancer. Hence NGO like helping hand for cancer care help in spreading awareness of breast cancer in women between the age group of 40-70 years. The Mobile Mammography screening Van which runs all over Mumbai, is sponsored by ONGC. This initiative undertaken by ONGC and helping hand for cancer care is to teach and encourage the women for self breast examination which is necessary once a month (Helping Hand 4 Cancer Care, /).

Chapter4. Methodology

4.1. Introduction:

This chapter shall discuss the research methods available forthe study and what is applicable for it to use in response for research questions in chapter 1 which is directed towards the impact of Social Partnerships between ONGC and Helping Hand for Cancer Care.

Similarly, this chapter presents the various procedures and strategies in identifying sources for needed information on the analysis and evaluation of the Social Partnership.

Therefore this part of the study specifies the method of research used, research design, respondents of the study, data collection, conducted semi-structures interview, data representative and data analysis of the gathered data.

4.2. Methods of Research Used:

As there is no Quantification involved in this study, Qualitative research was utilized. ‘Qualitative Research means any type of research that produces findings not arrived by statistical procedures or other means of quantification’ (Strauss,A.,L., and Corbin. J.,1998). This research methodology is proven to be very important in the analysis of the relationship between business and society (Harrison and Freeman, 1999). In explaining qualitative research, Denzin and Lincoln state that, qualitative implies an emphasis on processes and meanings that are not rigorously examined, measured (if measured at all), in terms of quantity, amount, intensity, or frequency. Thus, there are instances, particularly in the social sciences, where researchers are interested in insight, discovery, and interpretation rather than hypothesis testing (Noor. K.B., 2008).

4.3. The Research Design:

In order to come up with the most suitable research approaches and strategies for this study, Saunders et al. (2003) the research process onion is used. With the said process, it is easy to create an outline on what measures are most appropriate to be applied in the study. According to Saunder’s et al 2003, the central issue on how to collect the data needed to answer the research questions, there are important layers of onion that needed to peeled away.

4.4 Research Philosophy:

The research philosophy used for this study is Critical Realism. Critical Realism sees not only to understand but also to explain the social world (Kasi.P.M., 2009:96). According to Bhaskar (1998:2) critical realism is

‘A specific form of realism whose manifesto is to recognize the reality of the natural order and the events and discourses of the social world and holds that we will only be able to understand and so change-the social world if we identify the structures at work that generate those events and discourses…..These structures are not spontaneously apparent in the observable pattern of events; they can only be identified through the practical and theoretical work of the social sciences’.

This study is a combination of various theories and practical information collected from ONGC and Helping Hand for Cancer Care patients, to identify the cross-sector partnership.

4.5.Research Approach:

Within Qualitative research, this study is based in an inductive design. According to Bryman and Bell (2007: 12), in an inductive method

‘the researcher infers the implications of his or her findings for the theory that prompted the whole exercise. The findings are fed back into the stock of theory and the research findings associated with a certain domain of enquiry.’

Observations/Findings Theory

Figure1: Induction theory

Source: Adopted from Bryman and Bell (2007), Business research methods, p.14

This study evaluates whether a specific cross-sector partnership between ONGC and Helping Hand for Cancer Care can be considered. This requires an in-depth understanding and exploration of the relevant literature needed.

4.6. Research Strategies:

According to Yin (1998) the term case refers to an event, an entity, an individual or even a unit of analysis. It is an empirical inquiry that investigates a contemporary phenomenon within its real life context using multiple sources of evidence. A single case is used for this study. Among other CSR partnerships of ONGC, only Helping Hand for Cancer Care Patients has been used to classify the social partnership between them. Hence the Case Study approach is the most suitable research strategy for this study. As said by Noor, (2008) case study is not intended as a study of the entire organisation, rather is intended to focus on a particular issue feature or unit of analysis. A case study is being concerned with the ‘how’ and ‘why’ questions, which allow the investigation of contextual realities and differences between what was planned and what, actually occurred (Anderson, G., 1993).

4.7. Data Collection Methods:

Data has been collected from a variety of sources, allowing for a number of different perspectives to be taken into consideration in the development of the recommendations.

Secondary Research:

This study would be incomplete without secondary research. According to Stewart D. W, and Kamins M.A, (1993) ‘Secondary information consists of sources of data and other information collected by others and archived in some other form’.This data collection method is quicker, inexpensive and at most times a point of departure for primary research.

For this study, the secondary data was collected from written documents such as company reports, other documents, and online information. Other information which structure the theory were journals, books, other policy documents, and reviews complement the study.

Primary Research:

Primary Data is any information collected specifically for the investigation at hand (Boone et al, 2007). The primary data for this study is gathered by conducting Semi-Structured interview. Semi-structured interview is one of the principal methods for collecting primary data. The choice of semi-structured interview rather than any other data collection method was employed because it is non-standardised and offers more flexibility to approach different respondents differently while still covering the same areas of data collection.

With the permission of the participants the interviews were tape-recorded for the insurance that all data will be noted.

Respondents of the study:

In this study from the ONGC side the respondents’ were the H.R. Manager of ONGC, the retired officer of the CSR department, the General Manager and the interns of the CSR department for the interview.

While from Helping Hand for Cancer care patients the respondents’ for the interview were one of the Doctors, A trusty of the NPO and a few patients.

4.8. Data Analysis of Methods:

The most commonly used qualitative analysis approach in the domain of social science is the organisation of data according to topics, ideas or concepts often called themes (Swanwic. T., 2010). The method of analysis chosen for this study was Thematic Analysis which is a process for encoding qualitative research (Boyatzis, 1998). According to Kellehear et al (1997), thematic analysis is a search for themes that appear as being vital to the description of the phenomenon. It is a form of pattern recognition within the data, where emerging themes become the categories for analysis (Fereday. J.,Muir-Cochrane.E., 2006). As the primary data for this research was qualitative, thematic analysis was found to be the most suitable, as its focal point is to recognize themes and patterns of behaviour (Aronson, 1994).

Chapter 5. Data Analysis & Discussions

5.1. Introduction:

This chapter will present and discuss the findings by employing the Holistic frame work laid down by Seitanidi, (2010) and Chronological Stages described by Selsky and Parker (2005).More specifically; the findings will be grouped through the application of the framework.

5.2. Application of the Frame work:

According to Seitanidi’s (2010) Holistic frame work and the Chronological stages as mentioned in the literature review, there are three stages of a partnership.

1).Partnership Formation stage:

The Formation stage of the social partnership consists of a set of construct.

Formation Stage

Organisational Character Historical Evolution Motives

Of the relationship

A}. Organisational Characteristics:

In this section the structure of each organisation under examination before the collaboration will be presented, based on each organisation’s characteristics. Since, it is possible that the structure of an organisation affects its relationships.

ONGC is a leading public sector company of oil and natural gas engaged in E&P (Exploration and Production) activities in India. It is a state owned company; hence the Indian Government has the majority of stake in the company. The Government together with two states energy firms maintain an 84.11% in O.N.G.C. (Ganguly, S. 2007). O.N.G.C has a 47,757 employees working with it, and its sales is more than 4.52 billion $.

O.N.G.C. Organisational Chart

Source: O.N.G.C. official website 2009-2010.

Available at : http://www.ongcindia.com/organogram.asp

It has a hierarchical organisational structure rather than flat. It means that it has more layers of management and a more formal leadership style (Berger et al., 2004). The benefits of this type of structure are the quick decisiveness and action by the powerful people ((Berger et al., 2004).

ONGC’s very first Sustainability Report was produced in2009-2010. On the basis of this report, a CSR guidelines report was also made in July 2009. According to these guidelines report, their new CSR approach emphasised on transformation of CSR from ‘Philanthropy’ to ‘Stakeholder Participation’

http://www.ongcindia.com/%5Cdownload%5CCorp%20Sust%20Report%5CONGC_Sustainability_Report_2009-10.pdf.

ONGC is spearheading the United Nations Global Compact – World’s biggest corporate citizenship initiative to bring Industry, UN bodies, NGOs, Civil societies and corporate on the same platform (http://www.ongcindia.com/people.asp).

Helping Hand for Cancer Care:

It is an NPO established in 2002, and formed as a registered organisation in 2005. It is an initiative for helping patients’ surviving from cancer. Its dream project is to have more Mobile Mammography clinic for the early detection of breast cancer in Indian Women. While interviewing a member of the NPO, it was stated that:

“The helping Hand is doing a stupendous job in bringing for the masses a costly test for breast cancer detection at affordable rates so the Breast cancer detection reaches out to a large population”.

In spite of the progress India is making, the literacy rate among women is relatively low, which makes them unaware about the health issues. The mobile mammography clinics make it easier to reach the mass audience and spread awareness. This is clearly stated from a Dr. Working for the NPO

“This initiative of Mobile Mammography and Cancer awareness is an excellent media to spread the message of awareness for the early detection and prompt diagnosis for early management of Breast cancer. The impact it leaves behind among the common masses after the camp is tremendous.”

Organisational Chart

Source: Help for cancer care org.

Available at: http://www.helpforcancercare.org/Meet%20the%20Team.html

The organisational chart of this NPO is small and hierarchical in structure. According to Berger et al., (2004), the smaller the NPO, the more flexible, energetic and eager it will be. They may also appear to be more accommodating to the company, more malleable, more willing to accept risk, and more likely to offer exclusivity. It is more like a small team joining hands for a common cause.

B}. Historical Evolution of the relationship:

ONGC has CSR projects like undertaking villages, developing schools, hospitals ect in parts of the rural India. But in a city like Mumbai, where it has its head office, development of schools and hospitals was not needed. Hence it wanted a partner who needed their help in one of the CSR areas in which ONGC is involved.

Helping Hand for cancer care served ONGC’s CSR needs in the health sector. The NPO was suggested by the Additional Chief Medical General of ONGC, as he had consulted and worked with the NPO before.

As stated by him,

“Helping hand is professionally managed NPO which is serving the community and the poorer section of the society for early detection of Breast cancer.”

According to Seitanidi. M.(2010) the historical evolution of a pre-existing relationship can be either due to previous interaction between partners which included collaboration regional offices or consultation on special issues.

The formation of the partnership took place in 2009. A simple MOU was signed by both the partners. The agreement was to donate a mobile mammography clinic to the NPO for fighting breast cancer.

C}. Motives associated with each partner:

To set a particular criterion for a partnership selection, it includes a number of factors which enable the decision to partner with a particular organisation. Partner motivation is one of the frequent topics of discussion in the formation stage. Motivational differences are said to derail collaborative intent (Selky & Parker, 2005).

Regarding the motives of each organisation, in term of ONGC which is a state owned company, the motives were;

1). Firstly to involve ‘stakeholder participation’. NGO/NPO has always been one of the stakeholders. Hence the participation of an NPO was necessary and it also lead to the indirect participation of people at the grass root level.

2). To enhance organisation’s reputation (Seitanidi, M. 2010).

3). Seeking synergy with the partner who can support in the delivery of the goals.

4). Cost- effective relationship (Seitanidi, M. 2010).

5). Covering similar geographical area.

According to Iyer (2003) a common motive for a BUS is to pursue self-interest like enhancing corporate image (Alsop, 2004; Zammit, 2004). The motives of some organisation also tend to examine the effects of internal and external stakeholders. In this case, ONGC views stakeholder management as a means to an end (Sleky & Parker, 2005).

In most of the case studies, the motives of the non-profit tend to be altruistic in nature (Milne et al., 1996). Along with this, the NPO may also view their partnership with the BUS as a way to influence the society and to become important intuitional actors (Doh & Teegen, 2002).

In the case of Helping Hand for cancer care, the motives were;

1).To enhances organisation reputation.

2). Financial support in order to increase its activities.

3). Reaching as many people as possible and covering similar geographical area.

4). To encourage and educate the women.

From the findings of each organisation’s characteristics and each party’s motives, it can be argued that, ONGC’s collaborates with the NPO is for enhancing organisation image. Due to loss of public confidence towards the governmentin India and changes in the philanthropic giving’s (Weisbrod, 1997), it was necessary to enhance partnership with a private NPO like Helping Hand for Cancer Care.

While the NPO perspective is to seek financial help, make a social change at a bigger platform through the help of partnership and improve organisation reputation.

2). Partnership Implementation stage:

Moving towards the second stage of a relationship, the implementation stage here the objective is to investigate the evolution of the dynamics between the two organisations and to identify the phases of the partnership process (Seitanidi, 2010). The Holistic framework of Seitanidi involves three stages of partnership implementation;

Implementation Stage

Partnership PartnershipPartnership

Selection Designinstitutionalisation

A}. Partnership Selection:

The partnership selection stage is the first step of partnership implementation. It commences with the decision to choose partnership as a preferred form of association. As ONGC’s CSR policies have changed from Philanthropic to stakeholder participation, it is clear that social partnership is the ideal form of association.

B}. Partnership Design:

The second phase is to identify the design of the partnership. There are many sub-sections involved in the designing procedure, among which only a few are utilized in this partnership.

This stage involves experimentation with partnership relation, like drafting a Memorandum of Understanding (MOU) and setting up partnership objectives (Seitanidi, 2008). An MOU was also drafted in case of ONGC and helping hand for cancer. The MOU was also necessary as a part of the government policy. Another area of partnership design is the partnership structure which involves several departments. In this study, as seen in the organisational structure the medical department fall under the H.R. department. The NPO was bought in by the medical department, while the documentation work was done by the H.R. department and the implementation was carry forwarded by the corporate communication department.

To summarize, although this partnership has undergone the experimentation and partnership structure phase, the partnership design is not completed. One of the most crucial phases is the ‘Virtual team’ (Seitanidi, 2008). This phase comprises a team of people from the BUS to help in the smooth functioning of the NPO. This leads to the ultimate adaption of the partnership. Hence this relationship went one step back and instead of strengthening its interactions, they separated their activities.

C}. Partnership Institutionalisation:

Reaching to a partnership institutionalisation stage is a long process. The relationship has to pass a few tests for a partnership to reach the institutionalisation stage. The first stage is known as ‘Relationship mastering’ stage. It means that although a crisis may occur, it can be resolved rather than cause a serious problem in the relationship (Seitanidi, 2010). The second stage involves familiarisation on personal level rather than just organisational level. This stage is known as the ‘Personal Familiarisation’ Seitanidi, 2008).

The relationship in this study as stated before is formed by the advice of the Additional Medical officer of ONGC, who had worked with the NPO before. Hence there is evidence of personal familiarisation in this partnership. But the partnership did not pass the relationship mastering stage.

To conclude with, the partnership in this study did not pass all the levels of the designing stage. As the level of familiarity was long before the formation stage, it can be argued that this relationship did not begin at the ‘selection process’ (Seitanidi, 2010). The design and institutionalisation stages are not completely passed by the organisations. The ‘Virtual Team’ phase could be relevant both the stages which could smoothen the relationship and pass the partnership designing stage completely.

The dynamics of this relationship involve the level of interaction between the organisations (Seitanidi,2008). According to Le Ber and Branzei (2010), (cited in Yaziji and Doh, 2009) if the BUS and NPO have a high level of engagement and interact frequently, than the strategic value of the partnership is also high. This leads to a more resourceful cross-sector partnership (Rondinelli and London, 2003). Although there seem to be clear communication between the two organisations in this study, it was more in an informal way. This resulted in lack of integration at some levels.

3).The Partnership Outcomes:

The outcomes of the BUS-NPO partnership have been measured at three levels: Organisation, Social, and Societal benefits (Selky, 2005) (Seitanidi, 2010). Although the partnership didn’t go through all the stages successfully, the outcomes of the partnership were benefitted to all. The motives and goals which each organisation had planned were achieved through this partnership.

The outcomes achieved by BUS:

1} ONGC has built a very health corporate reputation in terms of business and community involvement. This kind of CSR practice was taken up for the first time. This relationship did the work of filling up the gap of communication between the stakeholders and people at grass root level (Selky, 2005). This has enhanced the reputation of ONGC even more.

2} ONGC spends 16.5% in the health care sector; hence it needed a partner in this sector only. It has developed few cancer care hospitals in Assam and other parts of India. But setting up a hospital in a city like Mumbai would take a huge investment. Hence it joins hand with helping hand for cancer care for a cost-effective relationship.

3} To spread awareness among women of breast cancer.

The outcomes achieved by the NPO:

1} The financial support given by ONGC, helped to accomplish a very important dream of having a Mobile mammography clinic to help breast cancer.

2} After having a partnership with ONGC, it started bring recognised as a serious NPO, as it got more associates to help them. It also has a trust, which helps in giving finance to deprived people for cancer operation and treatments.

3} It also helped in improving its facilities and increasing public awareness. Now it also has its own Yoga centre for Cancer patients.

4} Along with all this, there were many successful stories of pre-medical treatment and recovery of cancer patients.

“…. It is a very inspirational organisation, which is working for a very noble cause. Breast cancer in India has been ignored a lot”. (A patient from the NPO).

Another outcome which both the organisation gained was the learning outcome. According to Waddell (1999) and London et al., (2005) learning is an important outcome in the cross-sector partnership. The learning process of ONGC started when it shifted its CSR policies from philanthropic to stake holder participation. After the transformation in the CSR policies, the partnership between ONGC and Helping Hand for cancer care was the first to be formed. Hence there were many flaws in it. The first learning outcome for the BUS was to develop more interpersonal skills which would make the partnership more resourceful, social learning that can lead to needed innovation (Waddell, 1999).To be involved in the partnership till the end.

The NPO learned the administrative skills, technical skills. Along with this they also learned that traditional sectors solutions cannot address certain challenges and therefore form social partnership to enhance learning and borrowing from organisations in other sectors.

To conclude this, although the partnership did not go through all the stages successfully, it had a positive outcome. According to Seitanidi (2010), societal outcomes ‘refer to the unique benefits that accrue for society through the partnership relationship’. The partnership helped in spreading awareness about breast cancer in women, along with this through the help of this partnership the NPO got recognition which helped it develop the yoga centre and the give financial aid to the poor cancer patients. In this respect even though the partnership may not be the kind of social partnership described in the theories, its foundation still has a lot of positive societal outcomes.

Chapter 6. Conclusion

Conclusion:

The concluding chapter of this research will assess the study as a whole. It will provide a brief summary of the findings. It will also identify whether the relationship can be considered as a partnership.

6.1. Summary of the Dissertation:

There is a lot of literature available in regard to CSR. But in spite of this, CSR is relatively a new approach to corporate management (Campbell, L., J. 2006). Different writers have suggested different approaches and meanings of CSR. One of the most discussed and important approach is the Cross-sector partnership. It is a partnership between Businesses-Government- Social sector.

This dissertation aims to evaluate the cross-sector partnership between a BUS (ONGC) and an NPO (Helping Hand for Cancer Care) in India. This partnership will be evaluated with the help of the Seitanidi’s holistic framework (2010) because Seitanidi was the first one to have an in-depth study of the stages of cross-sector partnership. The stages have also been identified by Selky and Parker (2005). But the Holistic framework provides a much clear view to analysis the partnership.

The literature review of this study discuss the practices and concepts in India, examine the cross-sector partnership according to Seitanidi, (2007), it also explains the stages of cross-sector partnership. As far as methodological approach is concerned, this study used an inductive qualitative research, with both primary and secondary data that were analysed through the utilisation of a thematic analysis.

6.2. Identification of the Partnership:

The partnerships between BUS and NPO share a high level of social legitimacy, because of the importance given to cooperation and mutuality (Seitanidi 2006). Hence these kinds of relationship have the potential to meet the demands faced by both sectors. But on a conceptual and practical level the implementation of partnership remains problematic (Mohiddin 1998).

According to Kumar et al., (2001) the primary focus of CSR in India is to identify ‘how to carry out CSR’, which often lead to conflicting findings on related practices.

The literature of this study identifies four models of CSR suggested by a survey of TERI foundation; Ethical model, Statist Model, Liberal model and the stakeholder model. The CSR structure of ONGC is based on the Stakeholder model. The identification and involvement of the stake holder (NPO) is present in the relationship, but the interaction level between the organisations is relatively low and so is the participation of ONGC in the activities of CSR. As stated by Hakansson and Ford, (2002) ‘A relationship development is a matter of joint action and it is always necessary to mobilize the other organisation in the process’.

As per the findings of the literature provided in this dissertation, it is identified that the partnership between ONGC and helping hand for cancer care cannot be considered a full-fledged partnership. According to the data collected with the application of the Holistic framework, the partnership has gone through the formation and outcome stage but has not completely passed the implementation stage.

Due to the failure of not passing the stages, the partnership according to Austin (2000), may merely be another transactional type of relationship.

A research by Googins and Rochlin (2000), identifies this type of partnership.

‘In U.S. 140,000 such ‘partnerships’ were formed in theUS by the 1990s, centred on educational improvement, the nature of these so called partnerships might in reality be better described as enduring transactions: The number [of partnerships] appears overwhelming, and the potential for change in the U.S. education system seems vast. It takes just modest investigation to determine that most of these engagements are about a one-way transfer of resources- i.e., a corporate benefactor provides some Dollars and used supplies to a needy school. As such this does not appear to satisfy the intuitive conditions of ‘true partnership’ between the sectors (Googins and Rochlin 2000: 132) ‘.

To conclude this, even in spite of the positive outcomes, the relationship seemed to be transactional, because of the level of interaction and the voluntary effort from the BUS side. The partnership can only be completed when both the organisations not only share their resources, but also work together. To put this in practical, the NPO’s in future must empower themselves which will further assist in prioritising the process and the intermediate nature of the interaction as a source of change that might lead to more symmetry (Seitanidi, 2007).

Recommendations for implementing CSR

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Zadek, S., (2004) “The path to Corporate Social Responsibility” Harvard Business Review, pp.125.

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Copyrights law of television industry in different countries (U.K and India) and its fair use in media business.

Abstract

This report explores most of the criteria of Copyrights and its vast area which protect creativity, invention and artists’ originality by laws and regulations about intellectual properties. A large number of researches depict different kind of rules and their implementation for healthy business environment in media industry (Television) in different countries such as UK and India. Where appropriate information about Intellectual property and copyright gives full knowledge about report, as well as other side way of these properties’s fair use helps to understand media and its creative environment. Discussion and background research are influencing conclusion with their logical elements and issues. Key point such as definitions, area of law, types of intellectual property, differences between constitutions affect topic very well and discover a wide range of knowledge.

Introduction

Creativity is a major part of invention and every artist and inventor tries to save his/her invention. Every kind of intellectual property needs appropriate law for its protection by misuse and fair use. Wilson L. (2005, p.8) states that ‘‘Most people realize that copyright protects works of art like poems and short stories, photographs, paintings and drawings and musical compositions. It may be less obvious that copyright protects more mundane forms of expression, including such diverse materials as advertising copy, instruction manuals, broachers, logo designs, computer programmes, term papers, home movies, cartoon strips, and advertising jingles’’. In this quote writer clearly mentioned safety issues and area of creative work. In this report we will be discussing about this kind of intellectual properties which use in television industry. As well as according to this quote we understand that copyright is a unique way to protect creative works such as books, music and different kind of art and commercial work. Non commercial work and commercial work has categorised in intellectual property law according to there use, In simple words we can say that copyright laws prevent artistic work from unauthorised use. This report informed about different kind of copyright laws in different countries, behalf of this some important questions such as how to prevent creativityFair use of creative works on Television Industry, Which parts of television area comes in intellectual properties?

Television Industry always works on wide range of new inventions and creative ideas where intellectual property is a necessary part of this media industry. Although matter is about new T.V shows, concepts, technologies, music or advertisements every part of this industry reflect copyright and its law. Many inventors already had given brilliant creative, entertaining and profitable ideas to media industry which still works for other companies and television channel for their profit via fair use, so it is very important issue to protect this kind of art. A Television company have different facts such as it is a commercial industry, advertisement technique, democratic organisation or institution, a medium between government and organisation, cultural visualisation technique. It is bigger than a thinking of business. While its only a source of entertainment for viewers on the contrary it is a big system which belongs to monetary term

Copyright and media have a unique connection which makes a wonderful business environment. Journalism, media, cable and broadcasting industry, advertisement agencies and their software’s, videos, music etc. every part of television have a interesting fact about laws and terms and condition. Fisherman A. (2004, p.2) said that ‘‘The U.S. Constitution gives Congress the power to protect works of authorship by enacting copyright laws. But it is up to Congress to actually write the copyright laws and decide on the details of what should be protected and for how long’’. According to this statement we can understand that copyright and intellectual law system generated in U.S via Congress and copyright issues also have some eligible time period, every kind of intellectual property which relates to television and its factor have a different time ratio according to its type and sources.

Research

Rights and Power

Matsuura, Jeffrey H (2003, p.9) shows that ‘‘Copyright law provide ownership to the creators of the original works that are fixed in tangible form. It grants those creators several fundamentals right to use for the work they create. One of those right is the right to create copies of (duplicate) the work. Another of those rights is the right to distribute the work. Copyright law also grants the creator of an original work the right to perform or to exhibit the work publicity’’. Quote indicate that In television companies a producer or director have right of his copyright video to make copies for public display, video and soundtracks of video, distribution CD for profit by rent or sale as well as digital transmission etc. On the contrary Matasuura, Jefferey, H (2003. p.98) states that the video industry avoided many content right battles that confronted their print and music industry colleagues in the early days of the internet. In part, the delay in encountering those issues was caused by the relative scarcity of consumer access to broadband capacity adequate to support high-quality digital video content distribution. With time, however, that respite for the video content industry is ending and thus the relative good fortune of the digital video content industry is rapidly fading. The video industry now faces many of the same difficult rights management issues that the other media industries are already attempting to resolve. The same challenges as control over content in digital form that the print publishing and music industries have faced for several years are now confronting the television and motion picture industry’’

Collections

One of the valuable limitations according to television copyright is the fair use techniques and valuation, every subject have to know about the fully terms and conditions about copyrighted product such as video or programme theme. There is only one copy can be copy and distributed but only when they don’t use it for profit and make the copy available to the general public. On the other side it is not possible to get another copy from copyright holder.

Infringement and Strategy

CREEBER (2008, p.49) illustrate that ‘‘The USA, one of the biggest producers of media distributed – often illegally – around the world, passed the Digital Millennium Copyright Act in 1998 in an attempt to control unauthorized downloading of intellectual property. In 2001 the European Union (EU) crafted the EU Copyright Directive along similar lines. Many other nations also adopted such legislation, but in some areas of the world, most notably China, digital piracy continues with abandon.’’ the site explains more about the concept of which procedures would be ideal to apply to a particular piece of research. Participant observation, direct observations about copyright implementation period in different countries. Its clearly shows that copyright system implementation had a very important issue which protect creative work by media people and stop the unfair use of intellectual property. Althought some countries have not participated in this mission but gradually after a period country realised that they need a particular law for this problem. According to a internet news on Indian television website writer said that ’’The Anti-Piracy Coordination Cell, constituted by Federation of Indian Chambers of Commerce and Industry (FICCI) with the support of the HRD Ministry and the industry, will coordinate the efforts at combating the menace of piracy across sectors. Such a cross-sectoral initiative will lead to a synergized approach to a common and increasingly menacing problem’’ the statement informed that Indian government also participating gradually to remove piracy and unfair means in indian media. Any one who try to get profit by unfair means will be taken seriously by Indian judiciary.

Although every country implement laws and regulation to remove piracy from intellectual property but one question is still remaining that ‘‘ How others can fair use of creativity of genuine work and which kind of duration and laws they have to follow ?’’

Anything which use for social, cultural or political benefit and affect harm to copyright owner it comes to infringement. Specially when its not permitted. To avoid claims of piracy while we try to consider anyone else work we always beware that protect our self to become a piracy victim. We should aware and use a checklist before fair use of anyone work. For example we must research about the work and its background, we should get knowledge about works creator and his/her demands and authority belongs to work, some time if we use any kind of video or soundtrack we have to pay royalty amount regarding use of genuine work where on the contrary author or director of work provide NOC without any monetary terms. Media and television have a very complicated and deep amount of lawful information. Different catogry of fair use have different options such as if we want to use a broadcasted video or footage for public or social or culture related task we have to confirm its limitations and conditions for this statement Wilson L, (2005, p.71) believes that ‘‘ There is no definite boundaries between fair use and infringement, because no general rule defining infringement is possible – remember, the infringement evaluation must be made by weighing particular circumstances’’. It states that copyrights for intellectual properties specially in broadcasting system and cable tv is very strange. It is very necessary to get appropriate permission or license for fair use. Here the major point to understand is that difference between permission and license, use a particular stuff or work without monetary terms comes in permission and other side if we have to pay some amount for use works of someone else it comes in license section and similarity in both is that both depends on particular duration such as works area duration, time or date till then work can be use etc. One of the very good example is case study of international TV formats trading in the absence of IP protection where states that ‘‘The format is not necessarily reliant on legal protection. It certainly helps there is a degree of perceived legal protection but the industry at large is aware of how dubious that protection is’’ this statement basically describe about piracy and legal dimensions where a particular new invented TV show copied by different copycat producers. In this article there is a brief example has given about famous TV Show Pop Idols or American Idols which produced in different countries by various method such as Indian idol in India etc. Producer said that it is theft to make the same programme with few changes where concept and theme are quite same.

Internet Television Rights

New age and digitalization is making new innovative ideas of entertain audience where television become the part of life everyone’s other side some digital companies was ready to adopt a new television technology ‘‘internet streaming television’’ which provide all visuals of live streaming and recorded programmes on internet. Although was really creative innovations but intellectual property law and their law also quite different for this kind of technologies. Kretschemer M (2007, p.101) illustrate that Broadcasters, cable TV operators, content programmers, and television set manufacturers all agree that even if the digital transmission and interoperability issues are settled, the quandary over internet piracy and the possible distribution of high-definition content on the internet still needs to be resolved. Every procedure has a different evaluation according to its process if genuine director or producer allow his /her work to copy on internet by other websites then might be it’s a extrea profitable for them because in this case they can get royallity or other kind of amount such as license fees for there work, but if they have any contract or sponsorship with any company or label then contract paper decide the laws value for original creator.

REFERRENCES :

Wilson L (2005). fair use and use by permission. 1st ed.10 east 23rd street New York: Allworth Press.8

Wilson L (2005). Fair use free use and use by permission. 10 east 23rd street New York: Allworth Press. 71.

Attorney Stephen Fishman (2004). The Public Domain. 2nd ed. CA Nolo,: Berkeley. 2.

Matsuura, Jeffrey H (2003). Managing intellectual assets in the digital age . Boston: Artech House. 9.

Matsuura, Jeffrey H (2003). Managing Intellectual Assets in the Digital Age . Boston, MA : Artech House. 98.

CREEBER (2008). DigitalCulture: Understanding New Media. ENGLAND: Open University Press. 49.

n/a. (2010). Govt aims to align Indian Copyright Laws with global standards. Available: http://www.indiantelevision.com/headlines/y2k10/oct/oct118.php. Last accessed 14th march 2011.

Kretschemer M & Singh S. (2010). Exploting Idols. A Case study of international TV format trading in the absence of IP Protection. 1 (1), 15.

Castaned M. (2007). Television & New Media. The Complicated Transition to Broadcast Digital Television in the United states. 8 (1),

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Free Essays

An essay on hr problem in cognizant technology solutions, yyderabad, india

Introduction

This essay describes the recent HR problem faced by Cognizant Technology Solutions, Hyderabad, India one of the fastest growing IT Service Providing Companies, a subsidiary of Cognizant Head Quarters, New Jersey as heard from one of the associates within the company. The Organization faced the problem of retaining their experienced associates during the economic down-turn period or so called Recession period when the other competing companies fired many of their employees who have worked for more than half-a decade because of posing financial problems on the company in regard to wages and maintenance during that period. Started with around 264 associates to 10,000+ members (till date), they have contributed a lot to the Organization’s notable growth over a short period of 8 years at Hyderabad Off-shore Development Centre.

[ By Geeta Ramachandran, Sr. Executive – HR, Global Workforce Management (GWFM), CTS(H), Feb, 2006-(till date). ]

Key Words: Associates, Resources, Off-shore Development Centre, Business Continuity Plan, Work Force Management, Incentive Approach, Two-in-a-Box Module.

Background

Cognizant Technology Solutions, one of the leading Multi-National Companies started its Off-shore Development Centre (ODC) at Hyderabad, India in 2002 as a part of Global Expansion. It serves more than 500 clients belonging to various fields such as Banking & Financial Services, Health Care & Insurance, Communications, Consumer Goods, Energy & Utilities, Information, Media & Entertainment, Life Sciences, Manufacturing, Retail, Technology, Transportation & Logistics, and Travel & Hospitality. The Company has recorded its highest growth in the 4th quarter of 2010. And announced 200% hike for their top performers during this quarter recovering from the recession blows. They have crossed the 10M strength in the same quarter globally.

[http://www.cognizant.com/aboutus/in news ]

Interventions

Recession is more often can be termed as one of the phases for readjustment in disequilibrium of capital management. Whenever a resource is released within an organization from the declining activities, they will be immediately shifting to the expanding industries. Recession or recovery is the first phase of readjustment process in this world of non-uniform capital and rigidities in adjustment processes starts with the realization of errors delivered under the false impression projected by easy credit. Downturn period in the global markets is considered as bad by concerning the nominative judgments about the different phases of the cycle.

[ “Capital in Disequilibrium: An Austrian Approach to Recession and Recovery” by Noah Yetter and John P. Cochran. ]

Multi-national companies are focused on getting the experienced staff which would allow them to have the feasibility of not spending additional investments on any other different training programs. Small scale organizations are more focused on fresher as they cannot bear huge pay to the experienced hires. By providing the well established environment to the employees so that the employees can work freely and can apply all thought process into reality. Because of this, there is a diversion among the managers whom to consider with high priority when financial matters are involved with the resource management techniques.

[ Resourcing in Business Logistics: The Art of Systematic Combining, by M. Jahre, L.E. Gadde H. Hakansson, D. Harrison, G. Persson, and G. Liber, Torkel Stromsten, Stockholm School of Economics, Stockholm, Sweden, Book Review, Page No. 411-414.]

As there are financial prospects involved, it is always better to recruit fresh graduates and train them based on the requirements of business with the usage of proper forecasting techniques. If the resources belonging to an organization are homogenous in all aspects and all prices, wages, and interest rates are perfectly flexible in according to the organizational policies, then the recession or recovery process would be a single process which would be quick and practically painless.An experienced employee wages equal the 3-4 fresh graduates wages whose cost to company would be low when compared to former. It is always preferable to have those young minds which are innovative and creative at times and works smart in reaching the timely goals rather than being laborious for completion of tasks. And if the Organization thinks that an experienced employee needs to be retained with the organization, firm should assign them the multiple tasks up to the possible extent but not overloading them. By making the experienced resources responsible in some managerial positions and offering them the provision of consistent support and means for supervision from the top-level management to guide the new candidates in achieving service and delivery goals much to the satisfaction and delight of the customers.

[ “Estimating the impact of enterprise resource planning, project management decisions on post-implementation maintenance costs” by Meg Fryling, University at Albany, USA.]

In order to retain the experienced employees from the organization, one needs to build the strong belief about the future prospects of the employee ensuring about their role in the organization and more importantly job-safety. Cognizant has employed the same strategy during that turmoil and with the same strategy they achieved the tag of fastest growing IT Services Provider around the globe. Cognizant trained the people irrespective of experienced or a fresh candidate in the sector during the period to grab the opportunities in future. By making sure that the employees would fit into the requirements accordingly, and providing them the different options like self-learning, e-learning courses to learn and understand the new technologies rather than sticking to the existing technology which they have already learnt during their graduation and the same has applied over the years for the routine deliverables thus not allowing themselves to reach the further levels in contributing to the success of the organization.

[ “Leadership in the era of Economic Un-Certainty” by Charan. R, McGrawhill, 2009.]

[ “Managing a risk controversy: The Canadian Salmon Aquaculture industry’s responses to organized and local opposition” by Nathan Young; Mary Liston.]

Training and allowing them to understand, implement the new technologies might take some time initially but it makes the employee well-versed with the same. With the same strategy we can build the confidence in the people by spending whole-sum amount for training purpose as it helps in retaining the confidence of the employee on the management. After facing the initial phase of economic un-certainty, every Organization concentrated on cost-cuttings thus enabling the clients to trust the management with respect to the ROI and value of investments. This would reduce the revenue and profits to the company during that period and on a long-term basis, this result in maintaining the healthy relationship with the clients.

[“Applying the Theory of Planned Behavior to Explain Marketing Managers’ Perspectives on Sustainable Marketing” by Ahmed Shahriar Ferdous.]

Reallocation of the resources is another crucial factor which would create some distance between the employees and their families. Reallocation need to be carried out depending on the requirement and feasibility of the company. Depending on the designation, work-experience of a particular employee, he/she would be given the priority to serve the organization according not affecting the business continuity plan and meeting the deliverables in time. Regular Audits will be held at those which were shown to the clients at the start-up. Meeting the expectations of the customer in time is a technique which is possible only through dedicated resources for the organization. With the same approach, organizations build the reputation among the clients.

[ Estimating the impact of enterprise resource planning, project management decisions on post-implementation maintenance costs by Meg Fryling, University at Albany, USA.]

[Collaborative Behavior and the performance of the organizations by Andrew B. Whitford, Soo- young Lee, Taesik Yun, Chan Ju Sung.]

Resource Management within the organization should be considered as a high-priority issue which requires proper attention. Resource Planning and Resource Management according to the business needs to be scheduled. As Cognizant applies Two-In-A-Box Module, On-site/Offshore Delivery module, they tend to have more resource strength at off-shore than on-site as the CTC would be increasing if the on-boarded people are in large number. They do follow a policy of 1:3 ratios Onsite – Offshore resource strength because of which Cognizant resources would like to stay with the organization rather than opting for other organizations. And another way to look at it, the company offers huge incentives and various other activities alongside the regular work. Cognizant recruited graduates during recession period from universities who will be completing their graduation in another 6-8 months of time and gear up to face the global environment instead of firing the experienced hires. Meanwhile the organization can avail the time to plan accordingly and train them the different technologies to meet the expectations from the customers and serve them with high efficiency.

[By Rohit Eustachius, Executive – HR, Campus Talent Manager, CTS(H), Aug, 2006-(till date).]

Based on the above interventions for the problem, we can state that a mixture of fresh and experienced people is required in every industry and the same applies universally. With the help of experienced bunch, fresh employees into the company will learn key points and apply the same when it demands. Reduce the no. of experienced employees gradually and at the same time hire the fresh graduates to compensate work load and financial issues can be settled with less pay details.

[ “HR and IT Capabilities and Complementarities in Knowledge-Intensive Services” by Naresh Khatri, Alok Baveja, Narendra M. Agrawal and Gordon D. Brown. ]

Conclusion

Thus we can derive that problems relating to human resource management involves so many factors and all those factors should be considered when a problem needs a necessary action to be implemented to resolve the problem. Human Resource Management involves with financial issues which plays key role in organizational structure and helps in progress of the organization. This also reveal us how to invest in those crucial times of the market forecasting the future prospects and demands in mind. Resource planning, resource management are two important areas which would contribute to organizations success in the long-run prospects. In the resource planning or resource management, profitable expansion puts inflationary pressure on prices, as more requirement tries to be funded by the same pool of real resources, but this pressure isn’t always felt by all prices. Best returns on equity investments is possible, especially compared to the low returns generally available under depressed interest rates, which may draw excess profitable demand into the stock market, pushing prices to go up further. If the inflationary pressure of the original profitable expansion resulted in a general rise in prices, there would be a relative mild stock slump, and it reflects simply in the market’s realization as the firms are over-valued. But if the economy also experiences inflation in the asset price with little or no commodity price inflation, the stock correction ought to be quite severe, as the prices of stocks fall to reflect not only more realistic valuations of firms but also drastically lower demand for stocks. Easy credit props up the supra-normal demand for equity investments and they are spurred on by its effects, now by that excess amount plus a panic discount declines the demand which was forecasted, as investors who would otherwise have kept their money in stocks pull it out due to an increased in perceived risk. Once the period of increased risk with mass liquidation passes, investors will start to see that stocks are now underrated, and buy in again. This post-panic reawakening of equity investment will be a signal that the readjustment process is actually complete, and normal economic growth is continued. Tax cuts are helpful to the amplitude that they stimulate savings & investment and reduce the role of government in the economy, but implementing them as a means to stimulate consumption is a wrongheaded approach. Thus with the different approaches human resource management is a tough task as it involves multiple issues related enterprise resource planning, resource management, supply chain management etc. The research about the problem resulted in the following approaches to deal with the employees: Allowing the experienced employees to learn the new technologies by means of e-learning rather than attending the in-house training sessions separately thus reducing the cost to the company when the training programs are taken into consideration.

By recruiting the fresher from the universities and train them in different technologies accordingly in place of the experienced resources when the cost to company matters as the fresher would be paid less wages compared to the experienced by forecasting the future demand much in advance.

To reduce the cost to company by maintaining or retaining the productive resources who have contributed lot to the organization’s growth ensuring the customer satisfaction to the most possible extent.

By allocating senior resources to managerial positions to serve the newly hired resources to know in and out about the organization in detail and to gain expertise on the technologies they would apply.

Bibliography
International Human Resource Management: Managing People in a Multi National Context, 4th edition by Peter J.Dowling and Denice E. Welch.
Journal of International Consumer Marketing: Capital in Disequilibrium: An Austrian Approach to Recession and Recovery by Noah Yetter and John P. Cochran.
Journal of Global Marketing: [“Leadership in the era of Economic Un-Certainty” by Charan. R, McGrawhill, 2009.
Resourcing in Business Logistics: The Art of Systematic Combining, by M. Jahre, L.E. Gadde H. Hakansson, D. Harrison, G. Persson, and G. Liber, Torkel Stromsten, Stockholm School of Economics, Stockholm, Sweden, Book Review, Page No. 411-414.
Journal of Risk Research: Applying the theory of planned behavior to study the health decisions related to potential risks by Z. Janet Yang; Katherine McComas; Geri Gay; John P. Leonard; Andrew J. Dannenberg; Hildy Dillon
Pages 1007 – 1026
Journal of Risk Research: Managing a risk controversy: The Canadian Salmon Aquaculture industry’s responses to organized and local opposition by Nathan Young; Mary Liston.
Journal on Enterprise Information Systems: Estimating the impact of enterprise resource planning, project management decisions on post-implementation maintenance costs by Meg Fryling, University at Albany, USA.
International Public Management Journal: Applying the Theory of Planned Behavior to Explain Marketing Managers’ Perspectives on Sustainable Marketing by Ahmed Shahriar Ferdous.
International Public Management Journal: Collaborative Behavior and the performance of the organizations by Andrew B. Whitford, Soo- young Lee, Taesik Yun, Chan Ju Sung.
International Journal of Human Resource Management: HR and IT Capabilities and Complementarities in Knowledge-Intensive Services by Naresh Khatri, Alok Baveja, Narendra M. Agrawal and Gordon D. Brown.
http://www.cognizant.com.

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Documenting Primary school teaching in Mumbai (India)

Introduction

A century ago, when we look back at the educational situation, it can be seen that the concept of ‘primary education’ was not seeded in the minds of the people. Mist of the countries focussed on education as knowing of their religious needs rather than a preparation for one’s active life. Only in 19th century did most countries make primary education compulsory and people began regarding education as a right (Amrung & Gerald, 1999). Children usually enrol in primary schools by the age of 6 and it evolves as a five-year cycle and primary education forms as a basis for all further education and schooling and it is also the foundation to cope with the changing world and society (Pollard & Bourne, 1995). India’s primary education is like a glass which is two-third full and one third empty having 67 million children aged 6 to 10 years attending primary schooling but 28 to 32 million children who are not (World Bank Publication, 1997). Millions of young children hailing from lower socio-economic, comprising nearly 40% never complete their primary schooling and those who can have to face a number of problems like poor qualified teachers, very high teacher-student ratio, inadequate teaching materials (Saxena, 2005). All these factors contribute to low quality of education that imparts only little or no learning. Teachers teaching in primary schools account for the largest steadily growing profession in India, with nearly 2.8 million primary and upper primary teachers employed in the year 2000 (Tilak, 1995)

It is rightly said ‘upon the teacher rests the school’; the ‘teacher’ becomes the prime revitalizing force and plays a pivotal role in the education system. Good teacher is the one who is T- thoughtful, E- Enthusiastic, A-Ambitious, C- Creative, H- Having high dignity, E- Executiveness and R- Reliability and it is the teacher who helps the child to build his self-concept (Devasenathipati, 2001). According to Miyan & Rastogi (2005), a primary school teacher can be called as ‘competent’ only when she/he has a varied range of knowledge in all spheres and skills to achieve her/his goals. Primary schooling is very complex as teachers introduce the children to mathematics, science, language and other social studies which can be very tough and boring for the children, so the onus likes in the hand of the teacher to make all these subjects interesting by using various techniques of teaching like games, music, books etc (Richardson & Stop, 1998). ‘A unique human being- the teacher’ who has to play multiple roles; of a listener, leader, psychological diagnostician etc and requires her/his total self, the personal and professional side to shape the personality of the child (Spodek, 1972).

In India till the 18th century, education was confined to conventional beliefs and thoughts. It was only later when great thinkers like Raja Ram Mohan Roy felt the urgency to introduce an ‘institution for training teachers’ to help the students cope with the changing educational system around the world (Saxena, 2005). Cheng (1996) commented that “A teacher with ‘low educational efficacy’ believes that education cannot affect student’s performance, whereas a teacher with ‘high educational efficacy’ believes that education does positively affect learning outcomes. High educational efficacy has been constantly correlated with child centred (developmentally appropriate) environments and positive student outcomes”. Developmentally Appropriate Practice (DAP) is a term coined by the ‘National Association for the Education of Young Children’ which talks about the teaching techniques that identify and foster the developmental needs of children (Bredekamp, 1997). Documenting these practices which can be named as ‘best practices’ will help teachers to enhance their skills and help them improve for the better, at the same time documentation will also prove as a link between the teaching fraternities globally giving birth to more systematic and educational system along with this it will be a boon for the upcoming generation of teachers to adopt these protocols.

Hypothesis & Rationale

Many a time’s teachers are criticised for not doing their best in schools. There could be many reasons; either it could be ineffectiveness of the teacher or lack of resources. Hence it will be very useful to identify the best/healthy practices carried out by teachers with or without resources. This study will help in knowing and understanding the teacher’s effectiveness in primary schools and documenting the best practices so that other teachers who work under similar circumstances with similar goals and constraints get an idea of effective teaching. The teachers will be observed, recorded and documented in 4 areas: Teacher as a Person, Teacher as a Professional, Teacher’s Interpersonal Relationship and Qualities of the Teacher.

Literature Review

The literature is based on past researches done on teachers and primary school teaching and it is presented on the following subtopics:

Teacher’s Quality
Teacher’s Interpersonal Skills
Teacher’s Qualification
Documentation of the best practices
Primary school teachers and primary education
Teacher’s Quality

According to Hammond (2000) teachers preparations and teachings are the strongest correlations of the student’s achievement and teacher’s quality is the most vital educational investment. Similarly Rvikin, Hanushek and Kain (1998) reported the student’s performance outcomes to the teacher’s quality, they analysed 400,000 students in 3000 schools from New York, which concluded that school quality is the most important factor in students achievement however teacher’s quality is the most important predictor whereas size and teacher education plays a very small role.

Relationship between teachers’ personality and academic and social development was analysed by Heil and Washburne (1998). They found out that children made the greatest progress under the guidance of self-controlled teacher and least under fearful teachers. They also reported that children seem to grow as friendlier under self-controlled teachers.

Teacher’s Interpersonal Skills

Dasgupta (2004) observed that those teachers who had a strong interest in their students as individuals and were sensitive to their needs, the students could relate themselves with such teachers in a much better way creating a level of comfort with them. On the other hand, those teachers who are friendly but make no attempt to know their students, the children feel anxious being with them and they even doubted the teacher’s ability to perform. Similarly, those teachers who did not show any interest, the students believed that the teacher had a very low ability to perform and was low self-motivated.

A significant body of research reported that academic achievement and students’ behaviour is influenced by the quality of the teacher-student relationship. It also suggests that the emotional aspect of the teacher-student relationship is far more important than the conventional advice on methods and techniques of teaching (Gerald, 1999)

Teacher’s Qualification

Cheng (1996) conducted a study on high school students’ performance using data from the National Educational Longitudinal Studies (1998) and found that fully certified teachers have a significant positive impact on student test scores as compared to teachers who are not well qualified and certified.

Heil (1998) through his study concluded that teachers who had been out from teacher education since long and were away from on-going professional development lacked familiarity with current knowledge. She also commented that there was a significant difference in strength of developmentally appropriate practice beliefs between novice teachers and veteran teachers. The more oriented teachers scored significantly high on measures of developmentally appropriate practices.

Documentation of the best practices

A study was conducted by Miyan in 2005 documenting the best practices on 25 children in 7 schools and it was seen that the most prominent best practices carried out were providing children with positive reinforcement, treating all children equally, spontaneity while teaching and innovativeness in teaching methods.

Similar study conducted by Rastogi (2005) found out that the best teaching practices were using teaching aids and creative methods to teach like dramatizations, providing children with a stimulating environment.

Primary school teachers and primary education

According to Dasgupta (2004), ‘play’ should be the central activity of children even in primary schools and primary school teachers should teach children using the play way method as it helps children to relate to what is being taught. Introducing games in classroom is one of the ways of encouraging cooperation and motivating the children to study and learn the concepts.

Washburne (1998) surveyed primary school children to see the kind of the teachers liked by them and those who were disliked. He found that physical characteristics such as grooming, nice voice, and pleasing personality were found to be more important along with teacher’s qualities like interest in teaching, enthusiasm, innovativeness etc. At the same time children also laid equal emphasis on the personality traits like being cheerful, fair, non-judgemental etc.

Methodology

Aims & Objectives
To identify and document the ‘best practices’ of teachers, nominated as ‘effective teachers’ by principals/supervisors
To identify the practices that need improvement
To observe, record and document the ‘best practices’ of primary school teachers in 4 areas: Teacher as a Person, Teacher as a Professional, Teacher’s Interpersonal Relationship and Qualities of the Teacher.
To compare the teachers best practices in relation to the fee structure
To compare the teachers best practices in relation to his/her years of teaching experience
To compare teachers best practices in relation to the teacher child ratio.
Operational Definitions

Effective Teachers: These are the teachers having innovative and creative teaching practices and who will be nominated by the principals/supervisors

Primary Teacher: Teacher teaching to children in 1st and 2nd grade

Low Fee Structured Schools: Schools having fees ranging from Rs.15/- to Rs.350/- per month

High Fee Structured Schools: Schools having fees ranging from Rs.350/- to Rs. 450/- per month

Data Collection
Sample

Primary school teachers serving in the schools having low and high fee structure and located in Mumbai, India will be approached using an introductory letter. The schools will be selected keeping in mind the indicators like fee structure, location of schools, medium of instruction and minimum 5years of establishment. 10 schools will be approached and nearly 30 teachers will be observed and interviewed. From these 10 schools, 5 schools will represent schools having low fee structure and remaining 5 schools will represent high fee structure.

Research Design

The school authorities will be approached with a prior appointment and the school supervisor/principal will be given and introductory letter conveying the nature of the research (refer to appendix 2). The information and the facts about the school (profile of the school) will be obtained from the authorities including details of the school like the name, number of teaching staff, fee structure, teacher-child ratio etc. The principal/supervisor will be asked to nominate three teachers who according to them are effective in their teaching, in short who are exemplary. The teachers will be given a consent form (refer to appendix 1) which will agree their part-taking in the research.

Research Tools

The research tools that will be used for this study will be a fact sheet, an observation record & documentation sheet along with an interview questionnaire. The sample of the research tools is provided in the appendix.

The fact sheet will have two parts to it; first it will help in gathering the profile of the school and second one to gather the nomination of the teachers made by the principal/supervisor (Refer to appendix 3)

The observation record sheet will be again divided in two parts. First part will focus on gathering the teacher’s profile (age, qualification, number of years of experience) whereas the second part of the sheet who help in observing the nominated teacher in four criterias namely- Teacher as a Person, Teacher’s Interpersonal Relationship, Teacher as a professional and Qualities of the Teacher (Refer appendix 4a. & 4b). The documentation sheet will help in documenting the best practices of teachers along with those practices which need improvement. This will also help in understanding the teacher-child interaction and noting down the minuscule but important details of classroom teaching (Refer to appendix 5)

The interview questionnaire will help in interacting with the teachers on one to one basis. The nominated teachers will be interviewed on the basis of the four criterias namely- Teacher as a Person, Teacher’s Interpersonal Relationship, Teacher as a professional and Qualities of the Teacher. The interview will consist of open end questions will be give a chance to the teachers to be more expressive, so that all the details could be captured. (Refer appendix 6)

To summarise, the researcher will visit the schools during the school hours for observation. Observation will be done for each teacher for 3 days and each session would be for an hour. The observation record sheet and the documentation sheet will be carried to the classroom to record the verbal comments as well as the non-verbal gestures of the teachers along with the recording of the best practices. So the researcher will observe 3 teachers for 3 days in each school (schools having high as well as low fee structure), one hour per teacher in each school. The researcher will then interview the teachers during the school hours according to the convenience of the teachers. The interview session would approximately last for an hour.

Data Analysis

The observation record sheet will be analysed both quantitatively as well as qualitatively where as the documentation and interview sheet will be analysed qualitatively only. The data for the quantitative analysis will be encoded using the SPSS and co-relational analysis will be conducted for the statistical analysis. The data for the qualitative analysis will be encoded using the analysing conversation technique and the IPA (Interpretative Phenomenological Analysis) so that a rich data is collected.

Reliability and Validity of the research

To understand the reliability and validity of the research, a pilot study will be conducted on two schools. During the pilot study the effectiveness of the tool will be checked. A meta-analysis can also be conducted to understand the nature of previous researches done and certain improvisations in the present study can be made on the basis of the systematic review of meta-analysis.

Ethical Issues

Any research and the practical applications of the procedures come under the scrutiny of professional ethics (Anastasi & Urbina, 2004). Even for this research certain ethical issues have to be taken care of in a systematic manner. A formal approval will be taken from the principals/supervisors of the school who decide to become a part of the study, even the nominated teachers would be asked if they would like to participate and be one of the respondents, they will also be entitled to sign a consent form. All the data collected will be confidential. No one except the researcher will be allowed to access that data. There are no foreseeable risks involved with the tools used for the research. They will be assured that all their information will be kept confidential and privacy will be maintained. While conducting the observations and interview there could be some risk involved like anxiety and questions in the respondents mind. All the participants will be explained the nature of the study, objectives. They will be assured that all their information will be kept confidential and privacy will be maintained.

References:

Amurang, C., & Gerald. (1999). ‘Evaluating Primary Education’, International Developmental Research, Canada

Anastasi, A., & Urbina,S. (2004). ‘Psychological Testing’, Prentice Hall, USA

A World Bank Publication, (1997). ‘Primary Education in India’, U.S.A: Library Cross Publication

Bredekamp, S., & Copple, C. (1997). ‘Developmentally Appropriate Practices in Early Childhood Programmes’, Washington D.C.: National Association for Education of Young Children.

Cheng, Y.C. (1996). ‘Total Teacher Effectiveness: New conception and improvement’, International Journal of Education Management, 10 (6), 7-17.

Devasenathipathi, M. (2001). ‘A Good Teacher’, Educational Review, 144 (9), 101.

Hammond, L. (1999). ‘Teacher Quality and student achievement: A review of state policy evidence’, Seattle, WA : Center for the Study of Teaching and Policy, University of Washington.

Kain, F., & Rivikin, S. (2005). ‘Teachers, Schools, and Academic Achievement’, Econometrica, 73 (2), 417-458.

Heil, Lousi., & Washburne, C. (1998). ‘What characteristics affect children’s growth?’, The School Review, 68(4), 420-428.

Dasgupta, D. (2004), ‘Effective teaching techniques’, Avishkar Publications.

Miyan., M., & Rastogi., A. (2005). ‘Manpower Planning for Elementary Teacher Education: A pre-requisite for Quality Elementary Education’, University News, 43 (18), 56-62.

Pollard, A., & Bourne, J. (1995). ‘Teaching and Learning in Primary Schools’, New York: Rout Ledge.

Saxena, C. (2005). ‘A Historical Overview of Teacher Education in India from Rig Vedic Age till 1947’, University News, 43(18), 1-7.

Spodek, B., (1972). ‘Teaching in Early Years’, New Jersey: Prentice-Hall Inc.

Tilak., J.B.G. (1995) ‘How free is Free Primary Education’, Occasional Paper-21, New Delhi: NIE

Richardson, J., & Stopp, P. (1998). ‘Becoming a Primary Teacher’, London: Penguin Books

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Critical Analysis of the Strategic human resource management in India

Abstract

The last two decades have witnessed many developments in the research and practice of managing human resources. While the debate began with a consideration of the changing role of HRM, more recently there has been increased interest in conceptualizing and testing the links between business strategy and performance. In India, research in the area of HRM gained recognition with the ushering in of the new economic era of liberalisation during the early 1990s. The primary objective of this article is to provide a synthesis of the strategic human resource management (SHRM) literature as it relates to India. Specifically, this review will consider the dominant theoretical perspectives adopted by scholars; ways in which HRM and performance are defined and operationalised; the approach taken to research design along with noting the control and contingency variables used. The review also draws out the potential contributions of the existing studies to solving the ‘black box’ problem. Finally, the article also presents the implications for future research on SHRM in India.

Keywords: India, Strategic human resource management, HRM, firm performance

Introduction

Empirical research in the field of SHRM has proliferated significantly since the seminal work of Huselid in 1995. Many recent studies have discussed SHRM in the Asia-Pacific context (Audea, Teo, and Crawford 2005; Bae et al. 2003; Benson and Rowley 2003; Wan, Kok, and Ong 2002). Furthermore, the growth of India as an emerging market prompted institutions such as the World Bank to project the country as the world’s fourth largest economy by 2020 (Budhwar and Varma 2010). This increasing focus on India makes it an interesting setting for this study. The review aims to provide a synthesis of literature in the area of HRM and performance linkages in India. The study reviewed articles between 2003 (first empirical article: Singh 2003) and 2010 in academic journals, focusing on the HRM and performance debate. Specifically, this review will consider the dominant theoretical perspectives adopted by scholars; ways in which HRM and performance are defined and operationalised; the approach taken to research design along with noting the control and contingency variables used. Finally, the review also examines the potential contributions of the reviewed articles to solving the ‘black box’ problem.

This article is organised as follows. The first section reviews the extant literature on SHRM. The next section discusses the need for a review of SHRM in India. The third section outlines the research methodology used in this paper. The final sections discuss the results and present the main conclusions and implications of this study.

SHRM literature: Developments

Lengnick-Hall et al. (2009) identified seven themes across time in the SHRM literature: (1) explaining contingency perspectives and fit, (2) shifting from a focus on managing people to creating strategic contributions, (3) elaborating HR system components and structure, (4) expanding the scope of SHRM, (5) achieving HR implementation and execution, (6) measuring outcomes of SHRM, and (7) evaluating methodological issues. Each of these themes played a significant role in the evolution of the field. Empirical research has suggested a relation between HRM practices (whether as individual practices or as a bundle) and organizational performance (Paauwe 2009).

Wright and Boswell (2002) proposed a typology of HRM research based on two dimensions: level of analysis (individual/ organizational) and number of practices (single/ multiple). Many articles published after Huselid (1995) have not only analysed the effects on performance at an individual practice level like recruitment and selection (e.g. Koch and McGrath 1996), performance related pay (e.g. Dowling and Richardson 1997; Lazear 1996; McNabb and Whitfield 1997), training and development (e.g. Kalleberg and Moody 1994), and internal career possibilities (e.g. Verburg 1998), but also at multiple practice level, that is, bundles or combinations of HR practices (e.g. Arthur 1994; Gould-Williams 2003, 2007; Guest, Conway, Dewe 2004; Subramony 2009).

At the multiple practice level, it is possible to analyse HR practices as a system, which has been referred as a high performance work system (e.g. Huselid 1995) or as a HR practice configuration (e.g. Delery and Doty 1996; Delery 1998). Delery (1998) suggests four types of possible relationships as: a) additive (where each HR practice has its own, unique effect on performance outcomes); b) interactive (the effect of each practice depends on the up-take of other practices within the bundle); c) positively synergistic (some HR practices mutually complement each other); and d) negatively synergistic (an inappropriate combination of HR practices that leads to more negative consequences than the mere absence of the practice).More recently, Subramony (2009) categorized the HRM bundles as a) empowerment- enhancing (those HR practices that boost employee autonomy and responsibility levels); b) motivation-enhancing (bundles that provide employees with adequate levels of direction and inducements); and c) skill-enhancing (bundles that augment the knowledge and skill levels of the workforce). It is now generally accepted that human resource management bundles can favourably affect the performance of business firms. The treatment of HR practices as a bundle is more effective than as an individual practice; when considering its impact on performance (MacDuffie 1995; Ichniowski 1997; Guest 2004).

Though empirical research suggests that there is an association between HRM and performance, there is little understanding of the mechanisms through which HRM practices influence effectiveness (Delery 1998, 289). This largely unexplained facet of the HRM-performance relationship has been labelled the “black box” (Boselie et al. 2005). The discussion on the black box problem was triggered by Guest (1997) when he stated the need for more theory driven research in the area of HRM, performance and the linkages between the two concepts. Legge (2001, 30) reiterated the ‘need to open up the ‘black box’ of the process that links HRM and organizational performance’.

Background: Choice of country

India has been chosen as the research context for the following key reasons. India is one of the BRIC (Brazil, Russia, India and China) countries. Indian economy grew by 7.4 percent over the fiscal year 2009-10 (FICCI 2010). The sustained performance has been guided by robust growth in both service and manufacturing sector. The Indian economy adopted a structural adjustment programme at the beginning of 1991. The structural adjustment programme or liberalization initiated the process of the opening up of an otherwise closed economy of India (Som 2008). Thereby, an increasing need to understand HRM practices in India since the 1990s emerged since liberalisation of economic policies took place (Budhwar and Sparrow 1997). The operation of large number of MNCs in India has fuelled the need for the top managers of these organizations to learn about the nature of HR systems appropriate for the Indian context.

HRM in India has rapidly evolved into a specialized function in organisations (Budhwar et al. 2009; Budhwar and Varma 2010), especially in the last two decades. Indian national context is marked by regional, sectoral, socio-cultural, institutional, and economic-political variations. Thus, the nature of the HR function varies from traditional personnel administration to strategic HRM/HRD. Numerous studies have explored the impact of HRM practices on firm performance in western economies like US and UK (e.g. Huselid 1995; Becker and Grehart 1996; Ichniowski 1997; Becker and Huselid 1998; Wood 1999), whereas there is a dearth of empirical research in non-westernised context, specifically India. Given, these factors, we would argue that the contextual focus of this review is justified. This study aims to review the body of literature from a theoretical and methodological perspective.

Formalized personnel functions have been existent in Indian organizations since 1920s in India (Budhwar and Sparrow 1997; Rao 1999; Budhwar 2001). The personnel function then was primarily driven by the concern for labour welfare in factories. The personnel function started expanding beyond the welfare aspect into the three areas- labour welfare, industrial relations, and personnel administration in the 1960s. In the 1970s, the focus of personnel function shifted toward greater organizational ‘efficiency’. By the 1980s, terms such as HRM and HRD gained importance (Rao 1999). The 1990s saw a rapid change in the HRM function due to ushering in of liberalisation (Som 2007, 2008, 2010; Budhwar and Varma, 2010).

Budhwar and Varma (2010) analysed the HRM literature in the Indian context and revealed that research has been pursued on a very broad variety of subjects. These include (1) the evolution of the personnel function in India, (2) the role of unions and industrial relations in the new economic environment, (3) factors determining HRM, (4) HRM and firm performance (e.g. Singh 2003; Chand 2010), (5) HRM in MNCs operating in India (Budhwar and Bhatnagar 2009; Bjorkman and Budhwar 2007), (6) strategic integration and devolvement of HRM (e.g. Budhwar and Sparrow 1997); (7) organizational learning capability (e.g. Bhatnagar 2007), (8) employee relations, (9) turnover issues (e.g., Budhwar et al. 2009; SamGnanakkan 2010; Krishnan and Singh 2010), (10) comparative HR in public and private sector organizations (e.g. Budhwar and Boyne 2004), (11) emerging patterns of HRM in the business outsourcing sector (e.g. Budhwar et al. 2006), (12) the applicability of Western HR models in India, (13) HRD and training, and (14) comparative HR between India and other countries (e.g., Lawler et al. 1995; Budhwar and Khatri 2001; Budhwar and Sparrow 2002; Varma, Pichler, and Srinivas 2005; Woldu, Budhwar, and Parkes 2006).

While there is a significant increase in volume of empirical research in India, there is no previous study that has reviewed SHRM in India. Thus for the purposes of the current study, the review will expand upon one major sub-theme- HRM and firm performance. The next section presents the procedure adopted for this review.

Procedure for review of articles

Research questions

To accomplish the study objectives, the following research questions were posed.

How have HRM practices been operationalised
How has the concept of performance been operationalised
What has been the dominant theoretical perspective that has been adopted
What were the sample characteristics of the research study (e.g. individuals, workplaces, industries or sectors etc.)
Who are the respondents (e.g. Single rater vs multiple raters per unit of analysis or Single vs multiple actors
What data collection methods have been used (e.g. case study, survey, interviews, large scale secondary data etc.)
Does the study deal with how HR practices linkages with performance (Black Box problem)
What are some of the areas future research should focus on

The following sub sections discuss the scope of review and identification of articles.

Scope of the review

There are four important criteria used in selecting articles for review. First, the articles were based on empirical research. Thus, conceptual papers were left out from the review. Second, the articles analysed data from workplaces in India. Third, articles used HRM practices and firm performance as variables. Fourth, articles had to be published in English. Also, the review excludes research published in books, conference proceedings and unpublished dissertations.

Identification of articles

There are 20empirical articles in total which study the impact of HRM practices in India. The literature search was conducted using the following databases- ABI/ Inform, Academic Search Premier, Emerald Fulltext, EBSCO. The search was based on three key descriptors ‘human resource management practices’, ‘firm performance’ and ‘India’. The full text was reviewed in order to eliminate those articles that were not actually related to HRM practices and firm performance.

Empirical studies with specific focus on India and Asia have been presented in special issues of international journals like Journal of World Business (39(4), 2004), Employee Relations (29 (6), 2007), Human Resource Management (47 (1), 2008; 49 (3), 2010). Thus, an exclusive search was conducted in these issues. A total of 20 articles from 14 journals met the selecting criteria. A list of journals contributing these articles is given in Table 1.

– Insert Table 1 here –

Characteristics of the reviewed studies

Table 2 summarises the empirical studies reviewed in the study. Studies in Table 2 differ in sample size and demographic characteristics, industry context, operationalisation of HRM and performance, data collection and analytical method, directions for future research. Each of these aspects is discussed in the subsequent sections. Drawing on an extensive body of SHRM literature, we isolate potential research areas for investigation in India.

– Insert Table 2 here –

Operationalisation of HRM

One of the significant conceptual issues involves understanding how the central construct in this literature, the human resource system, affects firm performance outcomes. Many researchers (Guest 1997, 2001; Boselie et al. 2005, Paauwe 2009) have shared the concern of lack of theory in conceptualisation of HRM, performance and its subsequent link. Hesketh and Fleetwood (2006) contend even if there was sufficient conclusive evidence for statistical association between HRM practices and organizational performance, it is not enough to explain the association.

Another significant issue that has been raised in SHRM literature is the distinction between HR policies and practices (Purcell et al. 2003). The policies refer to the stated firm’s intentions whereas the practices are established on observable, actual activities operationalised in the firm (Wright and Boswell 2002; Wright and Nishii 2004). Paauwe and Boselie (2005) state that the majority of previous studies focus on intended HR practices rather than the ‘actual’ HR practices or the employees’ perception of them. Also, Purcell and Hutchinson (2007) discuss the role of front line managers (FLMs) in ascertaining the level of employee commitment. They argue that the outcome impact on employee attitudes of HRM policies would be more positive if the FLM leadership behaviour is also perceived as positive. Thus, it is argued that research would be more appropriate if it considers multi-actor respondents e.g worker, FLM and employer perceptions.

An important finding is that the reviewed studies have used various measures of HR practices. This is consistent with the empirical literature in the West where there is no definite operationalisation of HRM (Paauwe 2009). Another important finding is some studies, such as Paul and Anantharaman (2003) built an industry-specific instrument to measure HR practices. Ketkar and Sett (2010) have extended Wright and Snell’s conceptualisation of HR flexibility. All other reviewed studies have adopted measures from either existing literature on high involvement HRM (e.g. Bjorkman and Budhwar 2007, SamGnanakkan 2010), innovation, high commitment or progressive HR practices (e.g. Som 2008; Cooke and Saini 2010), bundles of practices (Guchait and Cho 2010), or have used existing practices in organisations surveyed to operationalise HR practices (e.g. Chand and Katou 2007).

Measure(s) of performance

Guest (1999) argues that there is no general theory about performance and its measurement, which can be referred to as the ‘criterion problem’. Dyer and Reeves (1995) suggested that the HR practices work at four levels sequentially- HR (employee), organisational, financial and market. The performance outcomes can be measured as financial, organizational and HR-related outcomes (Boselie et al. 2005). However, as reported by them, the majority of researchers, US commentators in specific, have taken financial outcomes such as profit and productivity.

The empirical studies by Ramsay et al. (2000) and Godard (2001) have strongly criticised the use of financial outcomes alone and led to a renewed attention to a pluralist perspective. Paauwe (2004) builds on this pluralist perspective, stressing HRM’s duality in its focus on added value and economic rationality versus moral values and relational rationality.

Four studies (Singh 2003; Som 2008; Mulla and Premarajan 2008; Ketkar and Sett 2010) have used the financial measures of performance. The majority of studies have used organisational measures of performance (e.g. Chand and Katou 2007; Cooke and Saini 2010; Guchait and Cho 2010). Only two studies (Paul and Anantharaman 2003; Chand 2010) have adopted multiple performance measures – financial and organisational. The remaining studies used HR-related outcomes like organisational commitment (Paul and Anantharaman 2003, 2004; Shahnawaz and Juyal 2006; Maheshwari, Bhat, and Saha 2008; Guchait and Cho 2010; SamGnanakkan 2010), intentions to leave (Guchait and Cho 2010; SamGnanakkan 2010) and employee performance (Ketkar and Sett 2010).

There is limited research on HR-related or proximal outcomes which are treated as intervening variables between HR practices and organisational performance (Kehoe and Wright, forthcoming). This suggests that majority of the research in India is based on unitarist perspective. Another limitation of the reviewed studies is that none have studied the potential impact of HRM practices on negative employee outcomes such as dissatisfaction, stress, burnout and fatigue (Guest 1999; Purcell 1999).

Sample size

The HRM and performance studies present two unique sets of issues owing to sample size. While large sample sizes are difficult to obtain, given the unit or firm level of analysis, the more related challenge is that practically important relationships may be missed because of inadequate statistical power (Gerhart 2007). A commonly used approach to determining the needed sample size for a latent variable model is based on the number of parameters estimated (Williams and O’Boyle Jr. 2008). A study with more parameters suggests a need for a larger sample size. Thus, sample size plays an important role in a research study. It is important to classify studies on the basis of primary levels of analysis (Boselie et al. 2005).

The sample size used in the reviewed studies ranged from a low of 54 employees (Cooke and Saini 2010) to a high of 4,811 employees (Stumph, Doh, and Tymon 2010). The majority of studies reported sample size of over 100. It is suggested that when testing sophisticated models, large number of samples should be used (Hulland, Chow, and Lam 1996; MacCallum, Browne, and Sugawara 1996). The units of analysis were either a single organisation or multiple organisations. The sample in multiple organisation study ranged from 2 (Shahnawaz and Juyal 2006) to 439 organisations (Chand 2010).

Respondents

A methodological issue that continues to be debated concerns who should provide information about HRM (Guest 2011). There has been an ongoing call for using data collected from multiple informants about the presence of practices (Gerhart et al. 2000). Marchington and Zagelmeyer (2005) suggest that most of the high commitment studies have relied on management respondents to estimate the impact of HR practices on performance. It has been suggested that, particularly in the context of large organisations, senior HR managers are not always reliable informants and that it is more sensible to seek information from those experiencing the practices, namely workers. Paauwe (2009) makes a plea for a more contextual approach to HRM. He also suggests that future research should explore HRM- Performance link in light of broader multiple stakeholders like employees, government, trade unions, consumer organizations, etc (Paauwe and Boselie 2005). Also, research should endeavour to adopt a broader view of performance, taking into consideration employee concerns and wellbeing (Guest 2004).

The majority of the reviewed studies have reported data from a single respondent, mainly focusing on senior management (Singh 2003; Agarwala 2003). While acknowledging the possible rater bias, such studies suggest that future studies could use a multi-rater approach, specially collecting data from heads of other functions. Ketkar and Sett (2010) proposed that their choice of single respondent – senior managers from departments other than HR is consistent with the proposition of Batt (2002). Batt (2002) argued that selection of non-HR managers as respondents could improve the reliability of measurements as these managers are expected to be more objective about the HR systems. Only three studies have used multiple respondents. These include Sharma (2008) and Chand (2010), who have drawn samples from employees and customers, and Som (2008) who used samples drawn from senior executives – MD, Director, VP, GM and HR personnel.

Industry context

Datta, Guthrie, and Wright (2005) suggest that industry characteristics may have wide implications for HRM. While there have been an increasing number of studies that discuss the impact of HRM practices on performance, research on the contextual factors that moderate the efficacy of these practices has been largely ignored. The findings of studies conducted in specific industry contexts are not necessarily generalisable to other industries.

Seven studies (Singh 2003; Agarwala 2003; Khandekar and Sharma 2005; Bjorkman and Budhwar 2007; Som 2008; Stumph et al. 2010; Cooke and Saini 2010) draw on samples from multiple industries. Few studies have drawn samples from software industry (Paul and Anantharaman 2003, 2004), hotel industry (Chand and Katou 2007; Chand 2010), banking (Sharma 2008), and the information and communication technology industry (SamGnanakkan 2010).

Theoretical basis

Boselie, Dietz, and Boon (2005) identify three commonly used theories for defining the HRM and performance relationship, namely, contingency theory, resource based view (RBV) and Abilities, Motivation and Opportunities (AMO) framework. Contingency theory argues that HRM responds accurately and effectively to the organisation’s environment and complements other organisational systems (e.g. Arthur 1994; Huselid 1995; MacDuffie 1995; Delaney and Huselid 1996; Delery and Doty 1996; Wright et al. 2001).

RBV advocates that HRM delivers ‘added value’ through the strategic development of the organisation’s rare, inimitable and non-substitutable internal resources, embodied in its staff (e.g. Boxall and Steeneveld 1999; Guthrie 2001; Batt 2002). RBV has become the dominant theoretical paradigm in most recent SHRM literature (Lengnick-Hall et al. 2009). AMO model argues that organisational interests are best served by an HR system that attends to employees’ interests, namely their skill requirements, motivations and the quality of their job (Appelbaum et al. 2000; Bailey, Berg, and Sandy 2001). It is interesting to note that these three approaches represent different traditions in HRM research. Contingency theory is based on organizational institutional theory. RBV can be traced back to concepts in Organizational economics, whereas the AMO framework has its theoretical underpinnings in industrial/ organizational psychology.

Five studies (Bjorkman and Budhwar 2007; Som 2008; Cooke and Saini 2010; Guchait and Cho 2010; Ketkar and Sett 2010) have explicitly specified the theoretical basis for review. Bjorkman and Budhwar (2007) draw on the resource based view (RBV) of strategic human resource management literature. Som (2008) found empirical evidence based on a universalistic or a best practices perspective. Cooke and Saini (2010) integrate three existing theories- RBV, ‘new’ institutional theory and organisational politics perspective. Guchait and Cho (2010) support a configurational or bundles approach to HRM. Ketkar and Sett (2010) extends the existing conceptualisation of HR flexibility used by Wright and Snell (1998). All the other articles reviewed did not contain a clear reference to the conceptual perspective adopted in the study.

Data collection method(s)

Hesketh and Fleetwood (2006) argue that most of the researchers show an empirical association between HRM practices and organizational performance. The authors argue that the existence or non-existence of empirical association does not necessarily imply causal connection between them. Also, Wright et al. (2005) identified that most empirical studies studying HRM and performance are post-predictive in nature. This means HRM practices were measured after the performance period. A more appropriate approach would involve assessing HRM practices at one point of time and assessing performance at some future point of time (Huselid 1995; Youndt et al. 1996; Paauwe 2009). The more recent studies (Guest, Conway, and Sheenan 2003; Wright et al. 2005) control for both past and subsequent performance.

Seventeen studies used the cross-sectional quantitative survey method. Although some studies have suggested use of longitudinal surveys, none of them have applied the method in their own study. The cross-sectional nature of the reviewed studies does not allow for any conclusions regarding causal relationships.

Two studies (Agarwala 2003; Bjorkman and Budhwar 2007) have used a mixed methodology using quantitative survey and interviews. The study by Cooke and Saini (2010) can be classified as a purely qualitative study. Only one study (Mulla and Premarajan 2008) was based on secondary data. The study drew on data from Chairpersons’ speech and directors’ reports of 100 companies listed by the Center for Monitoring Indian Economy (CMIE) database, Prowess. It can be concluded that survey method is the dominant method for researching the HRM and performance literature in India. Although, a social survey offers a great deal of insight into the phenomenon of interest, it is unable to answer some basic questions. For instance, even if a presented theory allows the understanding of reality, the question remains why this reality should be as it is according to this theory (Mingers, 2004; Stavenga, 2006). Thus, future research could focus on adopting a qualitative or a mixed method for collecting data.

Directions for future research

Several suggestions for future research have been made in the reviewed studies. The key issues that have been put forth are the black box problem (Agarwala 2003; Chand and Katou 2007; Bjorkman and Budhwar 2007; Som 2008; SamGnanakkan 2010); the need for longitudinal studies (Singh 2003; Paul and Anantharaman 2004; Som 2008; Chand 2010; Ketkar and Sett 2010); the need to study additional variables (Singh 2003; Paul and Anantharaman 2004; Bjorkman and Budhwar 2007); and the use of multiple respondents (Singh 2003; Cooke and Saini 2010; Ketkar and Sett 2010; SamGnanakkan 2010). Some studies suggest that future studies could be cross-national (Singh 2003; Chand 2010; Cooke and Saini 2010; Guchait and Cho 2010) and could use different industry settings (Paul and Anantharaman 2003; Sharma 2008; Cooke and Saini 2010).

In this article, we will focus on a key issue that emerges from the existing studies- the black box problem. Boselie et al. (2005) has noted that despite the increasing volume of research on HRM and performance, there has been little focus on the ‘how’ aspect of the linkages. Purcell and Hutchinson (2007, 3) note the critical link in the black box problem is ‘how HR practices influence employee attitudes and improve worker performance’. This involves a call for making the research more worker-centric (Guest 2011). The workers’ perceptions and behaviour has become increasingly vital in understanding the relationship between HRM and performance.

A number of studies have discussed how the HR practices influence financial performance (Huselid 1995; Wright and Snell 1998; Ahmad and Schroeder 2003). An increasing number of human resource scholars suggest it is important to explore the ‘black box’ containing the links between HRM practices and distant organizational performance measures such as pro?tability or stock value (Becker and Gerhart 1996; Tremblay et al. 2010; Krishnan and Singh 2011). Researchers argue that HRM practices have only an indirect effect on organisational performance (Appelbaum et al. 2000; Delery and Shaw 2001; Way and Johnson 2005). While there have been many studies that have acknowledged the existence of black box issue, Boselie et al. (2005) found 20 articles that have discussed the issue in detail.

The black box issue has been investigated using two routes. The first route is through quantitative studies that have substantiated the need for identifying the role of intermediate variables in the HRM and performance linkages (Razouk 2011). Becker and Grehart (1996, 793) stated ‘unless and until researchers are able to elaborate models, including key intervening variables- it will be difficult to rule out alternative causal models that explain observed associations between HR systems and firm performance’. Examples of these intermediate variables are employees’ attitudes, behaviours and performance, measured on an organizational level (Sels et al. 2006). Fey et al. (2009) have worked on dataset of 241 firms consisting of subsidiaries of 241 MNEs operating in Russia, USA, and Finland. The findings demonstrate that motivation and ability are important mediating variables in the HRM– Multinational enterprise subsidiary performance relationship. Boon et al. (2011) show that some relationships between perceived HR practices and employee outcomes appear to be indirect, occurring via Person–Organisation and Person–Job ?t. Elorza, Aritzetab, and Ayestaran (2011) conducted multilevel analyses of a sample of 732 employees from 26 Spanish small and medium-sized enterprises (SMEs). The study supported a model in which employees’ commitment mediates between the actual system and unit-level absenteeism, which in turn has an effect on productivity.

The second route used to investigate black box issues rely on in-depth qualitative research. Authors (Truss 2001; Purcell et al. 2003, Purcell and Hutchinson 2007) suggest that qualitative research is more appropriate to explore the black box since there could be an existence of a gap between intentions of HR managers and practice experienced by employees.

In Indian research context, three articles (Agarwala 2003; Paul and Anantharaman 2003; Ketkar and Sett 2010) have discussed the black box problem concerning HRM practices and performance linkages. Agarwala (2003) demonstrates that certain combinations of Innovative Human Resource Practices (IHRPs) lead to specific employee attitudes, such as organizational commitment. The study attempts to provide an explanation for the HR-firm performance link. Paul and Anantharaman (2003) developed a HRM-performance linkage model with four intervening variables- competence, teamwork, organisational commitment and customer orientation between HRM practices and operating performance. The operating performance in turn has an impact on financial performance. Ketkar and Sett (2010) confirm the concept of HR value chain. The study proposes that HR systems have a direct impact on firm-level HR outcomes such as employee performance (also referred to as proximal outcomes). Also, the effects of HR systems on more distal operational and financial outcomes are mediated by HR outcomes.

To summarise, studies have started investigating the black box issue in emerging and developing economies. In India, however, the studies are still scarce. There has been no study which has used the route of qualitative research to explore the black box. Future research should aim to continue ‘the search for holy grail’ by exploring the issue further.

Conclusion

Researchers (e.g., Bowen, Galang, and Pillai 2002; Zhu et al. 2008) highlight that strategic HRM research mainly has been limited to advanced market economies. India’s growing economic importance as an emerging market economy makes it an interesting research context. The growth of SHRM in India thus has wide ranging implications for researchers as well as practitioners.

However, we would like to acknowledge some limitations inherent in the study which should be considered in evaluating its findings. First, the review is specific to a single country, India. Future research could seek to extend the scope to other emerging economies. We also suggest a comparative review of India with other emerging economies or Western economies offers an interesting case. Second, the number of reviewed studies is less which reflects that the field of SHRM in India is still growing. Third, the review has been limited to articles discussing the HRM and performance linkages. Thus, we may have failed to cover articles on other relevant issues in SHRM like role of HR in cross-border mergers and acquisitions (Budhwar et al. 2009), strategic integration and devolvement of HRM (e.g. Budhwar and Sparrow 1997). Although not the focus of this paper, these topics could be of academic interest and exploring them further may have important implications. Despite these limitations, the article provides significant insights in the burgeoning field of SHRM in a promising world economy, India. The study suggests that while there has been an increasing volume of research on SHRM in India, the literature needs to more actively engage in conceptual and methodological debates. The review also highlights the areas of SHRM research that merit future attention in India. Furthermore, the study contributes to the extant literature by reviewing the state of empirical research in India on SHRM.

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Free Essays

To examine the determinants of FDI in China and India and the causes for their difference.

Abstract:

This study aims to examine the determinants of FDI in China and India and the causes for their difference. Ordinary least squares models were first applied to analyse separately FDI determinants in China and India and then a panel data model was developed to explore the causes of the differences. It was found that China’s FDI was determined by inflation while India’s FDI was influenced by infrastructure and trade openness. Infrastructure was the main reason why India was lagging behind China. The results suggest that India needs to upgrade its infrastructure and create effective trade policies in order to attract FDI.

Key words: FDI, China, India, inflation, trade openness, infrastructure.

1. Introduction:

Multinational Enterprises (MNEs), comprising 82,000 parent companies, 810,000 foreign subsidiaries and an excess of inter-firm arrangements worldwide, have played an important and growing role in today’s global economy (UNCTAD, 2009). The world’s top MNEs are the prominent driver of international production. In 2008, they accounted for around 4% of world GDP[1] and had combined assets of $ 10.7 trillion, combined foreign sales of $ 5.2 trillion and employed 8.9 million people (Table 1-1).

Table 1-1:Snapshot of the World’s top 100 TNCs, 2006-07/08
Variable

2006

2007

2006-2007

% change

2008

2007-2008

% change

Assets ($billion)

Foreign

Total

5,245

9,239

6,116

10,702

16.6

15.8

6,094

10,687

-0.4

-0.1

Sales ($billion)

Foreign

Total

4,078

7,088

4,936

8,078

21.0

14.0

5,208

8,518

5.5

5.5

Employment (thousands)

Foreign

Total

8,582

15,388

8,440

14,870

-1.66

-3.4

8,898

15,302

5.4

2.9

Source: UNCTAD (2009), p.19, Table I.17 (based on UNCTAD/Erasmus University database).

The key measure of MNEs’ activities is foreign direct investment (FDI), defined as “an equity investment outside of the parent corporation’s home country, it implies some control over economic activity, usually a greater than 10% stake” (Baker et al., 1998). In line with the increasing importance of MNEs, global FDI inflows have grown significantly in the last 20 years (UNCTAD, 2010): average annual inflow between 1990-2000 was 492.86 $ billion, which reached a peak of $ 2,099.97 billion in 2007 before declining to $1,114.2 billion in 2009, reflecting the effects of the global crisis. However, FDI inflows are expected to increase further to $1.3 – $1.5 trillion in 2011 (Figure 1-1).

Figure 1-1: Global FDI inflows and projections, 1990-2011

Source: UNCTAD (2010).

FDI inflows have been shifted noticeably to developing and transition economies owing to their economic growth and reforms as well as their progressive liberalisation of foreign investment regimes (UNCTAD, 2010). As a result, developing and transition economies attracted nearly half of global FDI inflows in 2009 (Figure 1-2). Among the largest FDI recipients from these economies, China and India have emerged as the second and third world most popular FDI destinations (UNCTAD, 2010).

Figure 1-2: Shares of developing and transition economies in global FDI inflows and outflows, 2000-2009 (%).

Source: UNCTADstat, calculated based on data of inward and outward FDI.

China opened up its economy to foreign investment in 1979 and since then inward FDI in China has risen appreciably. By 2009, the absolute value of FDI inflows was $95 billion compared to only $0.057 billion in 1980 (UNCTAD, 2010). Over 10 years after China, India too liberalised its economic policies, replacing the existing for more relaxed and open policies towards foreign investment. The reforms have resulted in considerable increased inflows of FDI during the past decade: inflow in 2009 rose to $34.61 billion from only $2-3 billion during the 1990s (UNCTAD, 2010). Even so, the amount of FDI in India is still lagging behind most other emerging economies, especially China. On the global competitiveness scale, China ranked higher than India in all criteria of economic competitiveness (Table 1-2).

Table 1-2: The global competitiveness index, 2010-2011

Pillars

Basic requirementsInstitutionsInfrastructureMacroeconomic environmentHealth & primary education
CountryRank

Rank

Rank

Rank

Rank

China30

49

50

4

37

India81

58

86

73

104

Efficiency enhancersHigher education & trainingGoods market efficiency

Labour market efficiency

Financial market development

CountryRank

Rank

Rank

Rank

Rank

China29

60

43

38

57

India38

85

71

92

17

Innovation& sophisticationTechnological readinessMarket sizeBusiness sophisticationInnovation
CountryRank

Rank

Rank

Rank

Rank

China31

78

2

41

26

India42

86

4

44

39

Source: World Economic Forum (2010).

The differences in FDI inflows between these two countries suggest an intriguing area for further research. If China, with its “new-found” belief in capitalism[2] can attract significant amounts of FDI, why India which is endowed with Western-type institutions and capitalist organizations cannotWhat causes the gap in volumes of FDI between the twoThis paper is going to address these questions by evaluating factors determining FDI based on current literature on FDI in general and FDI in China and India in particular.

The study is structured as follows: part 2 reviews the literature on FDI determinants in China and India. Part 3 presents the eclectic theory and empirical studies. Part 4 describes data and methods for analysis. Part 5 analyses FDI determinants in the two countries. Part 6 suggests policy implications and part 7 concludes.

2. Literature review:

The emergence of China and India as the two most favoured hosts of FDI among developing economies has generated various numbers of empirical studies on the major determinants of FDI in each country as well as the two countries combined.

2.1. China:

Studies on factors shaping FDI in China can be broadly categorized into two groups: studies at the national level and those at regional level.

2.1.1. National determinants:

The empirical results from Chen (1996), Henley et al. (1999), Zhang (2001), Dees (1998), Hong and Chen (2001) and Liu et al. (2001) all concluded that market size and preferential policies, along with others, were primary factors for China’s FDI.

Wei (2005) explored the determinants of FDI from OECD to China for the period from 1987 to 2000. The analysis found significant relationship between FDI and market size, real exchange rate and trade openness. Among these determinants, market size, measured by GDP[3] per capita, appeared as the major driving force for outward FDI from OECD countries to China. This seems to be convincing as China has a huge domestic market with a mass-production system, which considerably reduces production costs. This factor coupled with “FDI friendly” policies creates business opportunities for foreign investment and hence increase the attractiveness of China to multinationals. The analysis provides reasonable explanations for FDI inflows in China, however, it should be taken into account that the source of FDI from OECD countries only account for a small proportion of China’s inward FDI. Therefore, the results should be assimilated with caution.

Mathew et al. (2009) provided evidence that corruption, as an indicator of political risk, determined the location decision of MNEs. In particular, the finding suggested that provinces with effective local governments and better efforts to tackle corruption tended to attract more FDI. The study indicated that if provinces could improve their “anti-corruption efforts” to the average level, they would be able to receive more FDI. For example, FDI would be boosted to more than $ 40 million in the following year as a result of a 10 % increase in the anti-corruption efforts.

2.1.2. Regional determinants:

Some studies have investigated the determinants of FDI in China at a regional level. For instance, Xing et al. (2008), focusing on the Eastern Chinese area, found that FDI was positively related to market size and labour quality, whereas, education and infrastructure were statistically insignificant in explaining FDI.

Wei et al. (2010) analyzed the location factors and “network relations” of MNEs in Nanjing, China. This study confirmed the importance of infrastructure and government policy in the location decision of MNEs. Government intervention through investment policies was one of the key factors determining FDI since it indicated the significant role of government in expanding FDI.

2.2. India:

The growth of FDI in India over the last decade since its economic reforms has raised the interest for further investigation. However, there are only a nominal number of empirical studies trying to indentify major determinants of FDI in India.

One of those studies is that by Pradhan (2010), examining the role of trade liberalisation on FDI inflows in India between 1980 and 2007. The results found that trade openness had a positive correlation with FDI and that this relationship was stronger after the economic reforms since 1991. This implies the necessity of maintaining an “open door” policy to attract more FDI into the Indian economy. Other factors were also found significant in the study including real exchange rate and terms of trade.

In a current study of FDI determinants in India, Resende (2010) found the evidence supporting the positive impacts of technology growth, trade openness and market size on FDI. In particular, market size and market attractiveness appeared to be the most significant factors determining the inflows of FDI into India. Poor infrastructure, on the other hand, deterred MNEs from investing in the country.

Green (2005) explored FDI in a specific Indian industry sector: telecommunications from 1993 to 2003. The results showed that FDI would gain more traction if the government could reduce the limits on investment, maintain transparent regulations and improve physical infrastructure in the telecommunication sector. This conclusion seems to be appropriate as the evidence of FDI performance in this sector during the chosen period suggested that foreign firms entering the telecommunication industry did not stay in the business for a long time. The reasons behind this were that FDI had long suffered from inadequate infrastructure, opaque regulatory and legal environment.

Among infrequent macro-level studies on FDI in India, Mukim and Nunnenkamp (2010) investigated determining factors of MNEs’ location decision in 447 districts of India. The analysis indicated that infrastructure and skilled workforce influenced the location choice of MNEs. However, the study suffered from data limitations with regards to FDI determinants at district-level. This may reduce the reliability of its results and hence cannot be applied generally.

There seems to be a few studies considering FDI in India such as those by Green (2005), Pradhan (2010) and Resende (2010) investigating FDI determinants in India. However, their studies only focus on a particular industrial sector or factors instead of looking at different industries or various factors. Mukim and Nunnenkamp (2010) attempted to examine the determinants of FDI at a macro-scale level. Nevertheless, their research suffers from data limitations and hence cannot always apply. In comparison, FDI in China is well-documented: there is a range of studies from regional level such as those by Xi et al. (2008) and Wei et al. (2010) to national level including those by Chen (1996), Zhang (2001) and Wei (2005).

Furthermore, there are not many studies concerning FDI in China and India to eventually compare and justify the differences in total FDI between two countries. For example, except a study by Sinha (2007) that gives adequate attention to India, other studies such as Wei (2000) and Wei (2005) centre predominantly on China. There is not enough focus on India in terms of FDI determinants. This study will attempt to fill the gap indentified in current knowledge. In particular, two homogeneous models of FDI determinants in China and India will be developed to identify important factors in each country and then a final model for both countries will be included to ultimately compare and explain the gap between China and India’s FDI inflows.

3. Theoretical model of FDI determinants:

The theoretical framework for this study is based on the location advantages of “ownership, location, internalization” (OLI) paradigm proposed by Dunning (1973). The OLI model demonstrates reasons for firms that successfully operate abroad and their mode of entry (Table 3-1). In the theory, FDI is explained by identifying three main elements which guide the investment decision process of MNEs. They include: ownership (O), location (L) and internalization (I). Ownership advantages refer to the firms’ production process which allows it to have a competitive advantage in overseas markets. Location advantages are benefits that a host country can offer a foreign firm. Internalization refers to transaction costs and the ability of multinationals to exploit ownership and location advantages through FDI.

While ownership and internalization advantages vary among investing firms, location advantages are specific to the host country. This latter advantage provides a strong grounding for further research on the determinants of FDI.

Table 3-1: Relationship between OLI-advantages and mode of entry
Advantages
Mode of entry OwnershipLocationInternalization
FDIYes

Yes

Yes

ExportsYes

Yes

No

LicensingYes

No

No

Source: Perlitz (1997)

There is a vast number of studies on the location advantages of FDI such as those by Culem (1988), Estrin et al. (1997), Butler and Joaquin (1998), Wei (2000), Razafimahefa and Hamori (2005), Ang (2007), Sinha (2007) and Pradhan (2008). The organisation for economic co-operation and development (OECD, 2002) summarizes the main FDI determinants as follows:

Market size and growth prospects:

Countries with large market sizes (measured by GDP per capita) and sustainable economic growth (measured by the growth rates of GDP) offer better opportunities for MNEs to access the market, develop economies of scale and explore profitability. As an example, Ang (2007) confirmed that a large domestic market resulted in more FDI inflows, owing to the benefits of economies of scale.

Natural and human resource endowments:

These are factors of importance in MNEs’ location decision process. Export-oriented FDI in particular seeks to take advantage of those factors related to low labour costs and abundant natural resources. Moreover, the quality of human capital in a country is crucial for technology transfer, managerial techniques and spill-over effects of FDI. Sinha (2007) suggested that the recent “business process outsourcing” boom in India occurred thanks to the qualified workforce well-skilled in English and technologically educated in “IT enabled services”.

Physical, financial and technological infrastructure:

Infrastructure comprising transport, electricity, communication networks, education, health facilities and other forms are significant determinants of FDI. MNEs are more likely to be attracted to areas with good infrastructure. For example, Sinha (2007) found the significant impacts of port based infrastructure and its proximity on FDI as it lessens inland transportation and reduce costs. Lack of investment in infrastructure, on the other hand, deters FDI.

Trade openness and access to international markets:

Trade reforms, the degree of openness to trade (measured by the proportion of exports and imports to GDP) and access to regional and global markets are important factors in determining FDI. In particular, openness makes the transfer of goods and capital in and out of the host country easier in the absence of restrictions and thus stimulates production and reduces costs. In realisation of the importance of trade openness, the World Bank has been requiring developing economies to open up their markets so that free trade can help boost growth in these countries (IMF, 2006).

The regulatory, policy framework and policy coherence:

Macroeconomic stability (indicated by exchange rate stability and low inflation) and political stability (signified by transparent regulatory, legal framework and business environment) are essential for attracting FDI. For instance, Wei (2000) concluded that if China and India could reduce red tape and corruption to a level comparable to Singapore, FDI inflows would be 218% and 348% higher respectively for these countries.

4. Data and methodology:

4.1. Data:

Based on the theoretical model and empirical studies discussed previously, five location indicators were chosen to reflect the factors that are most likely to affect FDI. The explanatory variables comprise of infrastructure, trade openness, political risk, inflation and exchange rate. An overview of these variables and their predicted signs is presented in table 4-1:

Table 4-1: Determinants of FDI according to theory and empirical studies
VariablesPredicted signEmpirical studies
Physical, financial and technological infrastructure:
Infrastructure(+)

(+): Green (2005), Mukim and Nunnenkamp (2010), Wei et al. (2010), Sinha (2007).(-):Pradhan (2008).No effect: Xi et al. (2008)
Trade openness and access to international markets:
Trade openness(+)

(+): Culem (1988), Wei (2005), Pradhan (2010), Resende (2010).
The regulatory, policy framework and policy coherence:
Political risk(-)

(-): Green (2005), Mathew et al. (2008), Butler and Joaquin (1998).
Inflation(-)

(-): Estrin et al. (1997), Razafimahefa and Hamori (2005).
Exchange rate(-)

(-): Wei (2005), Pradhan (2010).(+): Resende (2010).

A regression analysis was carried out in order to investigate the links and trends of the presented indicators, specific to FDI in China and India.

The regression analysis consists of data from 1984 to 2008 for both countries. FDI net inflows per capita in current US dollars are used; this allows us to take into account the relative country size. The data on FDI was drawn from the World Bank database (IMF, 2010).

The period choice of this analysis was partly determined by the availability of variables’ data and is thus somewhat restricted. For example, investigation prior to1979 for China could not be applied due to the unavailability of several independent variables. This limits the number of observations and makes it difficult to justify the effects of economic reforms on net FDI inflows in China. Therefore, this data limitation potentially leads to the study missing a key turning point in China’s policy and regulatory regime following its economic reforms in 1979.

‘Human resources’ was identified as an important determinant of FDI in the theoretical framework. However, the data for possible indicators of human capital, such as secondary school enrolment and literacy rates, was insufficient. For example, some figures for the years studied were unavailable. As a result, human resources was not included in the regression.

Busse and Hefeker (2007) used 12 indicators of political risk which could have been applied to this analysis. However, due to budgetary constraints these were not available.

Furthermore, dummy and slope dummies (INDIA=1if India, otherwise China) were used to assess if FDI inflows and the chosen factors’ effects on FDI were significantly different between two countries.

FDI was specified as a function of the following form:

fdi = f ( infra, trade, pol, infla, exc)

Where the variables are listed and defined as below:

Table 4-2: Determinants of FDI in China and India
Variable nameProxy for variableMeasures
fdi

FDI inflows

Net inflows of FDI as a percentage of real GDP
infra

Infrastructure

Telephone lines per 100 people
trade

Trade openness

Sum of exports and imports as a percentage of GDP
pol

Political risk

Scale 0-1 (0=unstable, 1= stable)
infla

Inflation

Annual growth rate of the GDP implicit deflator.
Exc

Exchange rate

Official exchange rate (local currency units per US $)
Data sources and Summary statistics, time series plots: see appendix table A-1, A-2 and figure A-1, A-2.

4.2. Methodology:

4.2.1.Determinants of FDI in China and India:

Having considered all the variables that are used in the analysis, this paper applies time series regression models and the least squares method to examine FDI determinants in China and India.

As in other studies (Wei, 2005; Busse and Hefeker, 2006) the log-linear model was adopted to adjust for heteroscedasticity. Furthermore, by taking the log-linear form, any expected non-linear relationship between FDI and the explanatory variables could be transformed into a linear one. Therefore, the estimated equation is:

A unit root test was conducted to test whether the independent variables were stationary. The results of the tests are presented in appendix table A-3. It appears that in the case of India, most of the variables were non-stationary with an exception of lnexct. The data for China also resulted in most of the explanatory variables being non-stationary apart from lninfrat. Since the use of non-stationary variables can lead to spurious regression problem, making the analysis wholly unreliable, those variables were made stationary by using finite differences. Hence the new estimated model is:

Although taking the differences could remove the unit root, it would reduce the number of observations by one for each variable. This, in turn, may weaken the explanatory power of the models.

4.2.2. The difference in inward FDI between China and India:

In order to assess whether there is any difference in FDI inflows between China and India, a joint model of both countries during the period from 1984 to 2008 was conducted in the analysis. This would also assess whether the chosen explanatory factors affected FDI differently between China and India in the same period. Dummy and slope dummies were added to complete the model and panel data method was used. The estimated model is as follows:

5. Empirical results:

5.1. Individual country models:

Table 5-1 shows the results obtained for China’s and India’s models. For both China’s and India’s models, the hypotheses of non-autocorrelation and normality were not rejected at 5 % critical value. Therefore, the parameter estimates could be concluded as being unbiased and consistent.

Although, RESET tests suggested that the functional forms were mis-specified, the models were the best results to be found. The original form (1) increased the model fit and did not fail the RESET tests, however, this would lead to spurious regression problem as discussed above. In addition, possible interactions between variables were examined. A statistical interaction occurs when the effect of one explanatory variable depends on another explanatory variable, which makes the simultaneous impacts of these variables on the dependent variable non-additive. This may cause the estimated model to be incorrectly specified. As a result, variable interactions were explored through a two-way effect experiment, however, no sensible interactions between variables were found.

Parameter stability was tested using the N-step Chow tests and the hypothesis of parameter stability was not rejected at 1% critical value for both China’s and India’s models (test results are displayed in appendix figure A-3).

Table 5-1: FDI determinant modelDependent variable: fdi
China:
Model1Colinearity diagnostics (VIF)2Colinearity diagnostics (VIF)
Constant-0.236-0.186
?lninfra1.7761.1181.7471.117
?lntrad1.0841.298––
?lnpol0.5741.1740.7131.159
?infla0.0831.4500.094*1.207
?lnex-0.9111.209-0.9181.209
N24Mean VIF: 1.25Mean VIF: 1.17
R-squared0.2380.229
F1.1251.408
RESET9.2866**11.174**
Autocorrelation0.968021.0143
Normality (Chi^2)5.48955.5462
India:
Model1Colinearity diagnostics (VIF)2Colinearity diagnostics (VIF)
Constant0.185
?lninfra-1.708*1.345
?lntrad1.584*1.104
?lnpol0.0201.136
?infla0.0071.211
?lnex0.4331.235
N24Mean VIF: 1.251
R-squared0.412
F2.521*
RESET36.691**
Autocorrelation0.17512
Normality (Chi^2)0.15490
Note: *** significant at 1% level; ** significant at 5% level, * significant at 10% level.For more details of the test results, see appendix table-A-4, A-5, Figure A-3.

The possibility of multi-collinearity was also taken into account since the introduction of closely related variables in the model may cause serious multi-collinearity problem. This could result in an unexpected increase in the standard error of the coefficients and therefore renders the t-statistics unreliable. Multi-collinearity diagnosis was hence conducted and the results were shown in appendix table A-4. Variation inflation factors (VIF) were reported for each specification. In all models, multi-collinearity did not seem to be serious as mean VIFs were not substantially greater than 1.

Having evaluated the models, it was generally concluded that the models were satisfactory. The estimated results for individual country are analysed below:

5.1.1. China:

Interestingly most of the factors did not have the expected signs except trade openness and exchange rate. However, apart from inflation, the other variables did not prove to be statistically significant.

Inflation, in particular, had a significantlypositive impact on FDI inflows in China. The result is somehow surprising given that many empirical analyses such as those shown in table 4-1 have concluded that MNE’s investment decision is adversely affected by price volatility as it raises the costs of doing business.

However, according to Foad (2007), inflation may affect FDI through two ways. The first is that a rise in host country’s price level would make local produce more expensive in local export-markets. As a result, export behaviour would be reduced and hence discourages direct foreign investment. The second suggests that inflation in the host country gives MNEs a competitive advantage over domestic firms. In particular, since foreign firms can have access to resources from home parent companies; they are more protected from domestic inflation. Therefore, host country inflation may generate greater volumes of FDI. The second effect appears to be dominant in the case of China as the trends in FDI inflows and inflation over the period 1984-2008 shows that there were a few years, for example the early 90s and late 2000s, when the changes in FDI and inflation moved in the same patterns (Figure 5-1).

Figure 5-1: FDI and inflation in China 1984-2008.

Source: based on UNCTAD (2010).

5.1.2. India:

The explanatory power for India’s models is fairly higher than that for China’s (41.2% compared to 23.8% and 22.9% respectively). However, only infrastructure and trade openness were found to be significant. Infrastructure was negatively correlated with FDI inflows in India. This is in line with the study by Pradhan (2008), however, contrasts with other findings by Green (2005) and Mukim and Nunnenkamp (2010). The negative effect of infrastructure is most likely due to sluggish investment in infrastructural facilities in India.

Badale (1998) indicates that the regional differences in infrastructure have become an important location determinant for foreign investors. However, despite the efforts of Indian government to upgrade its infrastructural facilities in recent years, more work is still required to reach the levels comparable to other developing countries. State-controlled physical infrastructure has long been considered as the weakest link in the Indian economy (Steel, 2001). This bottleneck in the form of inadequate infrastructure may discourage FDI flows into the country.

According to the world economic forum, backwardness of infrastructure is the most concern for foreign investors while conducting business in India (Figure 5-2). In particular, one of the biggest infrastructure problems is electricity supply (Yallapragda, 2010). Since the state power supply is so uncertain that most businesses have started to use their own power generators. These evidences combined with the model result reinforce the suggestion that poor infrastructure could deter potential foreign investment into the Indian economy.

Figure 5-2: The most problematic for doing business in India

Source: World Economic Forum (2010).

The trends of FDI inflows and trade openness in India during 1984 and 2008 seem to suggest a positive association between openness and FDI (figure 5-3).

Figure 5-3: FDI and trade openness in India 1984-2008.

Source: based on UNCTAD (2010).

The results have verified this relationship: trade openness was found significant and had the predicted positive sign. Its positive impact on FDI inflows confirms the success of India’s policy reforms since 1991. Prior to the reforms, India followed an “inward-looking import-substituting” regime with “one of the most complicated and protectionist regime in the world” (IMF, 1998). In particular, the government imposed high import restrictions with quantitative restrictions on 90% of value-added of manufacturing, maximum tariff rate of 400% and significant export controls (Rajan and Sen, 2000).

However, following the economic liberalisation in 1991, India has made drastic changes in its trade policy in order to integrate itself with the global economy. India’s average imported weighted rate declined to 27% in 1999, effective protection rate came down to 72% in 1995, export controls were removed and emphasis was placed on promoting exports (Rajan and Sen, 2000). As a result, trade liberalisation has made the transfer of goods and capital into and out of the country easier with lower restrictions, thus stimulating production and reducing costs. Trade openness is, therefore, seen as a major catalyst for inward FDI in India.

5.1.3. China and India:

Table 5-2 shows the results for joint model of FDI determinants in China and India. Overall the models passed the auto-correlation tests; however, the R-squared obtained is not very high: the independent variables explain about over 23 % of the variation in the change in FDI inflows in both models.

Table 5-2: FDI determinants in China and India
INDIA = 1 if India, otherwise 0
Model 1

2

Constant-0.236

-0.186

?lninfra1.776

1.747

?lntrad1.084

?lnpol0.574

0.713

?infla0.083*

0.094**

?lnex-0.911

-0.918

INDIA0.421

0.486

?lninfraINDIA-3.485

-3.965*

?lntradINDIA0.501

?lnpolINDIA-0.554

-0.446

?inflaINDIA-0.076

-0.094

?lnexINDIA1.345

1.565

N48

48

R-squared0.265

0.235

F1.179

1.298

Autocorrelation (1)0.2297

-0.02330

Autocorrelation (2)-1.483

-1.610

Note: *** significant at 1% level, ** significant at 5% level, * significant at 10% level.

It is expected that there is a considerable difference between China’s and India’s volumes of FDI as illustrated in figure 5-4: generally, FDI inflows in two countries fluctuate over the estimated period. However, China’s FDI seems to follow a downward trend while the trend for India’s seems to move upwards.

Figure 5-4 a: Changes in FDI inflows in China, 1984-2008

Source: World Bank (2010).

Figure 5-4b: Changes in FDI inflows in India, 1984-2008

Source: World Bank (2010).

The dummy variable used to estimate these differences between the two countries’ FDI, nevertheless, was not statistically significant. Furthermore, the findings show that apart from infrastructure, other factors did not have any significant different effects on FDI inflows in China and India. India’s poor infrastructure is a deterrent for its attraction towards FDI as compared to China. More precisely, the lack of infrastructure reduced the volumes of FDI received by India to around 3.965% less than China. Infrastructure inadequacy is therefore one of the reasons why India is lagging behind China in attracting potential FDI.

China has been ahead of India in developing its infrastructure to desirable levels for foreign investment. This can be demonstrated in the case of Chinese special economic zone (SEZ) model. Following the reforms in 1979, SEZs were created and the first one was based in Shenzhen. It used to be a small fishing village and was successfully transformed into one of the most modern cities in the world with 120,000 MNEs in operation, contributing $40 billion to the total GDP and was recently the world’s sixth largest port (Sinha, 2007). India, in comparison, has adopted the Chinese SEZs strategy only over the last decade. However, most of the SEZs are relatively small in size and not reach their full potential. In addition, many Indian ports are undersized, with a high density of traffic and inflicted with poor management (Sinha, 2007).

The results also suggest that for both countries, inflation is the determinant of inward FDI but it has unexpected signs. In particular, inflation positively influences FDI. Possible explanations for the positive effect of inflation are the same as discussed in section 5.1.1.

6. Policy implications:

Based on the individual country models and the findings from Chinese-Indian joint model, policy suggestions are made to create a more friendly business environment for foreign investment in India.

India’s infrastructural bottlenecks have been proved as a major deterrent of FDI flows. India should therefore take a more balanced focus on developing desirable infrastructure throughout the whole country. In particular, Sinha (2007) suggests that India needs to invest at least $300 billion in infrastructure and it could be funded by foreign exchange reserves and public sector equity off-loading (PSU-offloading). Specifically, India has foreign exchange reserves worth more than $150, together with offloading PSU, which can be funded for upgrading infrastructure.

Power and electricity is another concern that Indian authority needs to resolve immediately. Power sector has given a return of 26% on government equity in state electricity boards (SEBs) (Economic survey, 2006). Privatizing power distribution companies and SEBs is necessary to improve the efficiency and tackle the long-term problems in inadequate power supply.

Furthermore, India should develop high standard transportation and telecommunication networks to better serve the economy. In the telecommunications sector, for example, the penetration of mobiles and telephones has been widely successful and it should continue to benefit all people in the country. In addition, Indian railway is highly below efficiency which should be privatized like Chinese railway. India should also replicate successful stories in the infrastructural efforts it has made. For instance, expressway networks should be established in all metro cities and link all parts of the country.

Another infrastructure concern is the creation of SEZs. Although India has adopted the Chinese SEZ model, it has not been really successful. The size and development of those SEZs do not fully reflect the potential of the Indian economy. It is thus crucial that Indian government should consider developing larger SEZs combined with world-class infrastructure, human resources and good management. This would consequently attract MNEs to invest in these SEZs.

Moreover, India should build larger ports equipped with good facilities which would help develop “state of the art” ports that can receive larger ships. Additionally, developing strategic ports in major states could help improve trade and linkage between India and other parts of the world.

The second factor determining FDI in India that has been discussed in this study is trade openness. Liberalization of foreign trade policy has brought in substantial benefits for India in terms of trade integration and foreign investment. Trade liberalisation, according to Balasubramanyam and Mahambare (2001), does not means an export promotion strategy being totally favoured. But a neutral regime which neither favour export-oriented industries nor import-substituting industries is appropriate since it provides a comparative advantage to determine the investment distribution between the two groups. Such a neutral regime is likely to attract larger volumes of FDI and promote its efficiency.

Creation of export processing zones (EPZs) is another recommended policy to promote exports and attract FDI (Balasubramanyam et al., 1996). Within these EPZs, no restriction on exports of final goods is imposed and duty-free of imports is permitted. It is considered as a small free-trade area and is well provided with infrastructure facilities and telecommunications.

In summary, evidence and results from this study have suggested fundamental policies, focusing on infrastructure and trade reforms, to provide congenial investment climate in India for attracting FDI and promote its position comparable to China as a FDI destination.

Conclusion:

The phenomenon of FDI inflows in developing and transition economies has attracted a significant number of analyses looking into the determinants of FDI in these countries. Based on previous literature and research, this study has attempted to examine important factors shaping FDI in two emerging markets: China and India.

India and China are the most favourite FDI destination among developing countries. China was a highly closed economy completely isolating itself from the global economy before 1979. Its closed economic policy almost limited China’s potential development. Eventually, the Chinese government began to liberalise its economic regime and opened its domestic market to the rest of the world. As a result, remarkable volumes of FDI have been attracted into the country.

The same picture has been drawn for India since its reforms in 1991: FDI inflows into India have increased rapidly which places it to the second most popular FDI host after China. However, as compared to its neighbour in the East, India is still far behind in terms of volumes of FDI received. India, despite being the world largest democracy with a huge promising market is still overlooked by foreign investors. The study tried to explore this paradox and to investigate the factors driving FDI in China and India.

For these purposes, two separate models were developed to identify the determinants of FDI in each country and then a joint model was conducted to compare and explain the difference in FDI between two countries. The individual model suggested that inflation, though concluded with an unexpected sign (coefficient was found to be positive), had significant impact on China’s inward FDI. On the other hand, trade openness and infrastructure proved to be major determinants of FDI in India. The model for both countries indicated that among factors examined, inflation was important for FDI inflows in the two countries. Furthermore, the analysis resulted in no significant difference between China’s and India’s FDI. Infrastructure appeared to be one of the main reasons why India was falling behind China in attracting FDI.

Based on those results, policy recommendations have been made to create a congenial business climate in India for improving its attractiveness towards foreign investors. Firstly, Indian government should take immediate actions to resolve the infrastructure bottleneck. This can be achieved by developing strategic infrastructure, popularizing telecommunication and transportation networks, establishing large SEZs and ensuring efficient power supply. Secondly, India needs to create an appropriate trade policy which balances export promotion and import substitution. In addition, growing EPZs with low trade barriers are desirable for attracting MNEs.

This study has provided decent explanation for the determinants of FDI in China and India. It has, to some extent, been able to answer the research question on why India is falling behind China in attracting foreign investment. The research, however, has some limitations which need to be addressed in further study. First of all, it was difficult to obtain sufficient data on FDI determinants for India and China over the last twenty five years and hence the number of chosen factors was restricted. This may explain for the low models’ explanatory power and insignificant F-statistics. Also, industry wise study can be conducted to identify which industry is the main contributor to FDI growth in China and India. Finally, this analysis only compares India with China and does not include other emerging economies such as Brazil and Russia. A study on FDI determinants in BRIC countries[4] thus would complete the comparative picture between India and other emerging countries.

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Free Essays

Meger Announcement and insider trading in india

Abstract

This study examines the stock price effects and volume pattern of the selected companies for the existence of illegal insider trading before a merger. The study is based on Merger/acquisition announcement during 2001 to 2005. The analysis has been done for 20 target companies which are listed in BSE and NSE, this study analyses the stock prices and the trading volume 30 days before an acquisition announcement. In order to study the pattern of stocks the Abnormal returns (AR), Cumulative abnormal returns (CAR) and the abnormal volume has been calculated for the selected target companies in the Indian context. Besides, very little theoretical work has been done by researchers in India. However, with improved availability of databases and computing resources, and with increasing global interest in Indian markets, we expect an explosion of work in the near future.

In this analysis I found that a considerable sample of firms have abnormal return before the actual announcement has taken place and also there are evidence of huge abnormal volume before a public announcement in the given sample.

Introduction

It is widely accepted that insiders trading activities generate interest, sometimes create panic and also increase the trading volume of other market participants. Most financial analysts keep track of insider trading, and some advisory services specialize in gauging insiders’ transactions. Business dailies and Financial Journals are preoccupied with trends in insider trading. It is generally supposed that corporate insiders have access to information superior to that of outsiders.

An inference sometimes drawn from these articles is that insider trading is based on inside information or nonpublic information and is therefore a violation of law. Of all white-collar crimes, insider trading probably is the most pervasive and acquiesced with. Lax regulations and the ease with which a manager can access sensitive information to profitably manipulate stock prices are, of course, what drives this nefarious practice. The most radical line of reasoning objects to any form of trading that is on the basis of differentials in information. It is argued that unrestricted insider trading will lead to a breakdown of capital markets which are unable to perform their role efficiently. The least restrictive view of insider trading sees insider trading as illegitimate only if it involves a breach of fiduciary duty or at least a breach of trust and confidence. Thus, the profits that managers make at the expense of their shareholders would be an abuse of the relation of trust, which links managers to their shareholders, as the gains accrue on the basis of information, which the managers have obtained by virtue of their position. The primary argument against insider trading is that it works to the disadvantage of outside investors who would then exit the market place, taking their capital with them. The argument in favor of allowing insider trading is that such trading leads to more informative security prices.

The announcement of a corporate merger is a major news event that has a significant impact on the share price of the target firm, it is generally accepted that insiders’ trading activities generate a lot of interest and also increase the trading volume of other market participants. It is generally supposed that corporate insiders have access to information superior to that of outsiders. An inference sometimes drawn from these articles is that insider trading is based on inside information or non public information and is therefore a violation of law. One of the most important restrictions on trading involves insider trading. It is illegal for anyone to transact in securities to profit from inside information i.e. private information held by officers, directors or major shareholders of the firm.

It is not only illegal to trade your own stock in a company based on this inside information but it is also illegal to pass on that information to someone, so that they can trade their stock. Anybody who has material and non-public information can commit such an act. This means that nearly anybody—including Directors, CEO’S, brokers, family, friends, and employees can be considered as an insider.

Insider trading actions by the Securities and Exchange Commission (SEC) against Dennis Levine, Ivan Boesky, Martin Siegel, and others have influenced the public perception of mergers and acquisitions activity. These well-publicized cases generally involve illegal insider trading based on non-public information about impending bids for take-over targets. Many regulators have interpreted public concern about illegal insider trading as political support for legislative proposals to restrict mergers. These regulators argue that increased trading in the shares of target companies before merger announcements indicates the pervasive nature of insider trading.

Associating share price run-ups with insider trading has intuitive appeal. The success of several regulatory authorities at identifying and prosecuting insider traders has reinforced the perception that such conduct is pervasive and that legitimate speculation is overwhelmed by illegitimate trading on non-public information. An active mergers and acquisitions market enhances opportunities for profitable legal and illegal trading in anticipation of take-over bids. If illegal conduct is sufficiently widespread, then that conduct could be an important cause of pre-bid price run-ups.

Some analysts, on the other hand, generally view increases in share prices before merger announcements as supportive of the efficient market hypothesis, which states that share prices at any time fully reflect all public information (Fama, 1970). Researchers have documented share price reactions to many types of corporate announcements including dividend changes, earnings reports, share splits, unexpected management changes, and macroeconomic events such as inflation, oil price shocks and interest rate changes. In cases where it is possible for traders to discover information in advance of news announcements, there is generally a significant share price run-up preceding the event.

Legitimate research and analysis of corporate information gives some traders informational advantages and their superior earnings serve as compensation for their efforts (Larcker and Lys, 1987). Their trading is beneficial to the extent it aligns share prices with their theoretically correct values, promoting efficient allocation of capital. The prospect of large take-over premiums and the many kinds of clues legally available assure the existence of an active market for information on prospective merger targets (Comment, 1986). Therefore, much share trading that precedes important news can be attributed to a well-functioning market and not necessarily insider trading.

In line with trends in many developing countries, South Africa has in recent years witnessed a sharp rise in merger/take-over activity. However, there have been no investigations on the relative importance of public versus private information related to the price run-ups associated with take-over announcements. The purpose of this study is to examine the role of pre-announcement news reports as an explanation for the excess returns associated with merger announcements of target companies listed on the Johannesburg Stock Exchange (JSE).

Purpose of the study

Those who possess privileged information have an incentive to gain illegal profits over the less privileged outsiders; this study is aimed at examining the effectiveness of the regulations by the SEBI and also the efficiency of the market.

The purpose of the study is to give a fair chance for the outside investors who would lose their trust on the capital markets and exit the market with them.

This research study is aimed at protecting the trust and confidence of the individual investors who do not have access to inside information and who depend upon only the publicly available information for investing

This study examines the existence of illegal insider trading before an acquisition announcement. The purpose of this study is to apply the mechanisms for detecting insider trading and to find how efficient the market is?

Problem Statement

Insider trading before announcement date of merger is characterized by wide share price and volume fluctuations and heavy trading within a short span of time. Insider Trading is a traditional worry of investors, and is associated with fast-growing stocks, high P/Es, smaller companies, Information Technology (IT) firms. Insider trading of stock market is usually caused by leakage of company news to insiders. Share prices fluctuations affect the investor’s wealth creation. In this context, the study of the impact of Insider trading before announcement date of merger in stock market is undertaken.

Does insider trading take place prior to an Acquisition announcement in India?

Background of the Study

Merger & Acquisition in India

The restructuring of companies through merger is governed by the SEBI (Substantial Acquisition of shares and Takeovers) Regulations, 1997. The regulations were formulated so that the process of mergers are carried out in a well defined and orderly manner following the principles of fairness and transparency. The applications for merger are scrutinized by the Merger panel constituted by the SEBI.

The terms Merger, Acquisition and Take-over are all part of the M&A parlance. In a merger, the companies come together to combine and share their resources to achieve common objectives. The shareholders of the combining firms often remain as joint owners of the combined entity. An acquisition resembles more of an arm’s-length deal, with one firm purchasing the assets or shares of another, and with the acquired firm’s shareholders ceasing to be owners of that firm. In a merger, a new entity may be formed subsuming the merging firms, whereas in an acquisition the acquired firm becomes the subsidiary of the acquirer firm.

Acquisitions may be undertaken to access the market through an established brand, to get a market share, to eliminate competition, to reduce tax liabilities or to acquire competence or to set off accumulated losses of one entity against the profits of other entity. The process of mergers and acquisitions in India is court driven, long drawn and hence problematic. The process may be initiated through common agreements between the two parties, but that is not sufficient to provide a legal cover to it. The sanction of the High Court is required for bringing it into effect. The Companies Act, 1956 consolidates provisions relating to mergers and acquisitions and other related issues of compromises, arrangements and reconstructions, however other provisions of the Companies Act get attracted at different times and in each case of merger and acquisition and the procedure remains far from simple. The Central Government has a role to play in this process and it acts through an Official Liquidator (OL) or the Regional Director of the Ministry of Company Affairs. The entire process has to be to the satisfaction of the Court. This sometimes results in delays.

Mergers and acquisitions in India has touched US$5.4 billion in the first five months (till May end) 2005, which works out to 3% of Asia-Pacific deal value. Significantly Asia-Pacific contributed to 23% of global volumes which was at $680bn for the first quarter and 18% of global volumes ($971bn) from January to May.

The M&A activity in Asia-Pacific has gone up with total deals for the first quarter at $130bn more than double that of the first quarter of ’04 when it was at $56bn. The total M&A volumes in the region for the last calendar year was at $234bn while till May end it was $179bn. The UB – Shaw Wallace deal has been listed among the top 10 deals in the consumer/healthcare sector in Asia Pacific. UB Group’s McDowell & Co and its affiliates entered into an agreement with the promoters of Shaw Wallace, to acquire its 54.54% stake in the company for Rs 325 per share. The other major deal which had been announced early this year was the Holcim- ACC deal.

According to the ET CMIE survey on mergers and acquisitions in calendar year ’02 there were 121 open offers, amounting to Rs 7,696 crore a whooping 165% from last year’s figure of Rs 2,895 crore from a total of 92 open offers. At the same time, the number of mergers has risen from 308 in ’01 to 348 in ’02. The value of acquisitions in ‘04 increased three-fold to Rs 55,534 crore in ‘04 compared to Rs 19,117 crore in the previous year, according to CMIE Mergers & Acquisitions (M&A) database. 574 deals were reported in 2003 and 353 deals were reported in 2004 around 35% less compared to the last year. Indian corporate mergers and acquisitions doubled in the first six months of 2002 from the same period last year, bucking a worldwide trend, off the long-awaited sale of big-ticket state-run assets, analysts said Wednesday.
India Advisory Partners, a consultancy firm tracking mergers, estimated that the value of transactions had jumped to 362 billion rupees (7.41 billion dollars) for the six months to June 30 from 168 billion rupees a year earlier.
The number of transactions in the period soared to 433 from 57 in the first half of 2001, as companies merged units to benefit from regulatory changes.
The consultancy firm said government policies drove consolidations by private-sector companies, which sought in bulk to face increased competition from foreign rivals such as the Royal-Dutch Shell Group with the deregulation of the 65 billion-dollar Indian oil market.
India’s biggest private sector firm Reliance Industries in March announced the acquisition of its petroleum unit in a 110 billion-rupee all-stock deal to become India’s biggest non-state company by profit. And ICICI Bank Ltd. absorbed its parent ICICI Ltd. in a 23.27 billion rupees deal after the central bank eased rules segmenting the type of services banks could offer.

Analysts say that takeovers, which rose in India as they slumped 35 percent worldwide, could accelerate in the next six months as the economy expands, and the government sells assets and opens its industries to further competition. The boom means surging fees for advisers such as Merrill Lynch and Company and Morgan Stanley. The Indian government has set itself a target of raising 120 billion rupees through privatization of state enterprises in the financial year ending March 2003.

New Delhi set the same goal last year, but managed to raise no more than 60 billion rupees. However, hopes have risen for a smoother process after the successful privatisation of sizeable firms such as Bharat Aluminium Company Ltd. despite dogged resistance by labour unions.

The government has announced that it will consider investments by foreign individuals in domestic airlines, although foreign airlines cannot. This opens the door to Richard Branson, who owns Virgin Atlantic Airways Ltd, to buy a stake in an Indian airline. The entrepreneur has announced that he is looking to buy a 25?49% stake in an Indian airline in his individual capacity, and that he is in talks with Air Deccan, the fast growing Indian “no frills” airline.

Singapore state investment agency Temasek Holdings Pte. Ltd has announced its acquisition of a 10% holding in Indian-Singapore logistics group Gateway Distriparks Ltd for Rs204m. Gateway Distriparks is one of India’s largest private logistics companies, operating container freight stations at the Jawaharlal Nehru Port in the western state of Maharashtra and other locations. It is also setting up a large facility in Visakhapatnam and buying a facility in Madras.

General Electric Co announced on 8 November that it has sold a 60% stake in its Indian business process outsourcing unit, GE Capital International Services, for about US$500m, making it one of the largest deals in the country’s booming back-office industry. The stake has been sold to two private equity firms, General Atlantic partners and Oak Hill Capital Partners. The sale is expected to be completed within six months.

Indian Technology Company, iFlex Solutions is to diversify by buying stakes in two overseas companies. The company, which designs and services the world’s most popular banking software, will acquire 100% of US based Equinox, which provides business process outsourcing services to US companies from is call centre in Delhi, and a 33% stake in Login, a French treasury software developer.

DHL is to buy a majority stake in Indian delivery firm Blue Dart Express Ltd. The global logistics company will pay US$125m for a 68.2% stake in South Asia’s leading integrated air express carrier and make an open offer to holders for a further 20%.

There has been a flurry of M&A activity in the recent past; several of the larger acquisitions have involved MNC’s in consumer industries targeting Indian companies to capture market share and distribution facilities. Prominent among these are Coke’s strategic alliance with Parle, India’s largest soft drink manufacturer; Colgate’s buyout of Ciba Geigy’s health care business; and Hindustan Lever’s (Unilever’s Indian venture) merger with a competitor — TOMCO and the acquisition of three large domestic ice cream businesses — Kwality, Milkfood and Cabdury’s. Recently, Whirlpool acquired a controlling stake in Kelvinator, India’s leading refrigerator company in which Electrolux has a minority stake. The increase in market activity has resulted in a number of financial intermediaries and investment banks offering M&A related services. Several firms, such as Arthur Andersen, Lazard Credit Capital, Kotak Mahindra, and Peregrine offer services in identification, valuation and negotiation for M&A transactions.

Announced Mergers and acquisitions deals in India (2001-2004)

Distinction between Mergers and Acquisitions

Although they are often uttered in the same breath and used as though they were synonymous, the terms “merger” and “acquisition” mean slightly different things. When a company takes over another one and clearly becomes the new owner, the purchase is called an acquisition.

A merger happens when two firms, often about the same size, agree to go forward as a new single company rather than remain separately owned and operated. This kind of action is more precisely referred to as a “merger of equals.” Both companies’ stocks are surrendered, and new company stock is issued in its place. For example, both Daimler-Benz and Chrysler ceased to exist when the two firms merged, and a new company, DaimlerChrysler, was created. In practice, however, actual mergers of equals don’t happen very often. Often, one company will buy another and, as part of the deal’s terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it’s technically an acquisition. Being bought out often carries negative connotations. By using the term “merger,” dealmakers and top managers try to make the takeover more palatable.

A purchase deal will also be called a merger when both CEO’s agree that joining together in business is in the best interests of both their companies. But when the deal is unfriendly–that is, when the target company does not want to be purchased–it is always regarded as an acquisition.

So, whether a purchase is considered a merger or an acquisition really depends on whether the purchase is friendly or hostile and how it is announced. In other words, the real difference lies in how the purchase is communicated to and received by the target company’s board of director employees and shareholders.

The model depicted in the adjacent diagram captures the critical elements of an effective integration strategy. This approach is a major advancement over the traditional approach to M&A management in which market, supplier, and people issues are addressed far too late to ensure success. The approach seeks to ensure that the five ingredients above are addressed by creating riveting focus, realigning the organizations, generating high self accountability for results, creating leading indicators of success, and using a process that maximizes learning.

Insider Trading and Insider

“Insider trading” is a term subject to many definitions and connotations and it encompasses both legal and prohibited activity. Insider trading can occur when a person who possesses material non-public information trades in securities on the basis of such information or communicates such information to others who trade. The person who trades or “tips” information violates the law if he has a fiduciary duty or other relationship of trust and confidence not to use the information. The most common examples of insider trading involve corporate officers and directors; they owe a duty either not to trade the securities of their own company or not to disclose any material non-public information they possess. Trading is also prohibited when a person who receives information through a confidential relationship uses (“misappropriates”) the information for his or her own trading or tips to others. People who receive information in confidence can include a broad range of persons involved in the securities markets. In USA, from time to time, the Security Exchange Commission has charged investment bankers, arbitrageurs, attorneys, law firm employees, accountants, bank officers, brokers, financial reporters and even a psychiatrist with misappropriating information and violating insider-trading prohibitions.

The American notion that insider trading is wrong was well established long before the passage of the federal securities laws. In 1909, the United States Supreme Court held that a director of a corporation who knew that the value of the stock of his company was about to skyrocket committed fraud when he bought company stock from an outsider without disclosing what he knew.2 But this condemnation is not universal, even in the United States.

By Securities and Exchange Board of India (Insider Trading) Regulations, 1992: “insider” means “any person who, is or was connected with the company or is deemed to have been connected with the company, and who is reasonably expected to have access, by virtue of such connection, to unpublished price sensitive information in respect of securities of the company, or who has received or has had access to such unpublished price sensitive information.” To most people it appears rather unjust that some speculators are able to earn profits at the expense of others who just happen to know less about the asset in question. Securities and Exchange Board of India (SEBI) has also put in place the disclosure norms for the office bearers of the stock exchange and directors of Asset Management Companies (AMCs) to prevent insider trading.

The directors of AMCs are required to file the details of the purchases and sales of transactions on quarterly basis. Indeed, the European Economic Community has formally recognized the importance of insider trading prohibitions by passing a directive requiring its members to adopt insider trading legislation. The preamble to the directive stresses the economic importance of a healthy securities market, recognizes that maintaining healthy markets requires investor confidence and acknowledges that investor confidence depends on the “assurance afforded to investors that they are placed on an equal footing and that they will be protected against the improper use of inside information.”3 These precepts echo around the world, as reports of increased insider-trading regulation and enforcement efforts are daily news.

Insider Trading and Cost to Investors

Illegal insider trading costs investors millions of dollars a year by inflating the cost of mergers and acquisitions, according to a Harvard Business School study. Between 1974 and 1990, bidding companies paid extra $4 billions as a result of trading on information unavailable to the public. Meulbrock in, “Insider trading is tremendously costly for the bidding companies,” has found that when insiders ran up the stock price of the company being acquired before the announcement, buyers ended up paying a 30 per cent higher premium for the company, on average, than they otherwise would have. Insider trading could even drive up the stock price so much that the takeover would no longer be practical.

Public Announcement & Announcement Date

A public announcement is an agreement made in the newsstudys by the acquirer primarily disclosing his intention to acquire shares of the target firm from existing shareholders by means of an open offer.

The announcement date is one when the target firm first publicly disclosed as a possible acquiring target. These announcements are made in the national dailies.

Regulations over Insider Trading

Investing, the insider takes his place alongside embezzlers, frauds, and all other varieties of scam artists. He uses privileged knowledge gained from executive friends told over a cup of tea or a game of golf to earn enormous profits in the stock market.

Surely, this kind of activity should be universally condemned as unfair and unethical. After all, one person, solely by virtue of personal connections or occupation, gains an advantage that the average investor does not have. Should not everyone have an equal opportunity to earn money in the stock market?

For India, along with most of the industrialised countries, the answer is yes. Insider trading was outlawed in 1992 when the stock market was liberalised and the Securities and Exchange Board of India (SEBI) was given the mandate to investigate instances of alleged insider trading.

It is a well-known fact that insider trading, and many other forms of corrupt dealing, are very common in the securities markets in India. According to one author, “Price-rigging and insider trading have become a way of life in the Indian stock market (Sivakumar).” And the former president of the Bombay Stock Exchange is quoted as saying, “that there is no other kind of trading in India, but the insider variety (Dalal).” Important steps have been taken towards reform and the purpose of this study is not to downplay many of the problems that exist in the markets in India. However, I believe the facts will show that insider trading does not belong in the same category as outright fraud or theft and that the negative effects of insider trading have been exaggerated. Furthermore, many of the fundamental problems plaguing the Indian markets are unrelated to insider trading and require reforms unrelated to insider trading laws.

Insider trading laws exist for reasons of both equity and efficiency. In regards to equity, the government wants to ensure that everyone involved in the stock market has equal information and that any information available to one active participant in the market is available to all participants. In other words, no one has an unfair advantage in the market. There is also a justification for insider trading laws based on efficiency considerations. Basic microeconomic theory holds that a commodity (i.e. a stock or an options contract) is priced efficiently if all information known or knowable is incorporated in the price. In other words, in an efficient market, if Intel invents a new, revolutionary microchip that will cause profits to triple next year, the price of the stock should immediately rise by three times as all market participants learn of this fact simultaneously. If there is unequal access to information (imperfect information in economics terms) then the market is said to be inefficient.

A quantitative study on the effects of insider trading on market efficiency has been completed by Utpal Bhattacharya and Hazem Daouk. They argue that, based on data collected in all 103 countries that have stock exchanges, the enforcement of insider trading laws increases market liquidity and decrease the cost of equity. The study attempts to control for factors such as the quality of legal institutions, level of international integration, foreign exchange risk, and others.

In all tests, they find a positive relationship between enforcement and liquidity and a negative relationship between enforcement and cost of equity (Bhattacharya).

Are these results to be believedSince countries that have insider trading laws have more advanced economies and more transparent markets, the correlation that does exist is not surprising. The only issue, and one that requires further research, is whether other factors such as these are adequately taken into consideration. Market transparency and investor I confidence, irrespective of insider trading laws or enforcement, are extremely difficult to quantify.

One objection to the two justifications for insider trading laws is that the government, by enforcing insider-trading laws, is expected to enforce an unattainable ideal on the stock market. Perfect information is an abstraction that exists only in elementary microeconomics textbooks and not in the real world markets. In fact, as information technology has progressed so rapidly, information can travel much faster and be available to more people than ever before. It could be argued that technology has done more to ensure an efficiently operating securities market than government regulations have. According to Ajay Shah and Susan Thomas, the introduction of computerisation into the Bombay Stock Exchange has increased both liquidity and efficiency in that stock exchange (A Shah–-Automation). Insider trading laws can hardly be credited with a similar improvement in efficiency. Insofar as insider-trading laws encourage the free distribution of stock-related information, they help to ensure more efficient pricing of stocks. However, when insider-trading laws discourage investors from buying or selling based on inside information, they only result in stocks being priced in a manner inconsistent with all available information. If insiders are allowed to act on the information they possess, it will also lead to more efficient pricing, as the buying and selling resulting from the information will be reflected in the overall price of the stock.

The argument in favour of insider trading laws also ignores the issue of use of information. Even if everyone has equal access to information, there is no guarantee that they will all use this information in the same way. Information must be analysed and different people have different opinions on what the best analysis of stock-related information is. For instance, although it is generally true that when two companies merge, the stock of the resulting company is worth more than the combined value of the individual stocks, it is not always the case. So an insider who knows in advance of a proposed merger cannot mindlessly purchase shares of the two companies hoping to earn an easy profit. He must examine whether the merger is sound and what the market’s perception of the merger is and act accordingly. So the possession of inside information by itself is not as valuable as it appears to be at first.

Another argument is that it is not the government’s job to ensure everyone is equal and has equal access to information. In fact, even with the entire insider trading laws that so many countries have, inequality of information still exists. Investors who are too busy to read the financial section of the newsstudy or to follow the latest information about the companies they invest in voluntarily allow information inequality to exist. Since so much inequality of information exists even when the government attempts to narrow the knowledge gap, equal access to information is a utopian goal.

India’s current insider trading regulations prohibit any “insider” from either acting on non-public information or from disclosing this information to any other person. The original law was passed in 1992 and SEBI passed a series of regulations to broaden the scope of the law in 2002.

A quick survey of enforcement of insider trading laws around the world will reveal that these laws are very rarely used. In Australia, there have been only six successful insider-trading prosecutions since 1992 (P Shah). The Netherlands, similarly, has also had only one successful prosecution in the past ten years and Japan has yet to even use its insider trading laws (Newkirk). Additionally, Germany did not even have a law against insider trading until it was required to pass one by the European Union in 1994 (P Shah). Of the 87 countries that prohibit insider trading, only 38 have prosecuted any insider trading case (Bhattacharya). India appears to follow in the footsteps of these countries as from 1996 to 2000; SEBI brought only Centre for Civil Society fourteen new insider trading cases (www.sebi.com). Furthermore, India, at the time of this writing, has yet to punish anyone for insider trading violations.

According to Arturo Bris, if a country has insider-trading laws that are weak or rarely enforced, the situation is worse than having no insider trading rules at all. Insider trading laws increase the potential profits of those who choose to break the law. The reason for the higher profitability of insider trading among countries where there are laws against the practice is that the market reacts more strongly to public announcements when insider trading is illegal since there are less people willing to act on inside information prior to public disclosure. This means that the few people who are willing to take the risk to trade based on inside information can earn larger profits and the net result is that the profitability of insider trading is increased rather than decreased (Bris). Therefore, when a nation fails to enforce its insider trading laws, insider trading becomes more profitable and there is no appreciable decline in insider trading activity. The facts stated above clearly establish that India is one of many countries that rarely enforces the insider trading laws that exist on the law books. Therefore, according to Bris’s analysis, insider trading is a very profitable venture in India with little chance of facing punishment. The two choices that India faces are to strengthen the existing laws against insider trading or to do away with the laws altogether.

The United States is an oft-cited example of a country that has been very successful in countering insider trading with its combination of tough laws and vigorous enforcement. Again referring to Bris’s study, the level of profitability of insider trading in the United States is comparatively low. Some of this can be attributed to liberal, transparent markets and the rapid dissemination of financial information in that country, but its insider trading laws is also relevant. Nevertheless, insider trading is still a profitable venture and therefore its existence, even in the United States, is guaranteed. Another important issue that is outside the scope of this study is the cost-effectiveness of enforcing insider-trading laws. The normative benefits of insider trading laws must be weighed against their costs. So even if one supports insider trading laws in theory, it is important to ask whether the money that would go to SEBI to make it as powerful as the SEC (Securities and Exchange Commission, USA) could not be spent more wisely elsewhere. Equally important is the fact that insider-trading laws have costs in regard to the efficiency of the stock market.

A corporate officer buys shares of his company’s stock in advance of a business deal announcement that is sure to send the stock price up. This officer could be disciplined by the stockholders as well as the company itself for bringing the company into disrepute. An outside investor trades based on information he gained from a company insider. In this case, every company and every stockholder has an interest in confidentiality so whoever revealed the information in question could be in violation of company rules.

An options trader with advance knowledge of a company’s losses buys an option to sell the company’s stock in the near future. The broker he deals with is directly hurt by this action since he must buy the stock after the company’s losses become public and the stock price goes down at a higher than normal price. In this case, the options market could have its own rules against insider trading and brokers and buyers could also sign a contract stipulating that they have no inside information prior to a transaction.

World Scenario

Insider-trading laws came into being after the crash of 1929. Congress enacted the Securities Act of 1933 and the Securities Exchange Act of 1934 to curb common abuses of the era. The 1934 act specifically addressed insider trading, although “insiders” were defined narrowly as corporate officers, directors and owners of at least 10% of a company’s stock. Later court cases and Securities and Exchange Commission regulations broadened the definition to include corporate “outsiders” and people who receive illicit tips.

Nonpublic information that gets you into hot water. You are guilty of insider trading if you are a corporate insider who trades on such information or that rightly belongs to someone else, such as an issuer of securities. “Misappropriation” applies to an investment banker who trades in advance of a merger deal, for example, or to a printing-press worker who sells information about an article he sees ahead of its publication.

In fact, the insider-trading laws were changed three years ago to make prosecutions easier. Under the new rules, it’s now assumed that an insider has a “relationship of confidentiality” with close family members. If you show off knowledge of confidential information to your 18-year-old daughter, and she trades on it, you’re both in trouble — if, that is, she had reason to believe it was truly inside information.

The legal concept in question here is “scienter,” doing something with fraudulent intent. If you didn’t know the information was tainted, you’re okay. “The empty-head defense can work,” says Bebel. “But willful blindness is not a defense.” Translation: If you sell after learning that the CEO and his relatives were bailing out of a stock the day before a pivotal Food and Drug Administration meeting, your failure to see a connection might not be perceived as credible.

Don’t assume you can fool authorities by flying under the radar. The SEC periodically targets small fry precisely to discourage such thinking. Recently, the SEC brought a case against a man whose gains totaled all of $500. The SEC and the exchanges have the power to detect virtually every move you make.

Several kinds of activities are sure to arouse the SEC’s suspicion. “Buying on margin, buying options for the first time, buying stock for the first time or making a much larger trade than usual are red flags,” says Paul Berger, associate director of the SEC’s division of enforcement. Acting too close to the date of a major announcement and “doing anything that is out of the ordinary for you as an investor are also warning signs,” adds Nancy Grunberg, a former SEC enforcement official.

Guilty or not, lawyers advise against talking to SEC officials if they contact you about insider trading instead, have your lawyer answer their questions. You may not have all the relevant information at your fingertips, and if the SEC catches you in a mistake, you could face charges of making a false statement. In addition, people have a tendency to tell stupid lies to government investigators.

Indian Scenario

The Securities and Exchange Board of India (SEBI) prohibits fraudulent and unfair trading practices, including insider trading and self dealing, Insider trading is defined as “taking place when insiders or other persons who, by virtue of their position in office or otherwise, have access to unpublished price sensitive information relating to the affairs of a company and deal in the securities of such company and deal in the securities of such company or cause the trading of securities while in possession of such information to others who use it in connection with purchase or sale of securities”.

Penalty for insider trading

Either on his own behalf or on behalf of any other person, deals in securities of a body corporate listed on any stock exchange on the basis of any unpublished price sensitive information; or Communicates any unpublished price sensitive information to any person, with or without his request for such information except as required in the ordinary course of business or under any law; or Counsels, or procures for any other person to deal in any securities of any body corporate on the basis of unpublished price sensitive information, shall be liable to a penalty not exceeding five lakh rupees (emphasis added). However, implementation of the Act is problematic. Despite full fledged electronic trading facilities at the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), it is difficult to flag a trade as a possible case of insider trading. Given the number of brokers and intermediaries who operate in the market, a person with insider information can create fire-walls between himself and the regulators. An additional factor making surveillance more difficult, are multiple listings, which are common. The main surveillance responsibility rests with the principal stock exchange. If the regional exchange does not have a sophisticated surveillance mechanism, monitoring compliance becomes almost impossible. Despite this handicap, SEBI has initiated probes in several cases of insider trading.

L.K. Singhvi, Senior Executive Director, in charge of enforcement, investigations and surveillance, said: “We welcome the market movements as they are good from the investor’s point of view. But we have to check for movements which are detrimental to investors, especially if such movements are witnessed prior to certain announcements and are of abnormal nature or are at the cost of the other investors.” To cite, the share price of Pentafour Software moved from Rs. 144.75 on December 1, 1997 to Rs. 359.50 on March 6, 1998, on rumors of an impending takeover of the company. Following news reports of India Cements making a bid for Rassi Cement and the subsequent announcement by India Cements, the latter’s share price moved up from Rs. 56.50 on December 1, 1997 to Rs. 239.10 on March 6, 1998.

In 1998, Indian financial markets were rocked by massive share price rigging fraud involving reputed industrial groups such as BPL, Sterlite and Videocon. No punitive action has been taken so far by SEBI against the main offenders. The latest controversy is related to the rigging of share prices of a private bank, Global Trust Bank (GTB). It has been alleged that Ketan Parekh and his associates rigged the share prices of the GTB prior to its merger with the UTI Bank, in order to improve the swap ratio in favor of GTB. With Parekh and his associates being the major traders, the share price of GTB rose from Rs.70 in October 2000 to Rs.117 within three weeks. It is only now when the bank merger had already been announced that investigations have been launched to look into Ketan Parekh’s role in alleged insider trading. The interim investigations carried out by India’s regulatory authority, Securities and Exchange Board of India (SEBI) found “evidence of a nexus” between Ketan Parekh and Ramesh Gelli, promoter of GTB.

Unfortunately, in most of the instances, the response of the regulatory agencies has been reactive rather than proactive. Like popular Indian movies, the regulatory agencies came into the picture when the damage had already been done. This is despite the fact that regulatory authorities have an armory of instruments at their disposal to prevent such frauds. According to L C Gupta, former member of SEBI Board, even when actions are taken, they are generally ad hoc in nature. Because of these reasons, there is a growing feeling that the regulatory authorities, particularly the SEBI, tend to protect the interests of big players rather than small investors.

The application of insider trading regulations in India have been flawed from the very beginning, and the long delayed order in the Larsen & Toubro (L&T) case has further eroded their credibility. This case was treated differently. A high-powered, board-appointed committee of the Securities and Exchange Board of India decided it, probably because it dealt with Reliance — India’s most powerful industry group. After dragging its feet over the investigation since November 2001, SEBI exonerated Reliance and the Ambani brothers of all wrongdoing in the strange transaction.

A reading of the order indicates that Reliance’s aggressive arguments were all accepted by SEBI without contest. And the brazen display of financial muscle and premeditated buying was condoned without reprimand or criticism. Let’s do a recap. Reliance Industries, which held 4.38 per cent of L&T’s capital on November 5, 2001, steadily hiked its stake to 10.05 per cent over the next 10 days until November 16. Consequently, the scrip rose sharply from Rs 167 to Rs 209. Coincidentally, on November 6, Reliance was approached for a possible sale of a block of shares to Grasim. SEBI’s order does not worry about the size of the stake that Grasim had sought, although it is important information.

In fact, the Grasim board recorded the deal as being an offer from Reliance rather than the other way around. Also, it went about arranging funds for a 10 per cent of the L&T shares at a substantial premium, suggesting premeditated buying by Reliance based on specific information. On November 16, Grasim allegedly made a firm offer of a 47 percent premium (Rs 306 per share) to the ruling market price for a block of 10.05 per cent of Reliance’s holding; and the deal was finalised on November 18. The investment banker is close to both parties, but Reliance claims that it had no idea that a deal would materialise.

The L&T management, which fought hard to keep the Birla’s out, also didn’t bother about the soaring price. And SEBI quickly accepted Reliance’s contention that since L&T was completely out of the picture there was no inside dealing. Several questions, asked by ordinary investors about the deal, apparently did not occur to SEBI’s powerful committee.

For instance, Reliance says that there was increase in the stock price after the deal became public. Since the Birla’s had made it clear that there would be no open offer to retail investors, only foolish investors would buy more shares above Rs 208.5. The order says nothing about the price manipulation angle.

Similarly, SEBI is unconcerned that Reliance wasn’t an outsider in L&T. It had two board positions, a ‘substantial holding’ (by SEBI’s own definition) and at one time even controlled the management. So much so, that Grasim was willing to buy L&T only if Reliance signed a deal specifically promising to keep away from L&T for a long time. SEBI does not discuss the sanctity or purpose of its “Substantial” shareholding rules, which require investors to report any holding of over five per cent in a publicly listed company. Isn’t this because this threshold is considered a significant indicator of a possible change in managementYet, Reliance’s 10-day circus on the bourses was not discussed by SEBI in this context, even though the sale of its holding triggered a nasty two-year battle for control.

SEBI’s exoneration of Reliance proves that there is no uniformity in the application of insider trading rules. For instance, contrast the L&T case with the SEBI’s allegations against Hindustan Lever (HLL). In 1997, two Unilever group companies (HLL and Brooke Bond, both with a 51 per cent stake by the parent) had merged. Just prior to the merger, HLL bought additional shares from Unit Trust of India (UTI) at a premium to market and extinguished them during the merger. This was done to keep Unilever’s stake in the merged company also at 51 per cent. It was a transparent deal, openly reported to shareholders. There was no monetary benefit to Unilever; if anything, the value of all shareholders increased when HLL extinguished the shares.

SEBI accused two HLL chairmen and several top directors of insider trading and ordered HLL to compensate UTI for a notional loss that UTI had not even claimed. SEBI turned livid when the Securities Appellate Tribunal (SAT), then comprising two top secretaries of the finance ministry, overturned its order. It filed an appeal in the civil court, which is still pending. Just a year ago, it revived the case by filing a criminal writ petition against HLL for ostensibly delaying the hearings a charge that is hotly contested by the company. The case is languishing again.

If SEBI’s munificence towards Reliance and harshness towards HLL are two extreme examples of the application of Insider Trading Rules, then take a look at SEBI’s attitude to public sector banks, which dumped units of UTI before its dramatic collapse in May-June 2001.

Although the banks dumped units at a high Rs 14.75 on the specific knowledge of UTI’s financial problems (UTI had borrowed from those very banks to fund its redemption), it wasn’t even considered insider trading or investigated. When JE Talaulicar, a Tata Finance director, was indicted for insider trading, SEBI even punished a senior executive of the group for Talaulicar’s actions. Yet, it holds Reliance blameless in L&T.

SEBI’s only clear indictment for insider trading was that of Rakesh Agrawal, Managing director of Bayer ABS Ltd in 2001. But that order too was set aside by SAT on the strange premise that although he (in fact a close relative) traded on unpublished, price sensitive information about the merger between Bayer and ABS Industries, SEBI had not proved that he derived an unfair advantage. Then there is the case of Samir Arora, the best-known fund manager in India. SEBI barred Arora from the capital market without even a hearing. And although many of us supported its quick action, the L&T-Reliance matter has us wondering if the regulator is even-handed especially since it continues to go soft on Alliance Capital Mutual Fund, which employed Arora and benefited from his actions.

Meanwhile, the flare up in stock prices of companies, preceding every major announcement by them, indicates that insider traders in India are seldom caught and are selectively persecuted.

The RBI has laid down guidelines for the process of merger proposal, determination of swap ratios, disclosures, the stages at which boards will get involved in the merger process and norms of buying and selling of shares by the promoters before and during the process of merger.

The guidelines cover two situations of mergers and amalgamations; an amalgamation of two banking companies and amalgamation of a non-banking finance company (NBFC) with a banking company.

For NBFC-Bank mergers, the RBI has said that its nod is needed ahead of the High Court approval. “Where an NBFC is proposed to be amalgamated into a banking company, the banking company should obtain the approval of the RBI after the scheme of amalgamation is approved by its board but before it is submitted to the High Court for approval.”

The RBI has decided that the Insider Trading norms stipulated by the Securities and Exchange Board of India, (SEBI) will be applicable for bank mergers and acquisitions. “SEBI regulations on Prohibition of Insider Trading should be strictly complied with information relating to takeovers and mergers and transfer of shares of listed banks and NBFCs is price sensitive. Even unlisted banks and companies should follow the SEBI guidelines in spirit and to the extent applicable.” The central bank has decided the price to be paid to dissenting shareholders in bank mergers.

To enable the RBI to determine the value, the amalgamated banking company should submit a report on the valuation of the share of the amalgamated company made for this purpose by the valuers appointed for the determination of the swap ratio and detailed computation of such valuation.

Where the shares of the amalgamated company are quoted on the stock exchange, the RBI needs the details of the monthly high and low of the quotation on the exchange where the shares are most widely traded together with number of shares traded during the six months immediately preceding the date on which the scheme of amalgamation is approved by the boards.

It is undeniable that there are serious problems in India’s stock market and there is a real need to enact reforms that will lead to a more transparent and more efficient capital market. The question is whether insider-trading laws are a part of the reform package that must be put in place to strengthen India’s capital market or whether they are a needless hindrance to the operation of the stock market.

At first, insider trading appears to be counter to the notion of a transparent market. If market participants are trading based on information the general trading public does not possess, then this appears to be a step away from a transparent market. However, as is always the case in economics, we must compare the scenario in which insider trading takes place to the scenario where insider trading is forbidden and much rarer. In the second case, there is not perfect information but rather equal access to information. This distinction is important because it means then that the price of a stock does not reflect all that is known or knowable about it. The stock price is not sensitive to inside information so there is a consequent loss of efficiency in the pricing of stocks.

Additionally, a point that must be stressed is that most varieties of insider trading do not, as is often claimed, result in loss of confidence in the market. If it is well known to investors that there is a group of insiders who trade on information prior to its general release e, why exactly would investors wish to not invest in that stockOn the other hand, when market manipulation is allowed to occur, there is a serious loss of confidence in the market as investors feel that they can never be sure that the market price of a stock is fair. According to Ajay Shah, “Manipulation is intrinsically about making market prices move away from their fair values; manipulators reduce market efficiency. Insider trading brings prices closer to their fair values; insiders enhance market efficiency (A Shah, Why forbid?).” So there is a non-trivial distinction between market manipulation and insider trading and it is inaccurate to equate the two.

Given the fact that the Indian stock market has many problems related to efficiency, such as the lack of transparency and the existence of market manipulation, what can be done to reform the stock marketOne viable area of reform is the elimination of restrictions on short selling. Short selling is an important moderator of price fluctuations and since India restricts its practice to such an extent, it is clear that government regulations are at least part of the problem. Another action that can be taken against market manipulation is the creation of anonymous stock trading systems, so that a group of manipulators cannot be sure whether the rest of the participants are fulfilling their part of the agreement. Like a member country of OPEC (Organisation of Petroleum Exporting Countries) that sells more oil than it should, there is a strong incentive for a member of a market manipulation cartel to short-sell a stock that the others are buying since he knows it is overvalued.

Reserve Bank of India had constituted, on the recommendations of the Joint Parliamentary Committee (2002), a Working Group to evolve guidelines for voluntary mergers involving banking companies. Based on the recommendations of the Group, the guidelines laying down the process of merger proposal, determination of swap ratios, disclosures, the stages at which Boards will get involved in the merger process and norms of buying / selling of shares by the promoters before and during the process of merger have since been finalised. The detailed guidelines are enclosed.

While dealing with the merger proposals between two banking companies or between a banking company and a non-banking financial company, banks may act in accordance with the enclosed guidelines. Boards of the banks have to play a crucial role in the process. It may be ensured that the decision of merger should be approved by two third majority of the total Board members and not those present alone.

The Reserve Bank has discretionary powers to approve the voluntary amalgamation of two banking companies under the provisions of Section 44A of the Banking Regulation Act, 1949.

These powers do not extend to the voluntary amalgamation of a banking company with a non-banking company where amalgamations are governed by sections 391 to 394 of the Companies Act, 1956 in terms of which, the scheme of amalgamation has to be approved by the High Court.

However, in both situations, the Reserve Bank is concerned that while amalgamations are normally decided on business considerations such as the need for increasing the market shares, synergies in the operations of businesses, acquisition of a business unit or segment etc., it is essential that considerations like sound rationale for the amalgamation, the systemic benefits and the advantage accruing to the residual entity are evaluated in detail.

These guidelines cover two situations namely: – (a) An amalgamation of two banking companies (b) An amalgamation of a non-banking finance company (NBFC) with a banking company.

Section 44A of the Banking Regulation Act, 1949 requires that the draft scheme of amalgamation has to be approved by the shareholders of each banking company by a resolution passed by a majority in number representing two-thirds in value of the shareholders, present in person or by proxy at a meeting called for the purpose.

Before convening the meeting for the purposes of obtaining the shareholders’ approval, the draft scheme of amalgamation needs to be approved individually by the Boards of Directors of the two banking companies. When according this approval, the Boards need to give particular consideration to the following matters:-

The values at which the assets, liabilities and the reserves of the amalgamated company are proposed to be incorporated into the books of the amalgamating banking company and whether such incorporation will result in a revaluation of assets upwards or credit being taken for unrealized gains.

Whether due diligence exercise has been undertaken in respect of the amalgamated company.The nature of the consideration, which, the amalgamating banking company will pay to the shareholders of the amalgamated company.

Whether the swap ratio has been determined by independent valuers having required competence and experience and whether in the opinion of the Board such swap ratio is fair and proper.

The shareholding pattern in the two banking companies and whether as a result of the amalgamation and the swap ratio the shareholding of any individual, entity or group in the amalgamating banking company will be violative of the Reserve Bank guidelines or require its specific approval. The impact of the amalgamation on the profitability and the capital adequacy ratio of the amalgamating banking company.

The changes which are proposed to be made in the composition of the board of directors of the amalgamating banking company, consequent upon the amalgamation and whether the resultant composition of the Board will be in conformity with the Reserve Bank guidelines in that behalf.

Section 44A of the Banking Regulation Act, 1949 also requires that after his scheme of amalgamation is approved by the requisite majority of shareholders in accordance with the provisions of the Section, it shall be submitted to the Reserve Bank for sanction.

The NBFC has availed of credit facilities from banks/FIs and if so, whether the loan agreements mandate the NBFC to seek consent of the bank/FI concerned for the proposed merger/amalgamation.

Regulation 2(ha) of the SEBI (Prohibition of Insider Trading) Regulations, 1992, which is applicable to the securities of listed companies, defines price sensitive information, as “any information which relates directly or indirectly to a company and which if published is likely to materially affect the price of the securities of the company”.

SEBI regulations on Prohibition of Insider Trading should be strictlycomplied with, as the various information relating to takeover/merger and transfer of shares of listed banks / NBFCs are price sensitive. Even the unlisted banks / companies should follow the SEBI guidelines in spirit and to the extent applicable. Insider trading laws cannot be justified on economic grounds. One of the most common claims made about insider trading laws is that they improve market efficiency, but as argued above, insider trading laws can only help to improve information equality, not information availability. If we compare a country that has insider trading laws with a country that has no such laws, the country with insider trading laws has a more equitable market, but a less efficient one. The existence of insider trading laws cannot move a market closer to perfect information because it does not improve information availability. A country with no insider trading law s, however, will only punish insider trading when there is a specific aggrieved party who is the victim of fraud or a breach of contract. The rest of the insider transactions that take place improve e market efficiency by bringing prices closer to the price that would prevail under perfect information. If India were to abolish its insider trading laws, it would improve the efficiency of its financial markets.

So why not prohibit insider trading on the basis of fairnessIf someone believes in fairness strongly enough, then any cost of insider trading laws can be justified. However, the situation in financial markets around the world governed by insider trading laws is very far from fair. Even in richer countries with more transparent markets, insider trading is quote common and even accepted in some situations. A law that prohibits an activity as common and accepted as insider trading can hardly be described as fair. Furthermore, when so few insider tradingcases are investigated by SEBI, this result in a situation of selective enforcement and makes those willing to violate the law even more wealthy. Laws, in a free society, should not seek to force people to change the way they conduct their everyday affairs but, instead, should “seek to enable [the people] to continue doing what they do within the framework of a set of rules that promote the common good without altering the basic rhythms of society (Chakra verti, 08).” The case for insider trading laws therefore falls even on fairness grounds.

It is often claimed that insider trading reduces investor confidence in the market.Supporters of this claim argue that one of the reasons there is so much foreign investment in the United States is that country’s strict enforcement of insider trading laws. If confidence in the market really does decrease when insider trading exists, than deregulation of financial markets is the most effective way to increase investor confidence. Stock exchanges that have private rules forbidding insider trading will attract more investors and corporations will wish to havetheir stocks listed on these exchanges. The free-market can provide for sensible insider trading rules without government intervention.

A cynic might argue that insider-trading laws exist to cater to rich investors who trade on inside information frequently and do not want anyone else to join them and lessen their profits. A more benign and more realistic proposal is that insider-trading laws exist because its premise of greater fairness and market efficiency is accepted by most countries. Nobody wants to stand for unfairness or appear to be favouring rich investment bankers over investors of more modest means. Insider trading laws are another manifestation of the do-good syndrome behind so much of modern legislation. The laws fail to achieve their stated objective and, in fact, have consequences quite contrary to the intentions of the legislators who passed the law.

Objective of the Study

This study aim is to empirically investigate the existence of insider trading prior to merger announcements in India. The study will examine the impact of inside information on trading in advance of planned merger announcements by focusing on the daily stock price movements and volume traded of target companies prior to the first public announcement of their proposed mergers. The present study attempts to examine potential implications of the desire for fairness. Common small investor is afraid of being exploited in the future by better informed traders. Here regulating authorities’ need to protect the small investors. The study’s analysis of insider trading also has broad implications for the debate over how best to regulate securities markets.

Those who possess privileged information have an incentive to gain illegal profits over the less privileged outsiders; this study is aimed at examining the effectiveness of the regulations by the SEBI and also the efficiency of the market.

Theoretical Framework

The Theoretical framework was constructed from the research Journal by Arthur Keown and John Pinkerton’s “Merger Announcements and Insider Trading Activity” Journal of Finance 36 (September 1981). This research journal was made available from the Bangalore Stock Exchange Information centre.

Numerous studies have shown that the illegal insider trading does take place, According to the Efficient Market Hypothesis (EMH), stock prices reflects all available information, so for a stock price to show abnormal returns, it would be an evidence that the market is inefficient because this would indicate that all available information is not reflected in the stock price.

The theoretical framework of the study revolves around the three versions of the Efficient Market Hypothesis (EMH):

Weak Form efficiency – No investor can earn excess returns by developing trading rules based on historical price or return information. This emphasizes that stock prices already reflect all information derived by examining market trading data such as the history of past prices, trading volume etc. The history of share prices cannot be used to predict the future in any abnormally profitable way.

Semi Strong Form efficiency – No investor can earn excess returns from trading rules based on any publicly available information. It states that all publicly available information regarding the prospects of a firm must be reflected already in the stock price.

The semi-strong form of efficiency implies that there is no advantage in analyzing publicly available information after it has been released, because the market has already absorbed it into the price.

Information announcements: This concerns the issue of whether trading in shares immediately following announcements of new information (for example announcements mergers and acquisitions) could produce abnormal returns. The evidence supports the EMH, and excess returns are nil. It has been discovered that most of the information in annual reports, profit or dividend announcements are reflected in share prices before the announcement is made.

Strong Form efficiency – No investor can earn excess returns using any information, whether publicly available or not. It states that stock prices reflect all information relevant to the firm, even including information available only to insiders.

In a strong-form efficient market even insiders are unable to make abnormal profits (note that the market is acknowledged as being inefficient at this level of definition).

For our discussion it is useful to distinguish between the two major roles of capital markets in the investment process. Firstly, they coordinate the allocation of new real capital among different firms, both directly and indirectly. The direct way would be through the issue of new shares. The indirect influence is exercised through the implicit determination of the necessary rates of return for internal financing of new investments. If managers act in the interest of the shareholders their investment decisions should depend on these rates of return; one might shed some doubt on this assumption. Secondly, capital markets organize the reallocation of already existing real capital to a different production context (through friendly or hostile mergers).

Review of the Literature

Keown and Pinkerton (1981) provide evidence of excess returns earned by investors in acquired firms prior to the first public announcement of planned mergers. As per their view systematic abnormal price movements can be interpreted as prima facie evidence of the market’s reaction to information in advance of its public announcements. Many cases of insider trading frauds involved knowledge of an impending takeover, in Meulbroek’s (1992) sample of illegal insider trading involves corporate control transactions, Agarwal and Jaffe (1995) examined empirically whether the short-swing rule (Section 16b of the securities Exchange Act)7 deters managers from trading before mergers.

On the other hand, Seyhun (1986) examining transactions reported to the SEC, finds that corporate insiders earn excess return that are on average small. Elliot, Morse and Richardson (1984) and Givoly and Palmon (1985) analyze the timing and frequency of corporate transactions surrounding news announcements. Both studies conclude that corporate insiders do not trade on inside information. Chakravarty and McConnell (1999) have analyzed the trading activities of a confessed insider trader, and their tests were also unable to distinguish between the price effect of informed trader and uninformed trader. Further, Jarrell and Poulsen (1989) assert that legitimate sources such as media speculation concerning the upcoming takeover and the bidder’s purchase shares in the target firm, contribute to the target’s stock price run-up.

In spite of the evidence that in general suggests that insiders be informed, it is still debatable whether outsiders can profit from knowing what insiders are doing. In a more recent study, Bettis, Vickrey, and Vickrey (1997) show that outside investors can earn abnormal profits, net of transaction costs, by analyzing publicly available information about large insider transactions by top executives. Moreover, Manne (1966) and Carlton and Fischel (1983) assert that insider trading fosters efficient capital markets by improving the accuracy of stock prices. Specifically, insider trading promotes quick price discovery, which mitigates the incentive for many individuals to collect the same information.

In order to determine the effectiveness of insider trading laws, Arturo Bris (2001) has gathered information on insider trading in 52 countries in the world and has analyzed a firm’s stock reaction before a tender offer announcement on a sample of 4,541 acquisitions. It has been found that profits to insiders, calculated over the fifty-five days that precede a public announcement, increase after insider-trading laws are enforced. Nevertheless, the study reports evidence showing that the toughness of the law matters. This is why providing civil, as well as criminal liability is vital to an effective insider trading program.

While it is possible to prove beyond a reasonable doubt (the standard in a criminal case) that a defendant engaged in insider trading based entirely on circumstantial evidence, it poses significant challenges and, in fact, almost all successful criminal insider trading prosecutions in the United States have rested at least, in part, on the testimony of cooperating witnesses. The burden of proving a purely circumstantial case is less onerous in the civil context, where guilt need be shown only by preponderance of the evidence, rather than beyond a reasonable doubt, and where the use of presumption may shift the burden of proof to the defendant under certain circumstances.

Arthur Keown and John Pinkerton in their journal “Merger announcements and insider trading Activity” (September 1981) have shown evidence of leakage of information before merger/acquisition attempts and have constructed a sample of 194 firms that were targets of takeover attempts. They have shown that in most mergers/takeovers, stockholders of the acquired firms sell their shares to the acquirer at substantial premiums over market value; announcement of a merger/takeover attempt is good news for shareholders of the target firm and therefore causes stock prices to increase substantially. So on the announcement day the average cumulative abnormal return for the sample merger target increases substantially, and after the announcement date the CAR no longer increases or decreases substantially. This is because of the efficient market hypothesis (EMH). Once the information is made public the stock prices jumps almost immediately in response to the new information.

According to this report by Keown and Pinkerton (1981) if insider trading rules were followed then stock prices should show no abnormal returns on days before the public announcement because no information would be available to the market before the announcement, instead the study showed that the stock prices of the target firm increases 30 days before the public announcement. They concluded that

Information leaking to some market participants who are purchasing the shares before the public announcement.
Days before the announcement there exists huge abnormal volume of stocks from the market.

Also, they found out that if insider trading rules were violated then, there would be abnormal returns earlier to the public announcement.

Keown and Pinkerton (1981) also show that daily returns become abnormally high by day -5 relative to the announcement, they discuss the incidence of abnormal volume for a large proportion of their sample three weeks before the announcement.

Inferring information about illegal insider trading

Insider trading is an extraordinarily difficult crime to prove. The underlying act of buying or selling securities is, of course, perfectly legal activity. It is only what is in the mind of the trader that can make this legal activity a prohibited act of insider trading. Direct evidence of insider trading is rare. There are no smoking guns or physical evidence that can be scientifically linked to a perpetrator. Unless the insider (trader) confesses his knowledge in some admissible form, evidence is almost entirely circumstantial. The investigation of the case and the proof presented to the fact-finder is a matter of putting together pieces of a puzzle. It requires examining inherently innocuous events – meetings in restaurants, telephone calls, relationships between people, trading patterns – and drawing reasonable inferences based on their timing and surrounding circumstances to lead to the conclusion that the defendant bought or sold stock with the benefit of inside information wrongfully obtained.

There are many mechanisms used by regulators to detect illegal insider trading. For example, the New York stock exchange monitors trading of all of its listed stock and uses statistical screens to identify unusual patterns of price and volume. These events trigger investigations by calling the affected company to ask whether there is material information that could be causing the unusual trading pattern. In extreme cases, the Securities Exchange Commission (SEC) is notified and it begins its own investigation. Faced with knowledge of these enforcement mechanisms, sophisticated traders who have inside information try to avoid trading patterns that would lead to easy detection by spreading their trading over many accounts and brokerage firms, and by spreading their trading over time. Even if there were no legal costs associated with insider trading, insiders have strong incentives to disguise their behavior so that other traders cannot easily infer the information they possess from their trading behavior.

In case of India, SEBI’s surveillance department is tracking the price and volume movements in the scrip’s, which have suddenly turned favorites. It has also asked stock exchanges to keep a track of counters witnessing high volatility. SEBI’s surveillance aims to check possibilities of insider trading which sometimes manifest through volatility in a particular counter just prior to important announcements of takeovers.

Insider trading is seen as an abuse of an insider’s position of trust and trust and as harmful to the capital markets because outsiders can be cheated who are not able to deal on equal terms, as a result the ordinary investor loses confidence in the market. Insider trading involves the deliberate exploitation of unpublished price sensitive information obtained from a privileged relationship to make profit or avoid loss by dealing in securities of a company when the stock price would increase or decrease substantially if the information is announced.

Insider trading occurs when a trade has been influenced by the privileged possession of corporate information that has not yet been made public. Because the information is not available to other investors, a person using such knowledge is trying to gain an unfair advantage over the rest of the market.

Using non-public information for making a trade violates transparency, which is the basis of a capital market. Information in a transparent market disseminates in a manner by which all market participants receive it at more or less the same time. Under these conditions, one investor can gain an advantage over another only through acquiring skill in analyzing and interpreting available information. This skill is based on individual merit and awareness. If one person trades with nonpublic information, he or she gains an advantage that is impossible for the rest of the public. This is not only unfair but disruptive to a properly-functioning market: if insider trading were allowed, investors would lose confidence in their disadvantaged position (in comparison to insiders) and would no longer invest.

According to Securities and Exchange Board of India (SEBI) an insider means “any person who, is or was connected with the company or is deemed to have been connected with the company, and who is reasonably expected to have access, by virtue of such connection, to unpublished information in respect of securities of the company, and who has received or has access to such unpublished price sensitive information”.

Research Methodology

Insider trading causes significant price and volume fluctuations on days preceding the announcement date. Keown and Pinkerton (1981) find a significant volume pattern prior the announcement and also a buildup in the Cumulative Abnormal Return (CAR) on days preceding the announcement. The inference that insider trading creates significant price revisions observed on insider trading days is premature without a better understanding of the mechanism by which inside information becomes incorporated into stock price. Besides price run ups, it is also common to see unusually high levels of share trading volume before announcements of merger and acquisition activity. Hence, one possibility is that the insider trading volume signals the presence of an informed trader. Keown and Pinkerton (1981) find a significant volume pattern prior to the merger announcement apart from a significant build up in the cumulative average return. Easley and O’Hara (1987) present a model where informed traders prefer to trade large amounts. Pound and Zeckhauser (1990) show that takeover rumors published in the “Heard on the street” column of the Wall Street Journal often mention unusual price and volume behavior for the stock in question. Meulbrock (1992) shows that trading volume is unusually high on days when insiders trade before takeovers. She also shows that trading volume is unusually high during the 20 trading days before takeover bids, even after netting out the trades of insiders who were prosecuted for insider trading. An alternate, but not mutually exclusive, hypothesis is that other trade characteristics, such as trade frequency or direction, lead to the incorporation of the inside information. In the context of examining the price-setting behaviour of the NYSE specialist, Peterson and Umlauf (1990) provide empirical support for this hypothesis. Using detailed transaction data, they report that trade size, direction, and number of trades affect the specialist’s quotes. With this as a backdrop, the methodology that we have used to infer the presence of insider trading is based on the daily closing price of the stock and the daily traded volume of the selected target companies.

Research Design

This research study is organized into different sections:

Section I covers Abstract, Introduction, purpose of the study and the research question. Section II covers the Background of the study, Theoretical framework and the Review of Literature. Section III covers Research methodology, Study design, study type, sample data gathering and Data Analysis. Section IV covers findings, analysis & discussion, conclusions & recommendations.

Study Population

This study has been done for 30 days before a merger announcement date and a sample of 20 target companies has been taken.

And all the target companies have to meet the following criteria.

The stock must be listed either in NSE or BSE.
It must be listed in at least two indexes.
The actual acquisition must have occurred.
It must be a common stock traded in the secondary market.
It must have medium capitalization.
Data Gathering

The primary source of data collection on acquisition announcement is from the newsstudys like Business Line, Economic times, Business Standard, and also from the Website of Karvy Consultants (www.karvy.com) the sample has been constructed for 20 target companies.

For each target companies the Stock price data and trading volume from Bangalore Stock Exchange Information Centre, www.finance.yahoo.com, www.bseindia.com , www.nseindia.com, India infoline.com and etc.

Methodology using stock prices

Closing Price – Opening Price

In order to calculate the Actual Return we have to calculate the Normal daily return of the stock; this is calculated by

Daily Normal Return (AR) =

Closing Price

The Daily market return is calculated by;

Daily Normal Market Return = Closing Price of Market – Opening Price of Market

Closing Price of Market

To calculate the Abnormal return (AR) of the target firm

Abnormal Return = Daily Normal return – Market Return

For the purpose of the study we have calculated the returns of the market by taking NIFTY index as a market benchmark.

And we also calculate the Cumulative Abnormal Return (CAR) which is the accumulated sum total of all the abnormal returns.

CARt = ARt + CARt-1

Where CAR is the sum of the CAR of the previous day and the abnormal return of the present day.

Methodology using Volume

Here we examine the average daily volume of the particular stock for 30 days before an announcement and then subtract it with the Normal day Average trading Volume for 100 days, the result is the Abnormal Volume of the given stock. Further we determine the percentage of higher volume for each of these target companies.

The significant abnormal volume is ascertained if it is higher by 75% when the Daily average volume is compared to the Benchmark Return.

Abnormal Volume = Daily Average Volume – Normal day Average (100days)

Daily Average Volume

Data Analysis

COMPANIESCARABNORMAL VOLUMERESULT
Ambuja Cements Negative94.78%Uncertain
Arvind Mills Negative-00.77% Nil
Tata Chemicals Positive55.65% Certain
Bharti Telecommunications Positive-111.96% Uncertain
BPCL Negative-103.61% Nil
HCL Technologies Positive -15.15% Uncertain
HDFC Positive-19.18% Uncertain
ICICI LTD Positive57.33% Certain
Balaji telefilms Positive-124.51% Uncertain
Blue Dart Positive-141.18% Uncertain
IDBI Negative-197.44% Nil
IFCI Negative40.47% Uncertain
TATA Motors

Negative-49.00%Nil
Pfizer

Positive-136.60% Uncertain

IndusInd Bank

Positive-50.77% Uncertain
ITC Positive-40.04% Uncertain
HLL Negative-69.03% Nil
OBC

Positive31.17% Certain
IBP Negative-75.43% Nil
Reliance Ind Ltd Positive25.05% Certain

Diagrammatic Representation of Res

Analysis based on stock prices

In this approach we have calculated the abnormal returns for 22 days for all the 20 target companies by taking the difference between the daily stock price return with the market return. The average abnormal return is calculated for the given sample and further the Cumulative abnormal return is calculated using the previous day cumulative abnormal return + abnormal return for the present day.

According to Keown and Pinkerton if there is any positive AR and CAR on days before the announcement day then we can infer that there exists insider trading before the announcement date. If there is any leakage of information before the announcement day, it would show up in the form of positive Average abnormal return and positive CAR just days before an announcement because insiders would start trading immediately.

Based on the analysis we find that out of 20 companies 12 companies show a positive average CAR on days preceding the announcement day this result suggests that there might be insider trading going on before the announcement in 12 out of 20 target companies.

Analysis Based on Volume

Here we examine the average daily volume of the particular stock for 30 days before an announcement and then subtract it with the Normal day Average trading Volume for 100 days, the result is the Abnormal Volume of the given stock. Further we determine the percentage of higher volume for each of these target companies. The significant abnormal volume is ascertained if it is higher by 20% when the Daily average volume is compared to the Benchmark Return.

Based on the analysis 6 companies out of 20 have abnormal volumes on days preceding the announcement date, this suggests the evidence that there was huge trading going on before the announcement.

Analysis of the Market efficiency

If the merger news comes as a surprise to the market then it should be reflected in the CAR and the trading volume for the two days preceding the announcement date, about 12 companies have positive CAR on the days preceding the announcement and 4 companies have abnormal volume before the announcement date.

Since the announcements effect are reflected in share prices before the announcement is made it shows that the market comes under the semi strong form of Efficiency.

The above study suggests that in majority of the cases news of comes as a surprise to the market. Hence, based on the significance of CAR and trading volume pattern prior to the announcement and the existence of substantial immediate response of the market, we conclude that there is strong evidence suggesting presence of insider trading about 20 days prior to a takeover announcement.

Findings

Companies where the presence of insider trading.

Under this category we include companies that satisfy all the following criteria

Cumulative Abnormal Return is positive on the 20 days before an announcement date.
The Average Abnormal volume is significantly higher by 20 percent.

There are 4 companies which come under this category.

Following Graphs represents the presence of Insider Trading:

ults:

Companies that do not exhibit insider trading activity

This category should include those companies which satisfy the following needs

The Cumulative Abnormal return should be negative on the days before the announcement.
The Average abnormal volume is less than 20 percent.

There are 6 companies which come under this category

Companies that are uncertain

A) This category includes those companies which have positive CAR on the days preceding the announcement but the trading volume is considerably lower than 20 percent.

There are 8 companies which come under this category.

B) This category includes those companies which have negative CAR on the days before the announcement, but have abnormal trading volume higher than 20 percent.

There are 2 companies which come under this category.

Future Research

This research study can also be extended to events like stock splits and dividend announcements. I have confined our study to mergers announcement. This study can also be extended to takeover announcements. One more issue that this work raises for future research is the effect of insiders’ behavior on liquidity. Another possible area for future research concerns the effect of insider trading on the probability of completion of merger. Insider trading could also raise the cost of merger by part of the analysis; I found evidence for the presence of insider trading activity in case of companies belonging to the same business group. However, such an inference cannot be drawn in case of non-group companies. In case of the two BIFR companies, there is evidence of some abnormal activity a day before the announcement. Finally, I carried out the analysis for each company individually. Based on the criteria mentioned in the text I recommend investigation in six companies for existence of insider trading. Further, there are eight companies which do not exhibit insider trading activity. All the remaining companies have been placed in the ‘uncertain’ category as in their case further investigation is required.

Conclusion

This study examines the stock price effects and trading pattern for the possible existence of informed trading prior to the merger announcement. The investigation is based on a database of companies for which the announcement has been announced for the period 2001 to 2005, the analysis has been done for 22 days before an acquisition announcement. The analysis has been done to examine the pattern of stock prices and trading volume of the sample target companies. For examining the stock prices the Abnormal return and the Cumulative abnormal returns have been calculated, and for examining the trading volume the abnormal return has been calculated using the normal day daily average trading volume for 100 days.

The analysis examines the following:

Abnormal returns before an announcement
Trading volume before an announcement
Market efficiency

The analyzed cumulative abnormal return (CAR) and the trading volume pattern provide evidence that the stock price increase before the announcement reflect insider trading. Insider trading can occur when a person who possesses material non public information trades in securities on the basis of such information or communicates such information to others who trade.

This problem is so deep in the market that it is very difficult to find out who has done this crime because direct evidence is rare. The insider might be trading through more than 10 brokers or he may be trading in someone else’s name, so given this how do we prove the existence of illegal insider trading?

In order to answer this SEBI’s surveillance department is tracking the price and volume movements in the scripts, which have suddenly become favorites. It has also asked stock exchanges to keep track of counters witnessing high volatility.

Recommendations

In the stock exchange of countries of USA and UK, it is possible to record and track every single transaction due to their advanced computer servers and their archive facilities, but in India it is not possible to trace every transaction, so one of the important change has to be made is the setting up of a single server system which would give access to the each and every transaction taken place and they should also upgrade to a universal client ID system which would give the authorities access to track every transactions in the market. The regulators have to consider give harsher punishments for this crime since it affects the public trust and confidence on the capital markets.

Suggested means of controlling insider trading

One of the ways to deal with insider trading is by passing regulations prohibiting such trades, penalizing them with criminal actions
Barring them from the industry after they are found guilty.
By tracing all the trades of the insiders
Files containing Confidential inside information should be secure
By keeping a tab on the brokers of the insiders.
Policy Implications

The results have immediate public policy implications. The analyzed cumulative

average return and trading volume pattern provide a base for the argument that stock price run-ups before merger announcement reflect widespread insider trading. The finding that informed trading transmits private information has public policy implications for capital-market regulation issues. That insider trading is rampant in Indian markets is no big revelation. In fact, the problem is so deep that it is difficult to find out instances where there has been no abnormal

price movement before a major corporate announcement. What is more worrying

is that in all these years SEBI has done very little apart from initiating probes, that too, very often, only after media outcryTo be fair, insider trading is difficult to prove. If regulators manage to catch some offenders, they get away with punishment not commensurate with their crime. The purpose of this study is to devise and apply the mechanism for detecting insider trading. Our purpose is neither to suggest how to prevent insider trading nor to decide how to penalize the persons alleged as inside traders. Be that as it may, there are few observations specifically in relation to insider trading in India. In the stock exchanges of the developed world, it is possible to go back and trace every single transaction due to their electronic record and archival system. If we can have such an effective system in India, authorities can reach the root cause of such alleged insider trading. In several stock exchanges across the country, there is no universal client ID system prevalent that would let authorities keep track of each individual investment. This means the route for ‘benami’ transactions through multiple trading accounts is open. Another way increasing the premium offered to stockholders. This work yields a major implication for future research. Future research should also take into account the adjustment with respect to dividends in stock price, which is generally not published. In the context of the methodology used, a more general switching regression model can also be used to address the issue of non-stationary of the market model parameters and its subsequent effect on the residual analysis.

The purpose of this study is to devise and apply the mechanism for detecting insider trading. Our purpose is neither to suggest how to prevent insider trading nor to decide how to penalize the persons alleged as inside traders. Be that as it may, there are few observations specifically in relation to insider trading in India.

In the stock exchanges of the developed world, it is possible to go back and trace every single transaction due to their electronic record and archival system. If we can have such an effective system in India, authorities can reach the root cause of such alleged insider trading. In several stock exchanges across the country, there is no universal client ID system prevalent that would let authorities keep track of each individual investment. This means the route for ‘benami’ transactions through multiple trading accounts is open. Another way out is electronic share system or dematerialized securities, the latter one although has started but still a lot needs to be done.

SEBI also needs to re-address the issue of insider trading liability. Clarification is also sought in ‘using’ or ‘knowing possession’ of material nonpublic information. The prohibition in the regulation do not include ‘causes to communicate’ in the definition of communication of any unpublished rice sensitive information as it is likely that instead of communicating directly, the insider may cause such information to be communicated. However, to what extent the watch dog and market participants are able to enforce it has to be seen. As far as SEBI’s ability to implement these guidelines is concerned, “Enforcement is the key to success of the regulation.”

The practical limitations to sue every transaction based on (perhaps only slightly) better information, make it certainly useful to examine possible economic trade-offs arising in the context of insider trading regulation. A better understanding of the economic effects of insider trading could potentially enable

us to identify more clearly which forms of insider trading are more damaging and who actually is the victim of insider trading. One way to restrict the scope of fairness considerations and to link it to economic arguments is the notion of ‘confidence’ in the markets, i.e., to prosecute insider trading only as far as it undermines the ‘confidence’ in the financial markets. The broad objective of the U.S. securities laws of the 1930s was to restore public confidence in the capitalist economy as a whole and the capital markets as their central allocation mechanism for investments in particular. Confidence in capital markets is of course a rather vague term with many different connotations and has to be clearly defined in the Indian context.

Bibliography

Research Journals

Research Journal by Arthur Keown and John Pinkerton’s “Merger Announcements and Insider Trading Activity” journal of Finance 36 (September 1981)

“Insider trading and market behavior around takeover announcements in the Spanish market” by Jose E Farinos, C Jose Garcia and Anna Ibanez (Department of Finance, University of Valencia).

Merger announcements and Insider trading activity in India: An Empirical Literature

By Manish Agarwal and Harminder Singh (NSE Research Initiative)

“Estimating the returns to Insider Trading” by Leslie A Jeng and Andrew Metrick (Rodney L White Center for financial Research)

SEBI Act of 1992: insider trading

Books:

Investments by Zvi Bodie (Boston University)

Alex Kane (University of California)

Alan J. Marcus (Boston College).

Websites

www.finance.yahoo.com
www.bseindia.com
www.nseindia.com
www.indiainfoline.com
www.karvy.com
www.domain-b.com
Bangalore Stock Exchange Information Centre (Intranet).
www.indiatimes.com
www.blonnet.com
www.mhhe.com

National Dailies

Business Line
Business Standard
Economic Times

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Free Essays

New Worlds for All:Indians, Europeans and the Remaking of Early America

Collin G. Calloway’s “New Worlds for All” is a wonderfully written look into the relationship between the indiginious people and the Europeans who came to America. His work takes a different path than those of other historians. There is a creative genius in how he explores the historical facts and insight into the history of the two different people’s lives. It is a helpful look at the lineage of the time and brings a new insight into the historical facts of our time.

Covering events from the Revolutionary war in his introduction where our fore fathers asked the Indians to not stand at their side but remain passive in the fight for freedom in the introduction. Quoting several of our fore fathers, the tact they used in their bid to get the native people to think that they were all one and that they stood together with them.

Each of the ten chapters covers a wide range of subject matter from the interactions with the Europeans and the Natives, to the warfare of the Natives against each other as well as against the invading Europeans. We take a walk through the Seven years war as well as all the wars that came before and after.

It takes a look at the way the Europeans arrived in North America and wanted to build societies much like the ones they had left behind in Europe. It also goes on to explain that while they thought they were superior they found that the Native people were in some cases more advanced and superior than their own culture. How their arrival changed not only the workings of the native communities but the very land they lived on with the cutting down of trees for homes and the over hunting of their lands for food making it harder for them to feed their own families.

The chapter on disease and healing was an amazing look at how the European disease affected the natives. It also looked at how the natives dealt with healing as not so much healing as conflict as they were complementary. Calloway goes on to say that while Native America people were not completely disease free the magnitude of their diseases were actually rather simple, from aches and pains to snake bites.

Medicine men had a vast knowledge of herbs and plants that could be used for medicinal purposes. He covers the decimation of entire tribes by disease some of them brought by the Europeans and others brought by the natives themselves as they traded in foreign lands. There were several ceremonial aspects to the trade with the natives that the Europeans tried to integrate into their own trades.

The Stuff of life in chapter three goes into depth about the interactions of the native people and the Europeans as they not only struggled to coexist as well as integrate the bits and pieces of each other’s cultures into their lives. Learning how to do something’s differently like hunting for food and even the diets and clothing they wore took on the differences of what they learned from each other.

In the next chapter Calloway talks about the integration of religious beliefs of the different people the Christians that brought with them their beliefs in one God and his word, it brought many of the natives into a new religious arena where they learned about bibles, churches, missions, priest and ministers. Indian religions tended to be less exclusive and intolerant than that of the Christians. It is an interesting look at the way they handled the integration of the Christians not only into their culture but into their lives and how their own beliefs were shaped outside of what the Christians believed.

Chapter five takes a look at the ways the Europeans affected the Indians in their warfare not only against the Europeans but also against other natives. The face of the way war was fought not only between warring tribes. The turning point in the tribal warfare changed on one Instance, 1609 when the Algonkin and the Montagnais Indians, the use of guns made this an uneventful war and short lived but it opened the door way to the Indian people to guerrilla warfare as well as the use of guns. The introduction of guns made the native weapons basically useless.

Chapter Six, the diplomacy and Foreign affairs of the Europeans and the Indians were at times bloody and deadly, fighting to preserve their own lands the Indians had to adapt to the foreigners as they invaded and the Europeans were after more land and more land, always fighting with the Europeans trying to maintain the balance between the two worlds was difficult one side or the other was always violating the treaties that they signed.

As more Europeans moved into the new world and more warfare and diseases ravaged the lands the Indians were forced to move from place to place and rebuild their world and lives often in environments that were not their own and dealing with people that they knew nothing about, this often created tension and conflicts. As well as the need for the Indians were forced to adapt to the world around them.

There is a lot of great information in this book, and a fresh perspective that takes the reader weather a professional historian or just the average reader into the lives of people from different worlds. It is a new look at the world that was created around us and the people who inhabited it, their lives and the changes that were caused by each interaction with the other.

Mr. Calloway takes us on a journey through old and new in an enlightening way, exploring the world as it is new and discovering the different effects of the changes in cultures, beliefs, politics and life as the people of two different cultures learned, adjusted, and tried to build the world we now see around us. A great read for anyone interested in the history of America and the people in it.

 

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Free Essays

Negotiating Indian and Chinese Culture

India is seventh largest country geographically and the second most populous country in the world. It is a democratic country. It is the origin for Hinduism, Buddhism, Jainism, and Sikhism. It has unity in diversity and diversity in unity.

The name is derived from Indus, which is derived from the Old Persian word Hindu from sanskrit Sindhu, the historic local appellation for the Indus river (wikipedia, 2008)

The most followed culture is Hinduism. The national language is Hindi, where as there are 29 officially recognized spoken languages including Hindi and English.

Infrastructure of India is very beautiful one, all the people encourage and breed spiritualism. Ancient philosophies like ayurveda yoga vastu are practiced in India. We can see the thirst for holistic and spiritual inquiry. These are the things which attract foreigners to visit India, and learn Indian culture. It is multilingual and multiethnic society. India is also called as home to diversity of wildlife which has variety of habitats.

India is the world’s twelfth largest economy at market exchange rates and the third largest in purchasing power. Economic reforms have transformed it into the second fastest growing economy in the world. (Kumar, 2008).

It is not possible to find out exact origin of Indian people

India’s ethnic history is extremely complex, and distinct racial divisions between peoples generally cannot be drawn clearly. However, Negroid, Australoid, Mongoloid, and Caucasoid stocks are discernible. The first three are represented mainly by tribal peoples in the southern hills, the plateau, Assam, the Himalayas, and the Andaman Islands. The main Caucasoid elements are the Mediterranean, including groups dominant in much of the north, and the Nordic or Indo-Aryan, a taller, fairer-skinned strain dominant in the northwest. The dark-complexioned Dravidians of the south have a mixture of Mediterranean and Australoid features. In 1999, 72% of the population was Indo-Aryan, 25% Dravidian, 3% Mongoloid and other. (nationsencyclopedia, 1999).

India has so many festivals. People love to celebrate all the festivals. They follow many rituals like pujas, fasting, feasting and all. Indian music includes classical, Hindustani, carnatic and also folk. Indian dance include bhangra, bharathanatyam, kathak, kuchipudi, and odissi. Though different regions have their own cultural dances, they like to participate in all kinds.

India has rich customs and traditions. These help people to keep up binding together. Customs include house warming ceremony, naming ceremony, pheras, touching feet etc. Different religions include different prayers.

Heritage places in India include like Taj Mahal, Konark, Ajanta-Ellora, Mahabaleswar, and Khajuraho. Tourist places include Delhi, Rajasthan, Hyderabad, Mumbai, Goa and more.

Chinese Culture

The culture of china is one of the world’s oldest and complex civilizations. It has a history of more than 5000 years. It has varied customs and traditions varying among cities, towns and provinces. Traditional Chinese culture includes large geographical area. Each region has been divided into many sub-cultures. They include Sichuan, Yunnan Guizhou, Zhejiang, Jiangxi, Jiangsu, Hunan, and Hubei,

According to Wikipedia, there were three sovereigns and five emperors. Different periods of history have different names for the various positions within society. Trades and crafts were usually taught by a sifu. (2008).

There has been a blurred line among religion, myth and phenomenon. There are many deities included in the tradition. Most recognized holy figures are Jade Emperor, Guan Yin, and Budai. Door God and Imperial guardian lions are spiritual symbols extended from mythology. People there in China still believe in fortune telling rituals.

China has the largest population of any country in the world. According to 2002 statistics, the total population of China is 1.28453 billion (excluding Hong Kong, Macao, and Taiwan) or about one fifth of the world population. China also has a very dense population, with approximately 135 people per square kilometer. ( CRI Online, 2002).

The main festivals of China includes Chinese new year, Double Ninth Festival, The seventh day of seventh lunar month, Duanwu festival, The laba festival and The lantern festival.

Official spoken language of China is Mandarin. Other spoken languages include Cantonese, Xiang, Min, Hakka and more.

Negotiation

When both the cultures of India and China are considered, it is hard to conclude which one is the best. When considering business strategy electronic field is going better in China, where as most of else businesses including IT industry is growing well in India. When it comes to living style of an Individual, India is better. It is mainly because India has follow up most of all world cultures. Especially western people will not have any complaints working for the clients in India. It may be because of the high literacy, and huge practice of western culture.

Both Indian and Chinese food has beautiful taste. When compared Chinese food is healthier but Indian food is tastier. People in India are more sophisticated than in China.

References

CRI Online (2002). Current situation of Chinese Population. Retrieved March 10, 2008, from

; http://english.cri.cn/1702/2006-9-28/[email protected];

Encyclopedia of the Nations (1999). India Ethnic Groups. Retrieved March 10, 2008.

;http://www.nationsencyclopedia.com/Asia-and-Oceania/India-ETHNIC-GROUPS.html;

The Epoch Times. (2008, January 22). Australia Blind to India’s Boom. Retrieved March 10, 2008, from

;http://en.epochtimes.com/news/8-1-22/64516.html;

Wikipedia. (2008, March 10). Culture of China. Retrieved March 10, 2008, from

;http://en.wikipedia.org/wiki/Chinese_culture;

Wikipedia. (2008, March 10). India. Retrieved March 10, 2008, from

;http://en.wikipedia.org/wiki/India#_note-8;

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Free Essays

Development of Scince and Technology in India

Since Independence, India has endeavoured to bring economic and social change through science and technology. The effort has been both on upgrading the traditional skills to make them relevant and competitive and developing advanced capabilities in frontier areas of science and technology. The visionaries who led the growth of science and technology (S&T) in India were convinced that S&T could play an important role in transforming India in to a modern, industrialized society. Experience and results show that this confidence was well placed.

Science, technology, and innovation are even more relevant today. Scientific knowledge and expertise, innovation, high technology, industrial infrastructure and skilled workforce are the currencies of this new era. Science and Technology are important drivers of economic growth and development in the contemporary world. The present juncture is critical for Indian science and major positive steps in this area will help the country to achieve sustained and rapid growth in the future.

The Science and Technology Division of the Planning Commission is the nodal division for all matters relating to Science and Technology Plan formulation ( both Five Year Plans and Annual Plans) and appraisal of the S&T programmes of six major S&T agencies/Departments, viz. •Department of Atomic Energy (DAE)- R&D Sector •Department of Space (DOS) •Department of Science and Technology (DST) •Department of Biotechnology (DBT) Department of Scientific and Industrial Research (DSIR) including the Council of Scientific and Industrial Research (CSIR) •Ministry of Earth Sciences (MoES) The Division has been maintaining a close liaison with these S&T agencies/departments for smooth information flow and provides them important suggestions/inputs in the formulation of various S&T plans and programmes at various stages of plan formulation, implementation and half yearly reviews. The Division has also been providing important inputs in the formulation of S&T Policy.

In order to promote Science and Technology in the States/UTs, create scientific awareness among the masses through popularization of S&T and technology dissemination for improving the quality of life of the people, the Division undertakes detailed discussions with the representatives of the States/UTs and provides important inputs/suggestions for the formulation of their Five Year Plans and Annual Plans in respect of the Science and Technology Sector. The vital role of science in modern life is not overstated in view of today’s world. Science and technology have profoundly influenced the course of human civilization.

Science has provided us remarkable insights into the world we live in. The scientific revolutions of the 20th century have led to many technologies, which promise to herald wholly new eras in many fields, As we stand today at the beginning of a new century, we have to ensure fullest use of these developments for the well being of our people. Science and technology have been an integral part of Indian civilisation and culture over the past several millennia. Few are aware that India was the fountainhead of important foundational scientific developments and approaches.

These cover many great scientific discoveries and technological achievements in Mathematics, Astronomy, Architecture, Chemistry, Metallurgy, Medicine, Natural Philosophy and other areas. A great deal of this travelled outwards from India. Equally, India also assimilated scientific ideas and techniques from elsewhere, with open-mindedness and a rational attitude, characteristic of a scientific ethos. India’s traditions have been founded on the principles of universal harmony, respect for all creations and an integrated holistic approach.

This background is likely to provide valuable insights for future scientific advances. During the century prior to independence, there was an awakening of modem science in India through the efforts of a number of outstanding scientists. They were responsible for great scientific advances of the highest international caliber. Apart from the vast changes it has brought about, the development of a scientific temper in the people is considered important. In the planned economy of a country, science must necessarily play an especially important role.

Improvements in techniques evolved as a result of scientific research brings about great increases in production in the different sectors of the economy. National resources are augmented by the substitution of cheap and abundant materials for those in scarce supplies and by finding uses for materials, which have remained un-utilized, prior to independence, very little attention was given to the problem of scientific and industrial research in India. A number of universities and institutes carried out research, mostly on fundamental aspects of science.

Certain industries also had their own research organizations. However, industry depended, by and large, on foreign techniques and did not develop research programmes of its own. A large number of products that had been imported into the country had to be manufactured to meet both civilian and military needs. Indian substitutes had to be found for imported materials and processes had to be developed which would use these materials in place of imported ones. In these circumstances, the Government of India constituted die Board of Scientific and Industrial Research in 1940.

The Council of Scientific and Industrial Research was formed in 1942. Since independence there has been a greater emphasis on the provision of additional facilities for the promotion of scientific and industrial research. The most significant development in this sphere has been the establishment of a chain of national laboratories and research institutes in different parts of the country. The establishment of national laboratories and research institutes has a special importance in a country like India where medium and small-scale producers contribute a considerable proportion of industrial production.

These industries cannot afford to have research facilities of their own, as the larger producers can. Besides these laboratories and research institutes, the Council of Scientific and Industrial Research has made contributions towards the promotion of fundamental and applied research at a number of institutions and universities. In the half century since independence, India has been committed to the task of promoting the spread of science. The key role of technology as an important element of national development is also well recognized.

The Scientific Policy Resolution of 1958 and the Technology Policy Statement of 1983 enunciated the principles on which die growth of science and technology in India has been based over the past several decades. These policies have emphasized self-reliance, as also sustainable and equitable development. Successes in agriculture, health care, chemicals and pharmaceuticals, nuclear energy, astronomy and astrophysics, space technology and applications, defence research, biotechnology, electronics, information technology and oceanography are widely acknowledged.

Major national achievements include very significant increase in food production, eradication or control of several diseases and increased life expectancy of our citizens. While these developments have been highly satisfying, one is also aware of die dramatic changes that have taken place, and continue to do so, in die practice of science, in technology development, and their relationships with, and impact on die society. Particularly striking is die rapidity with which science and technology is moving ahead.

Science is becoming increasingly inter-and multi-disciplinary, and calls for multi-institutional and, in several cases, multi-country participation. Major experimental facilities, even in several areas of basic research, require very large amount of materials, human and intellectual resources. Science and technology have become so closely intertwined, and so reinforce each other that, to be effective, any policy needs to view them together.

The continuing revolutions in die field of information and communication technology have had profound impact on the manner and speed with which scientific information becomes available, and scientific interactions take place. Science and technology have had unprecedented impact on economic growth and social development. Knowledge has become a source of economic might and power. This has led to increased restrictions on sharing of knowledge, to new norms of intellectual property rights, and to global trade and technology control regimes.

Scientific and technological developments today also have deep ethical, legal and social implications. There are deep concerns in society about these. The ongoing globalization and the intensely competitive environment have a significant impact on the production and service sectors. Because of all this, our science and technology system has to be infused with new vitality if it is to play a decisive and beneficial role hi advancing the well being of all sections of our society. The nation continues to be firm in its resolve to support science and technology in all its facets.

It recognizes its central role in raising the quality of life of the people of the country, particularly of the disadvantaged sections of society, in creating wealth for all, in making India globally competitive, in utilizing natural resources in a sustainable manner, in protecting die environment, and ensuring national security. India has the third largest scientific and technical manpower in the world; 162 universities award 4,000 doctorates and 35,000 post-graduate degrees and the Council of Scientific and Industrial Research runs 40 research laboratories that have made some significant achievements.

In the field of missile launch technology, India is among the five top nations of the world. Science and Technology, however, is used as an effective instrument of growth and change. It is being brought into the mainstream of economic planning in the sectors of agriculture, industry and services. The country’s resources are used to derive the maximum output for the benefit of society and improvement in the quality of life. About 85 per cent of the funds for science and technology come directly or indirectly from the Government.

The science and technology infrastructure in the country accounts for more than one per cent of the GNP. Science and technology in India is entering a new frontier. The prime objective of India’s nuclear energy programme is the development and use of nuclear energy for peaceful purposes such as power generation, applications in agriculture, medicine, industry, research and other areas. India is today recognized as one of the countries most advanced in nuclear technology including production of source materials.

The country is self-reliant and has mastered the expertise covering the complete nuclear cycle-from exploration and mining to power generation and waste management. Accelerators and research and power reactors are now designed and built indigenously. The sophisticated variable energy cyclotron at Kolkata and a medium energy heavy ion accelerator ‘pelletron’ set up recently at Mumbai are national research facilities in the frontier areas of the science. As part of its programme for peaceful uses of atomic energy, India has also embarked on a program of nuclear power generation.

Currently eight nuclear stations are producing 8 billion kilowatts of electricity. Four more nuclear power stations have been planned. The new nuclear reactors have been completely designed in India. The peaceful nuclear programme also includes producing radio-isotopes for use in agriculture, medicine, industry and research. The Indian Space Research Organization (ISRO), under the Department of Space (DOS), is responsible for research, development and operation in space systems in the areas of satellite communications, remote sensing for resource survey, environmental monitoring, meteorological services etc.

DOS is also the nodal agency for the Physical Research Laboratorywhich conducts research in the areas of space science, and the National Remote Sensing Agency which deploys modern remote sensing techniques for natural resource surveys and provides operational services to user agencies. India is the only third world country to develop its own remote sensing satellite. India joined a select group of six nations on October 15, 1994, when the Polar Satellite Launch Vehicle (PSLV) successfully . accomplished its mission of placing the 800-kg remote sensing satellite, IRS-P2, in the intended orbit.

The INSAT series of satellites launched earlier are performing well and provide vital services for telecommunications, television, meteorology, disaster warning and distress detection. The latest INSAT series will include new features like Kit-band transponders and mobile satellite service, transponders. The remote-sensing satellites, launched in 1988 and 1991, have already become the mainstays of the natural resource management system of the country. The projected launch of advanced remote sensing satellite will not only enhance the scope of their application, but will also offer commercial service to other countries.

The most significant milestone of the Indian Space Programme during the year 2005-06 was the successful launch of PSLV-C6. On May 5, 2006, the ninth flight of Polar Satellite Launch Vehicle (PSLV-C6) from Satish Dhawan Space centre (SDSC) SHAR, Sriharikota successfully placed two satellites-1560 kg CARTOSTAR-1 and 42 kg HAMSAT-into a predetermined polar Sun Synchronous Orbit (SSO). The successful launch of INSAT-4A, the heaviest and most powerful Satellite built by India so far, on 22 December 2005 was the other major event of the year 2005-06. INSAT-4A is capable of providing Direct-To-Home (DTH) television broadcasting services.

The Indian space programme entered a new era when ISRO’s Polar Satellite Launch vehicle (PSLV)-C7 successfully launched on January 10,2007 four satellites into high polar orbit from Satish Dhawan Space Centre (SDSC), Sriharikota. The four satellites put into orbit were India’s CARTUSAT-2 and space Capsule Recovery Experiment. (SRE-1), Indonesia’s LAPAN-TUBSAT and Argentina’s PEHUENSAT-1. The Indian achievement in the application of space-based remote sensing technology has led a US company to enter into an agreement for marketing the data from Indian satellites globally.

India’s progress in space technology has attracted worldwide attention and demand, with leasing agreements for marketing of IRS data and supply of space hardware and services. India also believes in co-operation in space with agencies all over the world. A high-level UN team selected India for setting up a UN Centre for Space Science and Technology Education. India is on the threshold of achieving self-reliance in the launch capability. It will be a befitting tribute to the father of the Indian space program, Dr. Vikararn Sarabhai, whose 90th birth anniversary was observed in August 2006.

India has been the forerunner among the developing countries in promoting multi-disciplinary activities in the field of biotechnology, recognizing the practically unlimited possibility of their applications in increasing agricultural and industrial production, and in improving human and animal life. The nucleus of research in this area is the National Biotechnology Board, constituted in 1982. A Department of Biotechnology was created in 1986. Recently, the Biotechnology Consortium India Limited was set up. It will play the role of catalyst in bridging the gap between Research and Development, Industrial and Financial Institutions.

Some of the new initiatives taken include developing techniques for gene mapping, conservation of biodiversity and bio indicators’ research, special biotechnology programs for the benefit of die scheduled castes and scheduled tribes and activities in the area of plantation oops. The areas, which have been receiving attention, are cattle herd improvement through embryo transfer technology, in vitro propagation of disease resistant plant varieties for obtaining higher yields, and development of vaccines for various diseases.

Council of Scientific and Industrial Research (CSIR) was established in 1942, and is today the premier institution for scientific and industrial research. It has a network of 40 laboratories, two co-operative industrial research institutions and more than 100 extension and field centres. The Council’s research programs are directed towards effective utilization of the country’s natural resources and development of new processes and products for economic progress. It is now playing a leading role in the fulfillment of the technology missions evolved by the Government.

Thus, we see that India has made unprecedented development in the field of scientific research and technology during the post-independence period and this just seems to be the beginning of a road with endless possibilities. All we need is to plan and organize in a way so as to be able to harness our intelligentsia in the right direction and provide it with the right opportunities. Science has been a major force in the development of the modern world. It has had a great impact on industry, commerce and the social life of nations. India is rightly proud of the high international standing of its scientific community.

The rapid growth in its heavy industrial sector is one testament to this achievement. Yet at a time when new advances are being made in almost all fields of investigation and practical application, the fact remains that ninety percent of the country lies outside the influence of science, untouched or barely touched by the rapid growth in knowledge and the new technologies that have evolved. This is a country where highly advanced industry lives along side primitive agriculture, but separated by an immense generation gap — a gap in education, prosperity and motivation.

The reason for this is that science as it exists here today is not a natural development of nor integrated with the life of the nation. Rather it has been imposed as a superstructure on the social and economic life of the country and has failed to become a dynamic force for widespread social upliftment. Government planners have recognized this gap which divides the nation by a few centuries of progress and we are now seeing the first real attempts to bridge the distance. The problem of development is twofold.

It is a task of awakening the sleeping potential of the country and educating it for effective action. It is also a task of adapting and molding the latest discoveries, technologies and life styles imported from the western world into a form and spirit in harmony with India’s social and cultural heritage. In the field of science this dual necessity can easily be seen. It is not enough that we create in the people an interest in modern technology or a willingness to adopt it.

It is first essential that the scientific community in India adapt itself to the needs of the country and the people. The pivotal questions are how to involve scientists in evolving technologies relevant to the present needs of the people — which means the rural communities — and how to ensure the application of existing knowledge in the field of agriculture, industry and social life. In the developed countries which passed through the Industrial Revolution, science has come to occupy its present position through successive stages of natural social evolution.

Among the conditions responsible for this development were the birth of democracy and political freedom, the spread of education, the rise of critical mental enquiry as a reaction to the dogmatism of Christianity and the vibrant expansion of human society through the opening of world wide commerce. Mind began to revolt against stagnation and religious fanaticism and to actively look for relationships between natural phenomena. Intuition was given scope for expression. This mental awakening took place in the context of an industrial revolution.

That is, mental enquiry at once expressed itself through the observation of natural law and the application of this knowledge for devising instruments of social utility. Mind arrogantly proclaimed itself the ruler of man and nature. Pure science and applied technology grew side by side integrated with the society in which they rose through progressive stages of development. The industrial revolution absorbed the great mental energies unleashed by scientific enquiry. IMPORTED SCIENCE During the period of western industrialisation India was, historically speaking, in decline.

Her population had learned to live on a subsistence level. The support of religion, culture and spirituality preserved social contentment and traditional ways. Society lacked the impetus to grow and expand. Science as a social institution and organised way of life came to India only after independence. Here it did not arise naturally out of the existing social conditions but rather came as a decision by the national and government leaders to imitate the developmental achievements of the West.

It was not born of a ripened mental climate for creative thought nor from a condition of great commercial activity and expression. In other words, it was imposed as a superstructure on top of the nation without reference to the felt need of the people or the stage of its historical and sociological evolution. AGRICULTURE, CUM INDUSTRIAL CUM SCIENTIFIC DEVELOPMENT Today the scientific community transcends national borders and social customs. It is truly international in outlook, exchange of knowledge, participation of members.

A scientist draws inspiration in being recognised by the higher echelons of the international community. To this extent the scientist has become insulated from the social atmosphere of the country in which he lives. This is especially true in India where science was never integrated with its social base. The problem facing us is to propose ways and means to accomplish this social integration of scientific knowledge and the community of scientists in India.

The development of science in a society occurs under certain social conditions and progresses through certain stages of development. Neither these conditions nor stages can be completely eliminated though they may vary in their make-up and duration. But it is possible to foster the conditions which will accelerate a natural progressive development. For science to be integrated with life, it means that scientific knowledge and technology must be applied in the context of daily life which in India centers around agriculture and to a lesser extent industry and commerce.

In fact the tasks of promoting the agricultural and industrial development of the nation and the application of science to social life are essentially one. The proper atmosphere must be created for a natural development of science in conjunction with agriculture and industry. The linking of these three is the key to national development. VILLAGE BASED SCIENTIFIC REVOLUTION When the scientific community turns its attention to advancing rural life, the conditions will be right for a socio-scientific revolution at the village level. Rural life in India means agriculture and agro-based industries.

Already agriculture is being modernised through introduction of new hybrid crops, and the growing utilization of fertilizers and chemicals. Rural youth are becoming accustomed to the operation of machinery. More agricultural products are being converted into consumer goods through agro-based industries. But for the rural people to rise above the level of the soil and develop mentally and scientifically, it is necessary to release the dynamism of the village population. The real lever of development is the releasing and channeling of the social energies of the people.

This can be accomplished when a few individuals in every community are made to see and benefit materially from the application of scientific techniques in their daily life. Once a few have prospered in this manner, whole villages will follow suit. Space science Space activities in the country started during early 1960s with the scientific investigation of upper atmosphere and ionosphere over the magnetic equator that passes over Thumba near Thiruvananthapuram using small sounding rockets Realising the immense potential of space technology for national development, Dr.

Vikram Sarabhai, the visionary leader envisioned that this powerful technology could play a meaningful role in national development and solving the problems of common man. Thus, Indian Space programme born in the church beginning, space activities in the country, concentrated on achieving self reliance and developing capability to build and launch communication satellites for television broadcast, telecommunications and meteorological applications; remote sensing satellites for management of natural resources.

The objective of ISRO is to develop space technology and its application to various national tasks. Accordingly, Indian Space Research Organisation (ISRO) has successfully operationalised two major satellite systems namely Indian National Satellites (INSAT) for communication services and Indian Remote Sensing (IRS) satellites for management of natural resources; also, Polar Satellite Launch Vehicle (PSLV) for launching IRS type of satellites and Geostationary Satellite Launch Vehicle (GSLV) for launching INSAT type of satellites.

The Space Commission formulates the policies and oversees the implementation of the Indian space programme to promote the development and application of space science and technology for the socio-economic benefit of the country. DOS implements these programmes through, mainly Indian Space Research Organisation (ISRO), Physical Research Laboratory (PRL), National Atmospheric Research Laboratory (NARL), North Eastern-Space Applications Centre (NE-SAC) and Semi-Conductor Laboratory (SCL).

The Antrix Corporation, established in 1992 as a government owned company, markets the space products and services Department of Atomic Energy The Department of Atomic Energy (DAE) was set-up on August 3, 1954 under the direct charge of the Prime Minister through a Presidential Order. The vision of the Department of Atomic Energy (DAE) is to empower India through technology, creation of more wealth and providing better quality of life to its citizen.

This is to be achieved by making India energy independent, contributing to provision of sufficient, safe and nutritious food and better health care to our people through development and deployment of nuclear and radiation technologies and their applications. DAE is engaged in the design, construction and operation of nuclear power/research reactors and the supporting nuclear fuel cycle technologies covering exploration, mining and processing of nuclear minerals, production of heavy water, nuclear fuel fabrication, fuel reprocessing and nuclear waste management. It is also eveloping advanced technologies that contribute to the national prosperity. The spin-off technologies, human resource developed and technical services being rendered by the Department have been greatly helping the Indian industry. The Department is also developing better crop varieties, techniques for control/eradication of insects thus protecting the crops, radiation based post harvest technologies, radiation based techniques for diagnosis and therapy of disease particularly cancer, technologies for safe drinking water, better environment and robust industry.

Main Focus areas of work in DAE are: Increasing share of nuclear power through deployment of indigenous and other proven technologies, along with development of fast breeder reactors and thorium reactors with associated fuel cycle facilities. 1. Building and operation of research reactors for production of radioisotopes and carrying out radiation technology applications in the field of medicine, agriculture and industry. 2.

Developing advanced technologies such as accelerators, lasers, supercomputers, advanced materials and instrumentation, and encouraging transfer of technology to industry. 3. Support to basic research in nuclear energy and related frontier areas of science, interaction with universities and academic institutions, support to research and development projects having a bearing in DAE’s programmes and international co-operation in related advanced areas of research and 4. Contribution to national security.

DAE has made the following significant contributions of DAE to the national initiatives: 1. AGRICULTURE: Enhanced production of oilseeds and pulses 2. EDUCATION, HEALTH: i. Homi Bhabha National Institute (HBNI) ii. National Initiative on Undergraduate Science (NIUS) iii. Countrywide Services in Cancer through Telemedicine 3. FOOD & NUTRITION SECURITY:Radiation Processing of Food & Agro Products 4. WATER RESOURCES:Desalination in water scarcity areas along the sea coast 5.

ENERGY SECURITY: Electricity supply in near and long term ensuring long term sustainable development. Solar Energy Research Initiative Department of Science and Technology (DST) is primarily mandated with promotion of R activities. Accordingly, DST’s initiative on Solar Energy is positioned upstream with thrust on enabling knowledge based R activities for entire gamut of solar technologies including balance of systems. This is expected to be achieved through nurturing of R groups, formation of consortia and setting up of State-of-art facilities.

Solar Energy utilization for applications both for power as well as other than power generation with a view to provide convergent technology solutions under real-life conditions are being explored and assessed. DST in recent times has made foray in the area of solar energy through various parallel independent initiatives with distinct objectives. S Inputs for Policy Formulation Precompetitive Research & Technology Upgradation Basic Research and Disruptive Technologies International Cooperation Enabling R for Solar Technologies

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Relating 7 C’s of Teamwork to Chak de India

Overview of the movie The film revolves around the central character of the film, Kabir Khan, the ex-star player of Indian Hockey, who had lost an opportunity to score a goal under penalty stroke and was accused of fixing match with the Opposite team (Pakistan). After seven years, he emerges from nowhere to coach the Indian Women hockey team from scratches. Even he dares to challenge selectors have a clash with the formidable Indian Men team to get selected for participation in World Cup. Team is rag bunch of girls with own agenda [pic] ? The film based on a real-life story makes a deeper impact on the students of management.

They can visualize the concept of the story and apply it in job areas later on. ? It provides guidance for not only being an effective manager but also how to be best and a role model for others in whichever area they enter,” ? ‘CHAK DE’ helps us to understand concepts like human resource management, strategy, motivation, determination, leadership skills, ambition, teamwork and making the most out of the worst kind of situations. ? The film proves that “Where there is a will, there is a way” Importance of teamwork “None of us are as Strong as all of us….. [pic] The Benefits of team work are as follows: ? Increased Productivity ? Improved customer service ? More flexible system ? Employee empowerment ? Competitive advantage ? More ideas 7 c’s of teamwork 1. Commitment ? It is the foundation for synergy in groups ? The time spent up front getting all team members on the same track will greatly reduce the number of derailments or emergency rerouting 2. Contribution ? The power of an effective team is in direct proportion to the skills member possess and the initiative members expend. Each one in a team should contribute because if a few team members shoulders most of the burden,the team runs the risk of member burnout, or worse – member turn-off. ? To enhance balanced participation on a work team, leaders should consider three factors that affect th elevel of individula contribution : inclusion, confidende and empowerment. 3. Communication ? For a work group to reach its full potential, members must be able to say what they think, ask for help, share new or unpopular idea. ? Communication should be friendly, open and positive. To enhance team communication, leadres can provide skill r=training in listening, responding and the use of languages as well as meeting managemnt, feedback and consensus building. 4. Cooperation ? F. A. C. T. S. model of effective team member behaviors (follow-through, accuracy, creativity, timeliness and spirit) may serve as a guide for helping teams identify behaviors that support synergy within the work team. 5. Conflict Management ? It is inevitable that teams of bright, diverse thinkers will experience conflict from time to time Leaders help work teams to manage conflict effectively, the team will be able to maintain trust and tap the collective power of the team. 6. Change Management ? Tom Peters, in Thriving on Chaos, writes “The surviving companies will, above all, be flexible responders that create market initiatives. This has to happen through people. ” It is no longer a luxury to have work teams that can perform effectively within a turbulent environment. ? It is a necessity. Teams must not only respond to change, but actually initiate it. 7. Connections When a work team is connected to the organization, members discuss team performance in relationship to corporate priorities, customer feedback, and quality measures. ? When a work team has developed strong connections among its own members, peer support manifests itself in many ways. Relating 7 c’s to CHAK DE INDIA Team building process in the film is very significant. Sixteen players from different parts of the country with different backgrounds and diversity meet for the first time for a common cause. Relating each C of team work to “CHAK DE INDIA” 1) Commitment The initial entry of the players of the team is interesting. The players introduce themselves as representative of their respective states in the introductory session, except Vidya Sharma, who says that she is from India, which subsequently makes her way to be captain of the team. ” Mujhe Sirf ek mulk ka naam sunaai deta hai – I.. n.. dia “ This shows that the leader wants the team to be aware of their goal and be committed to it. The coach is committed to achieve the goals and he wants every members commitment • There was emergency derailment or rerouting, when they go abroad to play for the world cup. ) Contribution • Team also need self-leadres who takes responsibility for getting thing done . This quality can be observed in Vidhya Sharma. • Bindia naik is seniuor player, however work team need people who have strong technical and inrepersonal skills and willing to learn. She was not at all willing to learn and lacked in interpersonal skills. • At the end, When team was in need of Bindia Naik ,the coach empowered her and she was motivated to play well and the taem had won against Argentina. She aws only the player who could break back to back manning of the opponent. 3) Communication The goals are clearly communicated to the team by the their coach. • The coach’s approach in training the team is not friendly. • It has been oserved that the coach comminicates the team in a negative for eg . Women can not play hockey, however this motivates the team to play much better. • Open communication can be oserved when the coach is training all the girl and pointing out their mistake. He was giving a fair feedback ,so that the team will improve. 4) Cooperation • “We do it right the first time” this has been lacking in the movie cause they had lost very badly in their match with Australia. Preeti and Komal are the girls who play for them selves, not for the country. They hardly cooperate with each other. How ever, in the crucial final match, they come together and work together to ensure that India wins. • Creativity Can be observe when all the team members forgive mistake , respect differences and cooperates with each other to achieve the goal • Gunjan the senior player keeps her ego aside, and develop a generous spirit (You cant have your way all the time and –to add value develop a generous team spirit) 5) Conflict Management The Coach Changes the sleeping position of the girlto resolve confluict and encourage team spirit. He also passes a rule that no staying with your state girl. • Komal Chautala (Chitrasi Nayak), the ace center forward of Haryana state gets punished for entering into an argument with Preeti and punished for a week with 5 similar offenders. • In the same way Balbir Kaur, Aliya Bose, Bindia Nayak and the one more girl from Darjeeling gets punished for misbehaving. • At the end Komal & Preeti Resolve their conflict and the team had won the final match against Australia ) Change Management • Bindia Nayak, the right half senior most player for her lifetime from Railways is dormant for her cool reaction in the field and become water –girl for the team during the world cup . She is neutralized several times in the film for her ego. Even if she is most professional player of the team, she is not allowed to play for her undisciplined behaviour. • Her position was changed from forward to center • When you need the best, by pass all your rules and call her. SRK goes and requests her to play when India has to confront Korea.

She was the need of the time. Punch word-Compromise with the ego. • 7) Connections • Coach tries to develop a connection between the team to encourage team spirit. • Some times crisis and conflicts help in team building. The show down with the street Romeos in the McDowell outlay was the foundation of team building and confidence building. Punch point-When there is a crisis, the team members come together. • In the finals all team members develops a sort of connection including Preet & Komal. [pic]

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India’s Population Growth

CHAPTER – 1 INTRODUCTION – POPULATION GROWTH The world experienced dramatic population growth during the twentieth century, with the number of inhabitants doubling from 3 to 6 billion between 1960 and 2000. India, too, saw very rapid population growth during this period – from 448 million to 1. 04 billion – and to 1. 21 billion in 2010. The effects of past and projected future demographic change on economic growth in India is the main focus of this chapter.

Figure 1 plots world population from 1950 to 2050, and shows the share of world population attributable to India; post-2010 data are United Nations (UN) projections. Global population grew at roughly 2% per annum from 1960-2000, a level that is unsustainable in the long term, as it translates into population doubling every 35 years. India’s population is currently growing at a rate of 1. 4% per year, far surpassing China’s rate of 0. 7%. The differential between India and China will result in India surpassing China with respect to population size in less than 20 years.

While a cause for concern, global population growth has not met Malthus’ pessimistic predictions of human misery and mass mortality. During the past few decades, rapid population growth has been accompanied by an unparalleled decline in mortality rates and by an increase in income per capita, both globally and in India. GLOBAL WORLD POPULATION In 1901 the world population was 1. 6 billion. By 1960, it became 3 billion, and by 1987, 5 billion and in 1999, 6 billion.

Currently, one billion people are added every 12 – 13 years. During the last decade there has been substantial decline in birth rate. The reasons for decline vary from society to society; urbanization, rising educational attainment, increasing employment among women, lower infant mortality are some major factors responsible for growing desire for smaller families; increasing awareness and improved access to contraception have made it possible for the majority of the couple to achieve the desired family size.

In some countries slowing of the population growth has been due to an increase in mortality (e. g. HIV related mortality in sub-saharan Africa). As a result of all these the decline in the global population growth during the nineties is steeper than the earlier predictions. Currently, the annual increment is about 80 million. It is expected to decrease to about 64 million by 2020 -25 and to 33 million by 2045 -50; 95 % of the growth of population occurs in developing countries.

Most demographers believe that the current accelerated decline in population growth will continue for the next few decades and the medium projections of Population Division of United Nations, that the global population will grow to 8. 9 billion by 2050 is likely to be achieved (Figure 1) POPULATION PROJECTION The Technical Group on Population Projections set up by the National Commission on Population has recently come out with population projections for India and states. As per this report, India’s population is expected to reach 1. 2 billion by 2011 and 1. billion by 2006 (see Table 5). According to this projection, population would grow by 1. 4 percent during the Eleventh Five-Year Plan period (more precisely during 2006-11). Even by 2021-26, the population is expected to have a growth rate of 0. 9 percent (see Table 6). An important assumption underlying this projection is that the total fertility rate would reach replacement level (approximately 2. 1) only by 2021. The reason behind this gloomy expectation is the slow pace of fertility transition in several large, north Indian states.

In fact, according the Technical Group, TFR would not reach the replacement level in some of these states even by 2031. Although the Technical Group did not carry forward the projection till the date of stabilization, the projected delay in reaching the replacement-level fertility would imply that India’s population would not stabilize before 2060, and until population size nears 1. 7 billion. One of the most chilling results of this exercise is the wide geographical disparity in the projected population growth.

If the total population of the country is expected to grow by 36 percent between 2001 and 2026, in southern states, the growth is expected to be around 15-25 percent only, whereas in northern parts of the country, the growth is expected to be in the range of 40-50 percent (see Table 7). Of the expected addition of 370 million to India’s population during 2001-26, Uttar Pradesh alone would account for a whopping 22 percent, and the other three northern states – Bihar, Madhya Pradesh and Rajasthan – would account for another 22 percent.

The population growth in these regions is also expected to cause population pressure in major migration destinations, chiefly Delhi and Maharashtra. Clearly, something urgent needs to be done to check population growth in these states. CHAPTER – 2 DEMOGRAPHIC TRANSITION DEMOGRAPHIC SCENARIO Demographers refer to these changes from stable population with high fertility and mortality to a new stability in population due to low fertility and mortality patterns as demographic transition.

Demographic transition occurs in four phases; of these the first three phases are characterized by population growth. In the first phase there is a fall in death rate and improvement in longevity; this leads to population growth. In the second phase there is a fall in birth rate but fall is less steep than fall in death rates and consequently there is population growth. In the third phase death rates plateau and replacement level of fertility is attained but the population growth continues because of the large size of population in reproductive age group.

The fourth phase is characterized by fall in birth rate to below replacement level and reduction in the proportion of the population in reproductive age group; as a result of these changes population growth ceases and population stabilizes. Experience in some of the developed countries suggest that in some societies even after attainment of stable population there may be a further decline in fertility so that there is a further reduction in the population- so called negative population growth phase of the demographic transition.

Different countries in the world have entered the demographic transition at different periods of time; there are also substantial differences in the rate of demographic transition and time taken to achieve population stabilization. CURRENT DEMOGRAPHIC SCENARIO India, currently the second most populous country in the world, has 17 percent of world’s population in less than three percent of earth’s land area. India began the 20th century with the population about 238 million and by 2000 it ended up with 1 billion. According to estimates, India added another 100 million by 2006 when its population reached 1. 1 billion.

The country added 16 million people annually in the1980s and 18 million annually in the 1990s until the present. While the global population has increased threefold during the last century, from 2 billion to 6 billion, India has increased its population nearly five times during the same period (Table-1). India’s population is expected exceed that of China before 2030 to become the most populous country in the world. India is in the middle of demographic transition. Both fertility and mortality have started declining throughout the country, though the pace and magnitude of the decline varies considerably across the states.

Like many countries of the world, the onset of mortality decline preceded the onset of fertility decline by few decades. The country has witnessed significant improvements in demographic and health indicators since Independence. But an accurate assessment of India’s demographic achievements is hampered by data deficiencies, particularly for the period before the 1970s. The official estimates of fertility and mortality levels at the time of independence are believed to be gross underestimates. Nonetheless, even they suggest significant achievements in this field.

The crude birth rate, which was officially put at 42 per 1,000 in 1951-61, has declined to 24 in 2004, as per the estimates available from the sample registration system (SRS). The life expectancy at birth, which was about 32 years at the time of independence, has doubled. Infant mortality rate has come down from about 150 in 1951 to 58 by 2004. Considering the size and diversity of India’s population, the decline in both fertility and mortality is a significant achievement. Nearly one-third of India’s population has lowered its fertility to replacement level.

Fertility in India has come down under a wide range of socio-economic and cultural conditions. Despite this achievement, many are concerned with the pace of fertility decline, particularly in the large, north Indian states. To overcome this, the northern region of India will need much more focused programmes and more investment not only in the provision of family welfare services but also for the overall socio-economic development. CHANGE IN THE AGE ; STRUCTURE India’s demographic changes are also manifest in its age structure.

The population pyramids below show the share of population in each age group, separately for males and females. In 1950, India had a very young population, with many children and few elderly; this gave India’s age distribution a pyramidal shape. Moving forward in time, the base of the population pyramid shrinks as the number of working-age individuals increases relative to children and the elderly. Following charts depict India’s population pyramids: In developed countries the reproductive age group population is relatively small; their fertility is low and the longevity at birth is high.

Population profiles of these countries resemble a cylinder and not a pyramid. These countries have the advantages of having achieved a stable population but have to face the problems of having a relatively small productive workforce to support the large aged population with substantial non-communicable disease burden. Some of the developing countries have undergone a very rapid decline in the birth rates within a short period. This enabled them to quickly achieve population stabilization but they do face the problems of rapid changes in the age structure and workforce which may be inadequate to meet their manpower requirements.

In contrast the population in most of the developing countries (including India) consist of a very large proportion of children and persons in reproductive age. Because of the large reproductive age group (Population momentum) the population will continue to grow even when replacement level of fertility is reached (couples having only two children). It is imperative that these countries should generate enough employment opportunities for this work force and utilise the human resources and accelerate their conomic growth. Planners and policy makers in developing countries like India have to take into account the ongoing demographic changes (number and age structure of the population) so that available human resources are optimally utilised as agents of change and development to achieve improvement in quality of life. This chart illustrates several critical points. First, the ratio of working-age people to dependents has been lower in Sub-Saharan Africa than in East Asia throughout the entire period shown.

This means that East Asia has had higher numbers of people in the prime years for working and saving. The difference between the two lines is primarily a reflection of a relatively high burden of youth dependency in Sub-Saharan Africa, due to its long history of high fertility. By contrast, East Asia, with a precipitous decline in fertility, experienced the most rapid demographic transition in history. Today, East Asia has more than 2. 3 workers for every non-worker, dwarfing Sub-Saharan Africa’s 1. 2 workers per non-worker.

This difference translates into households having an entire extra worker for every non-worker, which in turn results in a commensurately large increase in income per household, ultimately aggregating upward to increased country- level growth. Fertility decline lowers youth dependency immediately, but does not appreciably affect the working-age population for 20-25 years. But when the working-age population does increase as a share of the total population, there is an opportunity for economic growth. Figure 3 suggests that the superior economic performance of East Asia since the mid-1970s is related to East Asia’s demographics.

Indeed, using rigorous theoretical and statistical tools and appropriate data,2 economists have spent the past decade garnering evidence that East Asia’s rapid economic growth was spurred by its demographic transition, during which East Asia’s age structure has evolved in a way that has been highly favorable for economic growth. The resulting body of work suggests that demographic change accounts for approximately 2 percentage points of the growth rate of income per capita in East Asia, representing one-third of the supposed miracle.

Labeling the economic growth East Asia as a miracle, therefore, was partly a reflection of a failure to consider the implications of demographics. Figure 4 plots several aspects of India’s demographic profile over time, revealing significant improvements in basic health indicators. The interplay of these mortality and fertility changes implies sizable changes in the age structure of India’s population. Since 1950, India has experienced a 70% decline in the infant mortality rate, from over 165 deaths per thousand live births in the 1950s to around 50 today. India’s child (i. e. under age 5) mortality rate has fallen from 138 deaths per thousand in the early 1980s to 75 today. Life expectancy has increased at an average pace of 4. 5 years per decade since 1950. The fertility rate has declined sharply from approximately 6 children per woman in the 1950s to 2. 7 children per woman today. Figure 4 shows three trends that fertility may follow in the future, based on the assumptions the United Nations makes in publishing low-, medium-, and high-fertility scenarios. The population growth rate, after peaking in the late 1970s at about 2. 3% per year, has fallen to 1. % in 2010. In spite of the decline in fertility and the population growth rate, India’s population is still projected to increase (based on the UN’s medium-fertility scenario) from about 1. 2 billion today to an estimated 1. 6 billion by 2050 due to population momentum (i. e. , the large cohort of women of reproductive age will fuel population growth over the next generation, even if each woman has fewer children than previous generations did). Finally, the decline of crude birth and death rates shows that India is well along in its demographic transition. The sex ratio at birth in India is 1. 2 males for each female – one of the highest ratios in the world. The corresponding figure for 2003 was 1. 05 (United States Central Intelligence Agency, 2010). Sex-selective abortions, although illegal, are thought to be a prime reason for this high ratio. Indian families have long shown favoritism toward boys, and new technologies are allowing that preference to be expressed in differential birth rates. As in virtually all countries, life expectancy at birth in India also differs by sex. In the period 2005-2010, female life expectancy was 65. 0 years, and male life expectancy was 62. years – very similar to the differences that are seen in developing countries as a whole and in the world. However, India differs from the world and from developing countries as a whole in the manner in which sex differences in life expectancy have evolved since 1950. In most countries, women lived longer than men in 1950, whereas in India female life expectancy, at 37. 1 years, was 1. 6 years less than that of men. This differential has reversed in the intervening years. (United Nations, 2009) India’s demographic changes are also manifest in its age structure.

The population pyramids of Figure 5 show the share of population in each age group, separately for males and females. In 1950, India had a very young population, with many children and few elderly; this gave India’s age distribution a pyramidal shape. Moving forward in time, the base of the population pyramid shrinks as the number of working-age individuals increases relative to children and the elderly. The ratio of working-age to non-working-age people in India mirrored the corresponding ratio in East Asia from 1950 to 1975. Since then, it has been lower than that of East Asia – corresponding to a higher burden of youth dependency.

Indeed, India’s demographic cycle now lags roughly 25 years behind that of East Asia. A purely demographic perspective suggests that the next three decades will be a period of catching up for India with respect to per capita income in East Asia. While these fertility scenarios have very different implications for the future age structure of India’s population, all three suggest further growth in the working-age share. Under the low- fertility scenario, according to which the total fertility rate will drop to 1. 4 by 2030, India is expected to reach a higher working-age ratio than ever seen in East Asia.

The medium scenario shows India reaching a ratio nearly as high as East Asia’s high point, and the high scenario shows a very modest increase over today’s ratio in India. In sum, the medium- and low-fertility scenarios bode well with respect to India’s potential for realizing a sizable demographic dividend, representing what could amount to an additional percentage point or more of per capita income growth, compounded year after year. This is not an insignificant amount, given that the annual rate of growth of India’s real income per capita averaged a little over 4% during the past three decades (World Bank, 2010).

As an aside, it should be noted that India’s demographic indicators are similar to those of the South Asian region as a whole. Compared with the two other large South Asian countries, it is ahead of Pakistan in the demographic transition, but behind Bangladesh. An additional demographic fact deserves mention: there are an estimated 11. 4 million Indians living outside of India. The countries to which Indians have emigrated in largest numbers, as of 2010, are United Arab Emirates (2. 2 million), the United States (1. 7 million), Saudi Arabia (1. 5 million), and Bangladesh (1. 1 million).

In 2000, 57,000 Indian physicians were living overseas. In 2010, Indian emigrants are estimated to be sending home remittances totaling $55 billion, the most of any country, constituting about 4. 5% of GDP. (Ratha, Mohapatra, and Silwal, 2011) The number of Indian immigrants in the United States has grown rapidly in recent years (there were 1. 0 million in 2000). Their median age is 37, and just over half are female. Nearly three-quarters have at least a bachelor’s degree, and nearly half work in professional occupations. Mean personal income (in 2008 dollars) is $53,000, and median household income is $92,000. United States Bureau of the Census, International Data Base (2008 midyear estimates). As political, economic, and social conditions change over time in India and its neighbors, the number of migrants, the skills they take to other countries, and the value of the remittances they send may change significantly. DEMOGRAPHIC REPRESENTATION * INTERSTATE DIFFERENCE The projected values for the total population in different regions is shown in the Figure 2. 10. 3. There are marked differences between states in size of the population, projected population growth rates and the time by which TFR of 2. 1 is likely to be achieved.

If the present trend continues, most of the southern and the western states are likely to achieve TFR of 2. 1 by 2010. Urgent energetic steps to assess and fully meetin availability and access to service are needed in the unmet needs for maternal and child health Rajasthan, Orissa, Uttar Pradesh, Madhya Pradesh (MCH)care and contraception through improvement and Bihar (before division) in order to achieve a faster decline in their mortality and fertility rates. The performance of these states would determine the year and size of the population at which the country achieves aster decline in their mortality and fertility rates.

The performance of these states would determine the year and size of the population at which the country achieves replacement level of fertility. It is imperative that special efforts are made during the next two decades to break the vicious self- perpetuating cycle of poor performance, poor per capita income, poverty, low literacy and high birth rate in the populous states so that further widening of disparities between states in terms of per capita income and quality of life is prevented. An Empowered Action Group has been set up to provide special assistance to these states.

The benefits accrued from such assistance will depend to a large extent on the states’ ability to utilize the available funds and improve services and facilities. * GENDER BIAS The reported decline in the sex ratio during the current century has been a cause for concern (Figure 2. 10. 4). The factors responsible for this continued decline are as yet not clearly identified. However, it is well recognised that the adverse sex ratio is a reflection of gender disparities. There is an urgent need to ensure that all sectors collect and report sex disaggregated data.

This will help in monitoring for evidence of gender disparity. Continued collection, collation, analysis and reporting of sex disaggregated data from all socialoffence. However, unless there is a change in social sectors will also provide a mechanism to monitorattitudes, these legislations cannot achieve the whether girls and women have equal access todesired change. Intensive community education these services. In the 0-6 age group show massive inter-state differences (Figure 2. 10. 5). In addition, data indicate that over the last three decades there has been a decline in the 0-6 sex ratio . Table 2. 10. 2) There had been speculation as to whether female sex determination tests and selective female feticide are, at least in part responsible for this. The Government of India has enacted a legislation banning the prenatal sex determination and selective abortion while female infanticide is a cognizable efforts to combat these practices, especially in pockets from where female infanticide and foeticide have been reported, are urgently required. The National Family Health Survey clearly brought out the sex differentials in the neonatal, post neonatal, infant and under five mortality rates .

As there is no biological reason for the higher mortality among the girl children these differences are an indication of existing gender bias in caring for the girl child (Figure 2. 10. 5a). In the reproductive age-groups, the mortality rates among women are higher than those among men. The continued high maternal mortality is one of the major factors responsible for this. Effective implementation of the RCH programme is expected to result in a substantial reduction in maternal mortality. Currently, the longevity at birth among women is only marginally higher than that among men.

However, the difference in life expectancy between men and women will progressively increase over the next decade. Once the reproductive age group is crossed, the mortality rates among women are lower. Women will OUTNUMBER men in over 60 age group Departments of Health, Family Welfare and Women and Child Development are initiating steps to ensure that these women get the care they need. CHAPTER – 3 CAUSES OF POPULATION GROWTH BIRTH RATE * POVERTY According to ABC News, India currently faces approximately “… 33 births a minute, 2,000 an hour, 48,000 a day, which calculates to nearly 12 million a year”.

Unfortunately, the resources do not increase as the population increases. Instead the resources keep decreasing, leading to making survival for a human being more and more competitive even for the basic necessities of life like food, clothing and shelter. ?    India currently faces a vicious cycle of population explosion and poverty. One of the most important reasons for this population increase in India is poverty. According to Geography. com, “More than 300 million Indians earn less than US $1 everyday and about 130 million people are jobless. The people, who have to struggle to make two ends meet produce more children because more children mean more earning hands. Also, due to poverty, the infant mortality rate among such families is higher due to the lack of facilities like food and medical resources. Thus, they produce more children assuming that not all of them would be able to survive. The end result is a mounting increase in the population size of India. Due to the increase in population, the problems of scarce resources, jobs, and poverty increases.

Thus the cycle continues leading to an ever-increasing population that we see today. This cycle in fact might be considered as a positive feedback, in that the increase in one results in the increase of the other factor. As the poverty and the population both increase, the development of the country and the society seems even more far-fetched.? * Religious beliefs, Traditions and Cultural Norms? India’s culture runs very deep and far back in history. Due to the increased population, the educational facilities are very scarce.

As a result, most people still strictly follow ancient beliefs. According to ABC News, the famous Indian author, Shobha De said, “God said ‘Go forth and produce’ and we just went ahead and did exactly that. ” In addition, a lot of families prefer having a son rather than a daughter. As a result, a lot of families have more children than they actually want or can afford, resulting in increased poverty, lack of resources, and most importantly, an increased population. ?    Another one of India’s cultural norms is for a girl to get married at an early age.

In most of the rural areas and in some urban areas as well, families prefer to get their girls married at the age of 14 or 15. Although child marriage is illegal in India, the culture and the society surrounding the girls in India does not allow them to oppose such decisions taken by their family. For many, giving a girl child in marriage is done not by choice, but rather out of compulsion. The poor economic status of tribal villagers is attributed as one of the primary factors responsible for the prevalence of child marriages in India.

An example of one such incident was reported in Indiainfo. com. According to an article written by Syed Zarir Hussain on October 16th, 2000, “Forty-two-year-old Rojo Tok, a tribal peasant in Arunachal Pradesh, was all decked up in local finery to wed Mepong Taku, a girl who will turn 14 this winter. ” ? I was brought up in a very different environment and never had to worry about getting married at the age of 14 or 15. However, my parents turned their eyes away, when my maidservant’s daughter was being married off when she was only 13 years old.

I was very young, but my parents simply said, “That’s just how things are with poor people” and I did not have a say in it. Due to the young age of these girls, they have more potential of bearing children, that is, since they start bearing children at a very early age, they can have more children throughout their lifetime. This results in the increase of the global fertility rate. Since these girls get married at a very early age, they do not have the opportunity to get educated. Therefore, they remain uneducated and teach the same norms to their own children, and the tradition goes on from one generation to the other. DEATH RATE Although poverty has increased and the development of the country continues to be hampered, the improvements in medical facilities have been tremendous. This improvement might be considered positive, but as far as population increase is considered, it has only been positive in terms of increasing the population further. The crude death rate in India in 1981 was approximately 12. 5, and that decreased to approximately 8. 7 in 1999. Also, the infant mortality rate in India decreased from 129 in 1981 to approximately 72 in 1999 (Mapsindia. com, Internet).

These numbers are clear indications of the improvements in the medical field. This development is good for the economy and society of India, but strictly in terms of population, this advancement has further enhanced the increase in population. ?    The average life expectancy of people in India has increased from 52. 9 in 1975-80 to 62. 4 in 1995-00. Although our near and dear ones would live longer, due to the increase in the population, the resources available per person would be much less, leading to a decrease in the curvature of the slope of development instead of a higher gradient.

In addition, abortion is not allowed by several religions that are followed in India. In fact, in Islam, one of the leading religions of India, children are considered to be gifts of God, and so the more children a woman has, the more she is respected in her family and society. As a result, although the measures to control birth are either not available or known to the public, the facilities to increase birth through medical facilities are available.? MIGRATION? In countries like the United States (U. S. ), immigration plays an important role in the population increase.

However, in countries like India, immigration plays a very small role in the population change. Although people from neighboring countries like Bangladesh, Pakistan and Nepal, migrate to India; at the same time Indians migrate to other countries like the U. S. , Australia, and the U. K. During the 1971 war between India and Pakistan over Bangladesh, the immigration rate increased tremendously. However, currently the migration in India is –0. 08 migrants per 1000 population (AskJeeves. com, Internet), and is decreasing further.

This is definitely good for India. This way, the population might eventually come close to being under control and more people may get better job opportunities and further education. For example, the students in my university from India, like myself, have better chances for job opportunities and better education outside India than we would have had in India. CHAPTER – 4 IMPACT OF POPULATION GROWTH ECONOMIC GROWTH During the past decade, there have been two significant breakthroughs regarding the impact of demographics on national economic performance.

The first has to do with the effect of the changing age structure of a population. The second relates to population health. Demographers use the “demographic transition” as a starting point for explaining this effect. The demographic transition refers to the nearly ubiquitous change countries undergo from a regime of high fertility and high mortality to one of low fertility and low mortality. As this phenomenon tends to occur in an asynchronous fashion, with death rates declining first and birth rates following later, countries often experience a transitional period of rapid population growth.

This period has traditionally been the main focus of economists interested in demographics. But population growth is not the only major consequence of the demographic transition. The age structure is also transformed. This happens initially as a consequence of a baby boom that occurs at the beginning of the transition. The baby boom is not caused by an increase in births, but rather by the sharply reduced rates of infant and child mortality that are characteristic of the beginning of a demographic transition, mainly due to increased access to vaccines, antibiotics, safe water, and sanitation.

This type of baby boom starts with higher survival rates and abates when fertility subsequently declines as couples recognize that fewer births are needed to reach their targets for surviving children, and as those targets are moderated. Baby booms are very consequential economically, because the presence of more children requires that there be more resources for food, clothing, housing, medical care, and schooling. Those resources must be diverted from other uses such as building factories, establishing infrastructure, and investing in research and development.

This diversion of resources to current consumption can temporarily slow the process of economic growth. Of course, babies born in such a boom will invariably reach working ages within a period of 15-25 years. When this happens, the productive capacity of the economy expands on a per capita basis and a demographic dividend may be within reach. Environmental and ecological consequences The already densely populated developing countries contribute to over 95% of the population growth and rapid population growth could lead to environmental deterioration.

Developed countries are less densely populated and contribute very little to population growth; however, they cause massive ecological damage by the wasteful, unnecessary and unbalanced consumption the consequences of which could adversely affect both the developed and the developing countries. The review on “Promotion of sustainable development: challenges for environmental policies” in the Economic Survey 1998-99 had covered in detail the major environmental problems, and policy options for improvement; the present review will only briefly touch upon some of the important ecological consequences of demographic transition.

In many developing countries continued population growth has resulted in pressure on land, fragmentation of land holding, collapsing fisheries, shrinking forests, rising temperatures, loss of plant and animal species. Global warming due to increasing use of fossil fuels (mainly by the developed countries) could have serious effects on the populous coastal regions in developing countries, their food production and essential water supplies. The Intergovernmental Panel on Climate Change has projected that, if current greenhouse gas emission trends continue, the mean global surface temperature will rise from 1 to 3. degrees Celsius in the next century. The panel’s best estimate scenario projects a sea-level rise of 15 to 95 centimeters by 2100. The ecological impact of rising oceans would include increased flooding, coastal erosion, salination of aquifers and coastal crop land and displacement of millions of people living near the coast. Patterns of precipitation are also likely to change, which combined with increased average temperatures, could substantially alter the relative agricultural productivity of different regions.

Greenhouse gas emissions are closely linked to both population growth and development. Slower population growth in developing countries and ecologically sustainable lifestyles in developed countries would make reduction in green house gas emission easier to achieve and provide more time and options for adaptation to climate change. Rapid population growth, developmental activities either to meet the growing population or the growing needs of the population as well as changing lifestyles and consumption patterns pose major challenge to preservation and promotion of ecological balance in India.

Some of the major ecological adverse effects reported in India include: severe pressure on the forests due to both the rate of resource use and the nature of use. The per capita forest biomass in the country is only about 6 tons as against the global average of 82 tons. adverse effect on species diversity: conversion of habitat to some other land use such as agriculture, urban development, forestry operation. Some 70-80 % of fresh water marshes and lakes in the Gangetic flood plains has been lost in the last 50 years.

Tropical deforestation and destruction of mangroves for commercial needs and fuel wood. The country’s mangrove areas have reduced from 700,000 ha to 453,000 ha in the last 50 years. Intense grazing by domestic livestock Poaching and illegal harvesting of wildlife. Increase in agricultural area, high use of chemical fertilizers pesticides and weedicides; water stagnation, soil erosion, soil salinity and low productivity. High level of biomass burning causing large-scale indoor pollution. Encroachment on habitat for rail and road construction thereby fragmenting the habitat. ncrease in commercial activities such as mining and unsustainable resource extraction. Degradation of coastal and other aquatic ecosystems from domestic sewage, pesticides, fertilizers and industrial effluents. Over fishing in water bodies and introduction of weeds and exotic species. Diversion of water for domestic, industrial and agricultural uses leading to increased river pollution and decrease in self-cleaning properties of rivers. Increasing water requirement leading to tapping deeper aquifers which have high content of arsenic or fluoride resulting health problems.

Disturbance from increased recreational activity and tourism causing pollution of natural ecosystems with wastes left behind by people. The United Nations Conference on Environment and Development (1992) acknowledged population growth, rising income levels, changing technologies, increasing consumption pattern will all have adverse impact on environment. Ensuring that there is no further deterioration depends on choices made by the population about family size, life styles, environmental protection and equity.

Availability of appropriate technology and commitment towards ensuring sustainable development is increasing throughout the world. Because of these, it might be possible to initiate steps to see that the natural carrying capacity of the environment is not damaged beyond recovery and ecological balance is to a large extent maintained. It is imperative that the environmental sustainability of all developmental projects is taken care of by appropriate inputs at the planning, implementation, monitoring and evaluation stages. Urbanization

The proportion of people in developing countries who live in cities has almost doubled since 1960 (from less than 22 per cent to more than 40 per cent), while in more developed regions the urban share has grown from 61 per cent to 76 per cent. Urbanization is projected to continue well into the next century. By 2030, it is expected that nearly 5 billion (61 per cent) of the world’s 8. 1 billion people will live in cities. India shares this global trend toward urbanization. Globally, the number of cities with 10 million or more inhabitants is increasing rapidly, and most of these new “megacities” are in developing regions.

In 1960, only New York and Tokyo had more than 10 million people. By 1999, the number of megacities had grown to 17(13 in developing countries). It is projected that there will be 26 megacities by 2015, (18 in Asia; of these five in India); more than 10 per cent of the world’s population will live in these cities (1. 7% in 1950). India’s urban population has doubled from 109 million to 218 million during the last two decades and is estimated to reach 300 million by 2000 AD. As a consequence cities are facing the problem of expanding urban slums. Like many other demographic changes, urbanization has both positive and negative effects.

Cities and towns have become the engines of social change and rapid economic development. Urbanisation is associated with improved access to education, employment, health care; these result in increase in age at marriage, reduction in family size and improvement in health indices. As people have moved towards and into cities, information has flowed outward. Better communication and transportation now link urban and rural areas both economically and socially creating an urban-rural continuum of communities with improvement in some aspects of lifestyle of both. The ever increasing reach of mass media communicate new ideas, points f reference, and available options are becoming more widely recognized, appreciated and sought. This phenomenon has affected health care, including reproductive health, in many ways. For instance, radio and television programmes that discuss gender equity, family size preference and family planning options are now reaching formerly isolated rural populations. This can create demand for services for mothers and children, higher contraceptive use, and fewer unwanted pregnancies, smaller healthier families and lead to more rapid population stabilisation. But the rapid growth of urban population also poses some serious challenges.

Urban population growth has outpaced the development of basic minimum services; housing, water supply, sewerage and solid waste disposal are far from adequate; increasing waste generation at home, offices and industries, coupled with poor waste disposal facilities result in rapid environmental deterioration. Increasing automobiles add to air pollution. All these have adverse effect on ecology and health. Poverty persists in urban and peri-urban areas; awareness about the glaring inequities in close urban setting may lead to social unrest. Rural population and their development

Over seventy per cent of India’s population still lives in rural areas. There are substantial differences between the states in the proportion of rural and urban population (varying from almost 90 per cent in Assam and Bihar to 61 per cent in Maharashtra). Agriculture is the largest and one of the most important sector of the rural economy and contributes both to economic growth and employment. Its contribution to the Gross Domestic Product has declined over the last five decades but agriculture still remains the source of livelihood for over 70 per cent of the country’s population.

A large proportion of the rural work force is small and consists of marginal farmers and landless agricultural labourers. There is substantial under employment among these people; both wages and productivity are low. These in turn result in poverty; it is estimated that 320 million people are still living below the poverty line in rural India. Though poverty has declined over the last three decades, the number of rural poor has in fact increased due to the population growth. Poor tend to have larger families which puts enormous burden on their meagre resources, and prevent them from breaking out of the shackles of poverty.

In States like Tamil Nadu where replacement level of fertility has been attained, population growth rates are much lower than in many other States; but the population density is high and so there is a pressure on land. In States like Rajasthan, Uttar Pradesh, Bihar and Madhya Pradesh population is growing rapidly, resulting in increasing pressure on land and resulting land fragmentation. Low productivity of small land holders leads to poverty, low energy intake and under nutrition, and this, in turn, prevents the development thus creating a vicious circle.

In most of the states non-farm employment in rural areas has not grown very much and cannot absorb the growing labour force. Those who are getting educated specially beyond the primary level, may not wish to do manual agricultural work. They would like better opportunities and more remunerative employment. In this context, it is imperative that programmes for skill development, vocational training and technical education are taken up on a large scale in order to generate productive employment in rural areas.

The entire gamut of existing poverty alleviation and employment generation programmes may have to be restructured to meet the newly emerging types of demand for employment. Rural poor have inadequate access to basic minimum services, because of poor connectivity, lack of awareness, inadequate and poorly functional infrastructure. There are ongoing efforts to improve these, but with the growing aspirations of the younger, educated population these efforts may prove to be inadequate to meet the increasing needs both in terms of type and quality of services.

Greater education, awareness and better standard of living among the growing younger age group population would create the required consciousness among them that smaller families are desirable; if all the felt needs for health and family welfare services are fully met, it will be possible to enable them to attain their reproductive goals, achieve substantial decline in the family size and improve quality of life. Water Supply In many parts of developed and developing world, water demand substantially exceeds sustainable water supply.

It is estimated that currently 430 millions (8% of the global population) are living in countries affected by water stress; by 2020 about one fourth of the global population may be facing chronic and recurring shortage of fresh water. In India, water withdrawal is estimated to be twice the rate of aquifer recharge; as a result water tables are falling by one to three meters every year; tapping deeper aquifers have resulted in larger population groups being exposed to newer health hazards such as high fluoride or arsenic content in drinking water.

At the other end of the spectrum, excessive use of water has led to water logging and increasing salinity in some parts of the country. Eventually, both lack of water and water logging could have adverse impact on India’s food production. There is very little arable agricultural land which remains unexploited and in many areas, agricultural technology improvement may not be able to ensure further increase in yield per hectare. It is, therefore, imperative that research in biotechnology for improving development of foodgrains strains that would tolerate salinity and those which would require less water gets high priority.

Simultaneously, a movement towards making water harvesting, storage and its need based use part of every citizens life should be taken up. Food security Technological innovations in agriculture and increase in area under cultivation have ensured that so far, food production has kept pace with the population growth. Evolution of global and national food security systems have improved access to food. It is estimated that the global population will grow to 9 billion by 2050 and the food production will double; improvement in purchasing power and changing dietary habits (shift to animal products) may further add to the requirement of food grains.

Thus, in the next five decades, the food and nutrition security could become critical in many parts of the world especially in the developing countries and pockets of poverty in the developed countries. In India one of the major achievements in the last fifty years has been the green revolution and self- sufficiency in food production. Food grain production has increased from 50. 82 in 1950-51 to 200. 88 million tons in 1998-99 (Prov. ). It is a matter of concern that while the cereal production has been growing steadily at a rate higher than the population growth rates, the coarse grain and pulse production has not shown a similar increase.

Consequently there has been a reduction in the per capita availability of pulses (from 60. 7 grams in 1951 to 34 grams per day in 1996) and coarse grains. Over the last five decades there has been a decline in the per capita availability of pulses. During the last few years the country has imported pulses to meet the requirement. There has been a sharp and sustained increase in cost of pulses, so there is substantial decline in per capita pulses consumption among poorer segment of population.

This in turn could have an adverse impact on their protein intake. The pulse component of the “Pulses and Oil Seeds Mission” need to receive a major thrust in terms of R;D and other inputs, so that essential pulse requirement of growing population is fully met. Rising cost of pulses had a beneficial effect also. Till eighties in central India wages of landless labourers were given in the form Kesari Dal which was cheaper than cereals or coarse grains. Consumption of staple diet of Kesari Dal led to crippling disease of neuro lathyrism.

Over the last three decades the rising cost of pulses has made Kesari Dal more expensive than wheat or rice and hence it is no longer given to labourers as wages for work done; as a result the disease has virtually disappeared from Central India. Over years the coarse grain production has remained stagnant and per capita availability of coarse grain has under gone substantial reduction; there has been a shift away from coarse grains to rice and wheat consumption even among poorer segment of population. One of the benefits of this change is virtual elimination of pellagra which was widely prevalent mong low income group population in Deccan Plateau whose staple food was sorghum. Coarse grains are less expensive than rice and wheat; they can thus provide higher calories for the same cost as compared to rice and wheat. Coarse grains which are locally produced and procured if made available through TPDS at subsidised rate, may not only substantially bring down the subsidy cost without any reduction in calories provided but also improve “targetting” – as only the most needy are likely to access these coarse grains.

Another area of concern is the lack of sufficient focus and thrust in horticulture; because of this, availability of vegetables especially green leafy vegetables and yellow/red vegetables throughout the year at affordable cost both in urban and rural areas has remained an unfulfilled dream. Health and nutrition education emphasizing the importance of consuming these inexpensive rich sources of micronutrients will not result in any change in food habits unless there is harnessing and effective management of horticultural resources in the country to meet the growing needs of the people at affordable cost.

States like Tamil Nadu and Himachal Pradesh have initiated some efforts in this direction; similar efforts need be taken up in other states also. Nutrition At the time of independence the country faced two major nutritional problems; one was the threat of famine and acute starvation due to low agricultural production and lack of appropriate food distribution system. The other was chronic energy deficiency due to poverty, low-literacy, poor access to safe-drinking water, sanitation and health care; these factors led to wide spread prevalence of infections and ill health in children and adults.

Kwashiorkor, marasmus, goitre, beri beri, blindness due to Vitamin-A deficiency and anaemia were major public health problems. The country adopted multi-sectoral, multi-pronged strategy to combat the major nutritional problems and to improve nutritional status of the population. During the last 50 years considerable progress has been achieved. Famines no longer stalk the country. There has been substantial reduction in moderate and severe undernutrition in children and some improvement in nutritional status of all segments of population.

Kwashiorkor, marasmus, pellagra, lathyrism, beri beri and blindness due to severe Vitamin-A deficiency have become rare. However, it is a matter of concern that milder forms of Chronic Energy Deficiency (CED) and micronutrient deficiencies continue to be widely prevalent in adults and children. In view of the fact that population growth in India will continue for the next few decades, it is essential that appropriate strategies are devised to improve food and nutrition security of families, identify individuals/families with severe forms of CED and provide them assistance to over come these problem

Operational strategy to improve the dietary intake of the family and improve nutritional status of the rapidly growing adult population would include: •Ensuring adequate agricultural production of cereals, pulses, vegetables and other foodstuffs needed to fully meet the requirement of growing population. • Improving in purchasing power through employment generation and employment assurance schemes; •Providing subsidised food grains through TPDS to the families below poverty line. Exploring feasibility of providing subsidized coarse grains to families Below Poverty Line (BPL) Operational strategies to improve health and nutritional status of the growing numbers of women and children include: * Pregnant and lactating women – screening to identify women with weight below 40 Kgs and ensuring that they/ their preschool children receive food supplements through Integrated Child Development Services Scheme (ICDS); adequate antenatal intrapartum and neonatal care. 0-6 months infants – Nutrition education for early initiation of lactation protection and promotion of universal breast feeding, exclusive breast feeding for the first six months; unless there is specific reason supplementation should not be introduced before 6 months and immunisation, growth monitoring and health care. * Well planned nutrition education to ensure that the infants and children do continue to get breasted, get appropriate cereal pulse vegetable based supplement fed to them at least 3 – 4 times a day , appropriate help in ensuring this through family/community/work place support and immunisation and health care. Children in the 0 – 5 age group – screen by weighment to identify children with moderate and severe undernutrition , provide double quantity supplements through ICD , screening for nutrition and health problems and appropriate intervention. * Primary school children – weigh and identify those with moderate and severe chronic energy deficiency, improve dietary intake to these children through the mid-day meal. Monitor for improvement in the identified undernourished infants, children and mothers; if no improvement after 2 months refer to physician for identification and treatment of factors that might be responsible for lack of improvement. * Nutrition education on varying dietary needs of different members of the family and how they can be met by minor modifications from the family meals. Intensive health education for improving the life style of the population coupled with active screening and management of the health problems associated with obesity. chapter – 5 Strategies to Achieve Population Stabilization

Fertility decline in India has been the effect of various socio-economic developments as well as government sponsored family welfare programme. Rising levels of education, increase in female age at marriage, influence of mass media, economic development, gender empowerment and measures for equality, continuing urbanization, diffusion of new idea, and declines in infant and child mortality have all contributed in lowering the levels of fertility. These factors, along with strong health infrastructure and focused family welfare programme, will continue to be driving the fertility transition.

Even at the national level, the views regarding the ideal number of children are fast approaching the two child norm. But at the same time, preference for sons is clearly evident in many parts of India. The regional difference in fertility level is also likely to continue for many more years. Given this context, what are the strategies that can be adopted to achieve the population stabilization within a reasonable time period? National Rural Health Mission (NRHM) Recognizing the importance of health for social and economic development and for improving the quality of life, the Govt. f India launched the National Rural Health Mission (NRHM) in 2005 to carry out the necessary correction and strengthening of basic health care delivery system. The Plan of Action of NRHM envisages increasing public expenditure on health, reducing regional imbalances in health infrastructure, pooling resources, integration of organizational structures, optimization of health manpower, decentralization and district management of health programmes, community participation and ownership of assets and providing public- private partnership.

The goal of the mission is to improve the availability of and access to quality health care of the people, especially for those residing in rural areas, the poor, woman and children. The expected outcomes from the Mission as reflected in statistical data are: IMR reduced to 30/1000 live births by 2012. Maternal Mortality reduced to 100/100,000 live births by 2012. TFR reduced to 2. 1 by 2012. Malaria Mortality Reduction Rate – 50% up to 2010, additional 10% by 2012. Kala Azar Mortality Reduction Rate – 100% by 2010 and sustaining elimination ntil 2012. * Filarial/Microfilaria Reduction Rate – 70% by 2010, 80% by 2012 and elimination by 2015. * Dengue Mortality Reduction Rate – 50% by 2010 and sustaining at that level until 2012 * Cataract operations-increasing to 46 lakhs until 2012. * Leprosy Prevalence Rate – reduce from 1. 8 per 10,000 in 2005 to less than 1 per 10,000 thereafter. * Tuberculosis DOTS series – maintain 85% cure rate through entire Mission Period and also sustain planned case detection rate. • Upgrading all Community Health Centers to Indian Public Health Standards. tilization of First Referral Units from bed occupancy by referred cases of less than 20% to over 75%. * Engaging 4,00,000 female Accredited Social Health Activists (ASHAs). The NRHM (2005-12) seeks to provide effective health care to rural population throughout the country with specific focus on 18 states that have weak public health indicators and poor health infrastructure. National Population Policy The immediate objective of the National Population Policy is to meet all the unmet needs for contraception and health care for women and children.

The medium-term objective is to bring the TFR to replacement level (TFR of 2. 1) by 2010 and, the long-term objective is to achieve population stabilisation by 2045. The Policy has set the following goals for 2010: * universal registration of births and deaths, marriages and pregnancies; * universal access to information/counselling and services for fertility regulation and contraception with a wide basket of choices; * to reduce the IMR to below 30 per 1,000 live births and a sharp reduction in the incidence of low birth weight (below 2. kg. ); * universal immunisation of children against vaccine preventable diseases; * promote delayed marriage for girls, not earlier than the age of 18 and preferably after 20 years; * achieve 80 per cent institutional deliveries and increase the percentage of deliveries conducted by trained persons to 100 per cent; * containing of STD reduction in MMR to less than 100 per 100,000 * universalisation of primary education and reduction in the drop-out rates at the primary and secondary levels to below 20 per cent for both boys and girls.

Several states/districts have demonstrated that the steep reduction in mortality and fertility envisaged in the National Population Policy are technically feasible within the existing infrastructure and manpower. All efforts are being made to provide essential supplies, improve efficiency and ensure accountability – especially in the states where performance is currently sub- optimal – so that there is incremental improvement in performance.

An Empowered Action Group attached to the Ministry of Health and Family Welfare has been constituted in 2001 to facilitate capacity building in poorly performing states/districts so that they attain the goals set in the Policy. If all these efforts are vigorously pursued it is possible that the ambitious goals set for 2007/2010 may be achieved. National Commission on Population The National Commission on Population adopting the small family norm; was constituted on 11 May 2000 under the chairmanship of the Prime Minister. The Deputy Chairman of the Planning Commission is the vice chairman.

The Commission has the mandate to: * review, monitor and give direction for the implementation of the National Population Policy with the view of achieving the goals it has set; * promote synergy between health, educational, environmental developmental programmes so as to hasten population stabilization; * promote inter-sectoral coordination in planning and implementation of the programmes through different agencies at the Centre and in the states; and * develop a vigorous people’s programme to support this national effort.

A Strategic Support Group consisting of secretaries of concerned sectoral ministries has been constituted as a standing advisory group to the Commission. Nine working groups were constituted to look into specific aspects of implementation of the programmes aimed at achieving the targets set in the National Population Policy. NCP has allocated funds for action plans drawn up by district magistrates in poorly performing districts to implement programmes aimed at accelerating the pace decline in fertility.

Meeting the unmet demand for contraception The NPP document lays great stress on meeting the unmet need for contraception as an instrument to achieve population stabilization. The presence of high level of unmet need for contraception in EAG states is not a myth, as it is supported by data from both NFHS and DLHS. But it would be a mistake to assume that inadequate access to services should be the dominant, or even a major, explanatory factor for its presence.

As a carefully conducted in depth investigation in the Philippines had shown, unmet need for contraception could arise from several reasons, such as weak motivation, low female autonomy, perceived health risks, and moral objection to the use of contraception. The elimination of these factors, and thus the unmet need, could prove to be as difficult as generating fresh demand for contraception. According to the DLHS Round 2 (2002-2004) 21 percent of women in India have an unmet need for family planning.

The unmet need for limiting is higher (13 percent) as compared to unmet need for spacing (9 percent). Total unmet need is highest among the younger women an

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Did the Indian Mutiny of 1857 Create the British Raj?

Did the Indian Mutiny of 1857 create the British Raj? The Indian Rebellion of 1857, which was also called the Indian Mutiny, or the War of Independence was a turning point in the history of Britain in India. However, whether this lead to the formation of the British Raj, will be explicitly explored in this essay. The East India Company traded in cotton, silk, tea and opium. They won over Bengal after gaining victory in the Battle of Plassey in 1757, under Robert Clive.

The East India Company functioned as the military authority in growing sections of India, as well. By 1770, heavy taxation and other policies had left millions of Bengalis deprived. While British soldiers and traders made their fortunes, the Indians starved. Between 1770 and 1773, about 1/3 of the population died from famine. At this time, Indians also were barred from high office in their own land, which meant people like Robert Clive had more opportunities and privileges. The British considered them inherently corrupt and untrustworthy.

The Company began to vigorously expand its area of control in India, making it easier for young aristocrats from Britain to exploit its potential. The British felt there were two positive economic benefits provided by the India. It was a captive market for British goods and services, and served defence needs by maintaining a large standing army at no cost to the British taxpayer. Amongst these benefits were the large scale capital investments in railways, canals and irrigation works, shipping and mining; the commercialisation of agriculture and the establishment of an education system in English.

This emphasised law and order creating suitable conditions for the growth of industry and enterprise; and the integration of India into the world economy. Conversely, the British Raj are criticised for leaving Indians poorer and more prone to devastating famines; exhorting high taxation in cash from penniless people. Also, draining Indian revenues to pay for an army beyond India’s own defence needs and servicing a huge debt. This was the result of the economic power left in British hands. In 1784, the Board of Control was established, this gave British Parliament he right to oversee all aspects of the East India Company. The Governor General managed the Board of Control, he was was appointed by the British Government, this meant that the British had control over the east India Company, giving them the power to impose restrictions on certain prospects. There was a great deal of racial distrust between the British and Indians living in India at the time of the British Raj. Moreover, many Indians despised the English, they felt that they were only concerned about their own Industrial Growth this made them uneasy with the new ‘Alien Rule’.

Many were unhappy with the rapid cultural changes imposed by the British. They worried that Hindu and Muslim would be ‘Christianized’, mainly by the missionaries. There is some truth to these statement, but there were a number of other underlying causes for the rebellion. The Indian soldiers were believed to be under a ‘double rule’, both a military and religious rule, which meant the two often came into conflict, causing them vast problems. One of these problem was the cause of The Great Rebellion.

The main reason the Indian Sepoys mutinied against their British commanders was because they had heard that the newly issued rifle cartridges were greased with pig and cow fat, making them unacceptable for both Hindu and Muslim soldiers. This led to a monumental outbreak, as the Muslims and Hindus rebelled ceaselessly. What started as a small conflicting group of Indian soldiers from a single regiment, soon expanded to a vast number of Indian Sepoys fighting for their integrity and freedom.

Following the Indian Mutiny, the East India Company was abolished by Act of Parliament and the British crown assumed full rule of India. The British used violence and negotiation to put an end to the Uprising, resorting to merciless tactics to restore order. This created resentment, opportunity for revenge and long-term problems. They used fear to breed control, which was very disorderly. The British dispatched more troops to India and eventually succeeded in putting down the mutiny. Many sepoys who had surrendered were executed by British troops.

To ensure that British rule could never be threatened in such a way again the Indian Army was reorganised so that it needed its British components to function effectively. Alternatively, the British should have dealt with this issue in a more political and diplomatic way, instead of as an act of vengeance. The conflicts of 1857 and 1858 were brutal and bloody, The bitter legacy of murder and mutilation of atrocities committed by both sides circulated in newspapers and illustrated magazines in Britain, poisoning relationships for decades.

The Government of India act 1935 gave Indian provinces more independence. For the first time direct elections were introduced and the right to vote was increased from seven million to thirty-five million. The British government never actually intended to take control of India, but when British interests were threatened the government had to step in. The embodiment of the new British rule in India was the office of the Viceroy. British rule from the time after the mutiny is often called the Raj.

During this period small amount of British officials and troops (about 20,000) ruled over 300 million Indians. This was often seen as evidence that most Indians accepted and even approved of British rule. Undoubtedly, Britain could not have controlled India without the co-operation of Indian princes and local leaders, as well as huge numbers of Indian troops and many others. Moreover, British rule of India was maintained by the fact that Indian society was so divided that it could not unite against the British.

In fact, the British encouraged these divisions. The British embarked on a furious policy of “Divide and Rule”, fomenting religious hatred as never before. The better-off classes were educated in English schools. They served in the British army or in the civil service. They effectively joined the British to rule their poorer fellow Indians. For much of the 1800s the average Indian peasant had no more say in the way they were ruled than did the average worker in the United Kingdom.

The British view tended to portray British rule as a charitable exercise – they suffered India’s environment (climate, diseases) and in return they bought India a good government and economic development (railways, irrigation, medicine). On the other hand, Ruling India brought huge benefits to Britain. India’s huge population made it an attractive market for British industry. In the 1880s, about 20% of Britain’s total exports went to India. By 1910 these exports were worth ? 137 million.

India also exported huge quantities of goods to Britain, especially tea, which was drunk or exported on from Britain to other countries. Then there were the human resources. The Indian army was probably Britain’s single greatest resource. Around 40% of India’s wealth was spent on the army. This army was used by Britain all over the world, including the First and Second World Wars. It was the backbone of the power of the British empire. In 1901, the British viceroy of India, Lord Curzon, said ‘As long as we rule India, we are the greatest power in the world.

If we lose it we shall straight-away drop to a third rate power’. Overall, I have a mixed opinion on whether that Indian Mutiny of 1857 did actually create the British Raj. They used the same tactics the East India Company used, divide and conquer. They broke India up into small kingdoms and put a native Raj in power over that Kingdom. In this way no Raj had enough power to challenge British Rule. Therefore, I have come to the conclusion that the Indian Mutiny did in fact contribute towards strengthening the British Raj, yet did not ultimately create it.

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India: Foreign Trade Policy

India: Foreign Trade PolicyAlthough India has steadily opened up its economy, its tariffs continue to be high when compared with other countries, and its investment norms are still restrictive. This leads some to see India as a ‘rapid globalizer’ while others still see it as a ‘highly protectionist’ economy.

Till the early 1990s, India was a closed economy: average tariffs exceeded 200 percent, quantitative restrictions on imports were extensive, and there were stringent restrictions on foreign investment. The country began to cautiously reform in the 1990s, liberalizing only under conditions of extreme necessity. Since that time, trade reforms have produced remarkable results. India’s trade to GDP ratio has increased from 15 percent to 35 percent of GDP between 1990 and 2005, and the economy is now among the fastest growing in the world.

Average non-agricultural tariffs have fallen below 15 percent, quantitative restrictions on imports have been eliminated, and foreign investments norms have been relaxed for a number of sectors. India however retains its right to protect when need arises. Agricultural tariffs average between 30-40 percent, anti-dumping measures have been liberally used to protect trade, and the country is among the few in the world that continue to ban foreign investment in retail trade. Although this policy has been somewhat relaxed recently, it remains considerably restrictive.

Nonetheless, in recent years, the government’s stand on trade and investment policy has displayed a marked shift from protecting ‘producers’ to benefiting ‘consumers’. This is reflected in its Foreign Trade Policy for 2004/09 which states that, “For India to become a major player in world trade … we have also to facilitate those imports which are required to stimulate our economy. “India is now aggressively pushing for a more liberal global trade regime, especially in services. It has assumed a leadership role among developing nations in global trade negotiations, and played a critical part in the Doha negotiations.

Regional and Bilateral Trade AgreementsIndia has recently signed trade agreements with its neighbors and is seeking new ones with the East Asian countries and the United States. Its regional and bilateral trade agreements – or variants of them – are at different stages of development:  * India-Sri Lanka Free Trade Agreement, * Trade Agreements with Bangladesh, Bhutan, Sri Lanka, Maldives, China, and South Korea. * India-Nepal Trade Treaty, * Comprehensive Economic Cooperation Agreement (CECA) with Singapore. Framework Agreements with the Association of Southeast Asian Nations (ASEAN), Thailand and Chile. Preferential Trade Agreements with  Afghanista, Chile, and Mercosur (the latter is a trading zone between Brazil, Argentina, Uruguay, and Paraguay). World Bank InvolvementAs a number of research institutions in the country provide the Government with good, just-in-time, and low-cost analytical advice on trade-related issues, the World Bank has focused on providing analysis on specialized subjects at the Government’s request.

In the last three years, the Bank has been working with the Ministry of Commerce in a participatory manner to help the country develop an informed strategy for domestic reform and international negotiations. Given the sensitivity of trade policy and negotiation issues, the Bank’s role has been confined to providing better information and analysis than was previously available to India’s policymakers.

World Bank ReportsOver the last two years, the World Bank has completed two reports:Sustaining India’s Services Revolution: Access to Foreign Markets, Domestic Reforms and International Negotiation: The study concludes that to sustain the dynamism of India’s services sector, the country must address two critical challenges: externally, the problem of actual and potential protectionism; and domestically, the persistence of restrictions on trade and investment, as well as weaknesses in the regulatory environment.

From Competition at Home to Competing Abroad: The Case of Horticulture in India: This study finds that the competitiveness of India’s horticulture sector depends critically on efficient logistics, domestic competition, and the ability to comply with international health, safety and quality standards. The study is based on primary surveys across fifteen Indian States. A third study, dealing with barriers to the movement of professionals is under preparation.

The Bank has also held a number of workshops and conferences with a view to providing different stakeholders with a forum to express their views on trade-related issues. | | | | | Permanent URL for this page: http://go. worldbank. org/RJEB2JGTC0| | Publications| * Studies on India-Bangladesh Trade (Vol. 1 of 2)  * Studies on India-Bangladesh Trade (Vol. 2 of 2)  * Sustaining India’s Services Revolution | | | | | | * Home |  * Site Map |  * Index |  * FAQs |  * Contact Us |  * Search |  *  RSS|

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Tv Channels Project India in a Bad Light

TV Channels project India in a bad light Recently the rise of consumerism and a spurt in the number of satellites in the vicinity of our planet have led to rise in the number of TV Channels as well as their viewers across the country. We have specialized channels that cater to the different categories of human taste viz entertainment, music, news,sports,etc. The wider availability of channels helps the viewer to opt among them as per his or her choice. The news channels which are clubbed together in a word ‘media’ is one of the pillars of democracy. It is the moral duty of these news channels to bring the truth in front of the masses.

Talking about our country,a nation which is second largest in the world in the terms of population and the largest effective electorate is truly an exemplar of democracy. Like any other nation,it is also laden with issues-both domestic as well as of international concerns. These news channels bear the social responsibility of imparting the news, the happenings,the incidents or accidents which should be nothing but the truth. Also the RTI Act empowers any common Indian citizen to go to the depths of affairs and have access to information povide its disclosure does not pose a grave threat to the security and integrity of the nation.

The ‘truer’ picture sometimes become harsh and pretty inconvenient to be comestible but scandals and other activities of corruption need to be brought to general awareness. And, it is not only the darker side of affairs, it is also about the achievements and the milestones the country makes in the various spheres-sports, science, humanities,etc. We have several programmes on the national television that are oriented towards the cultural and economic welfare-be it related to the promotion of agriculture,tourism,industry,services,etc.

Besides there are programmmes which highlight the nations prosperity, its geographical and cultural diversity and also encourage communal harmony. The consumer oriented channels which basically thrive on the TRP ratings,drama and screenplay is of prime concern to them which helps in a maintaining a certain class of audience bound to it. The audience is engrossed as the way the theme is displayed has a glamour, a pomp and show associated with it. For this, they may exaggerate certain situations or circumstances.

Nonetheless,they impart a social message under the rosy spicy recipe of drama-be it child marriage,female foeticide,’honour’ killings,terrorism, etc. And, when a guy from the lower strata of society manages to win 5 crores in a game show by the dint of his knowledge and labour besides a grace of fortune,it clearly sends a strong signal to the society about the reachability of the capital to the masses. Last but not the least,the image of the news channels and the media might have been tainted over the issue of ‘paid’ news and the dubious string operations but their importance cannot be undermined as a source of public information.

There are reality shows which do not miss a opportunity to jeer at the widespread corruption but yes, one needs to appreciate them for their creativity for the ways they adopt to entertain people. It was an eminent personality of Bollywood who blogged regarding a movie getting Oscars with an acerbic response that the jury gets a kind of emotional satisfaction watching the widespread Indian poverty and the slums which the director of the movie has encashed upon. If that be the bitter truth, so be it.

There are movies which highlight the unity , the cultural diversity , the celebrations in our country. It would be too early to conclude that TV Channels project our nation in a bad light. Frankly speaking, a sugar coated truth is the better word. Allowing mobile phones in class make students less serious in studies The world is getting smaller and we are living in the era of a ‘global village’ where communication and the exchange of ideas happens within the wink of an eye. Information is the key and the power,truly. And, there are several tools and gadgets that facilitate this flow of information.

From print media to digital and electonic media, which are primarily used as means of mass communication, we have telephones and mobile phones which are important means of personal communication. Moreover, the recent splurge in the usage of gizmos and gazettes among the generation Y and the youngsters has becomea fad and a status symbol rather than a necessity and mobiles are no exception to it. Their use is not confined to a mere tete-a tete but incorporates several varied applications which diversifies their usage.

And a modern day youngster would not be satisfied with a simple Nokia 3600 or1100. He or she would go for the more sophisticated or sleek designs provide there is no hole in the pocket created. Now, coming to the usage of mobile phones inside a class, there are norms which are both discipilnary and moral and make sufficient common sense,whch direct both the teacher/professor and the students who are partcipating in a lecture to put off their cells or keep them in such a mode which aviodsunnecessary distraction.

But even the norms which are rarely followed in totto, and even when followed put a cap or restriction to their use as they are intended to. Ina large gatheing being addressed and lectured to,where it becomes increasingly difficult to keep track of each and every student, there are hubs created inside the class where students fail to get engrossed in the monotonous lectures and find their own ways to do away with the time to which cellphones prove to be a great aid.

It may include sharing information regarding the latest cell that the neighbour has recently bought, or texting to the pal sitting at the other corner regarding the shabby outlook of the professor,to playing games like snakes,tetris or other advanced versions to listening to songs and watching videos(of all kinds) on the tiny screen. The world of SMSes ahs virtually made the students handicapped of writing anything sincerely as they still cannot help writing those abbreviations of informal chat even when they are writing an answer to aquestion which clearly indicates to their frivolous attitude.

Adding to the worse of it,these students would just take a snapshot of te notes of a sincere and laborious classmate thinking that it would suffice and save my time and labour getting ‘wasted’. One may put forth the argument that even during the non mobile days there were always a section of students who were a source of nuisance and distraction by their activities . But the inadvertent entry of mobiles inside the classes provide innumerable creative ways to bolster their activities.

A serious student who is trying his/her best to concentrate and attend the lecture would surely look askance at the slim mobile phone his pals are discussingabout for long. Now this seriously puts forward 2 very primary questions;first,why the pattern of education becomes so dread ful and tedious which call s for the students to distract and second, why cant we cater to the students interests and inclinations so that they are provided room to choose the lecture they want to attend?

Mobile phones are just the present and a lame excuse for ignorance,we need to find the root cause and address it prooperly rather than to contemplate over its complete ban or usage. However, a partial ban like prohibiting its use during the class hours and allowing only after it, seems a temporary but an effective solution as per the need of the hour.

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Structures of Legal Restraint, Oh Police Powers in India

The Ibakkar – Natarajan Commission Part one of the Nanawti Commission report, probing into the Godhara incident in Gujarat, released last month has once again opened the Pandora’s Box over logic of setting up Inquiry Commissions in the country. The report while giving clean chit to the Narendra Modi Government has supported the theory of conspiracy, leading to a widespread criticism across the country. Many call it ‘eye wash’ and other call it ‘sponsored report’. Communists have termed it a ‘piecemeal’ and fabricated report, whereas; National Democratic Alliance (NDA) calls it ‘triumph of truth’.

Justice Nanawati report in fact contradicts the UC Banerjee report which also probed the Godhara incident. How a single incident draws two extreme conclusions? The two reports have raised a very debatable issue. What do judicial commissions, appointed by the various governments to examine issues ranging from riots, scandals and assassinations to inter-state disputes actually achieve? Critics of commissions say that their recent history has been extremely spotty. Apart from taking inordinately long to deliver reports, they seldom achieve anything.

Keeping apart from such allegations and counter allegations, the issue that has again come to fore is whether an inquiry commission can substitute criminal prosecution? Do these Commissions serve any purpose? Is it not an eye wash? Are these Commissions able to bring culprits to book? Are not Commissions of inquiry a waste of time and money? To understand the entire issue, one has to discuss the Commission of Inquiry Act, 1952 itself. Before this Act came into being, the governments used to order an inquiry by executive notifications under Public Service Inquiry Act, 1850.

Sometimes, they used to enact adhoc and temporary legislations too. To meet the public demand for impartial and judicial inquiries, the Government of India came out with a comprehensive legislation, which resulted into passage of this Commission of Inquiry Act, 1952. Since its enactment, the constitution of Inquiry Commissions has become a tool for the various governments to subside the public anger. Since Independence, more than a hundred Inquiry Commissions have been set up, but a very few have served the purpose. And the reasons are obvious.

First, the provisions enshrined in this Act are not of deterrent in nature and secondly, most of the time the Commissions are set up under retired Judges for obvious reasons. Section 4 the Act provides for powers and it is clear that the Commission has no power to compel a person to adduce before it and give evidence. It cannot pass verdicts or judgments which could be enforceable. The helplessness is such that even if an offence has been committed in view of or in presence of Commission, the Commission needs to forward the case to the Magistrate for trial as provided in Criminal Procedure code.

The appointment of retired Judges, as head of the Commission is very much suitable for the government. It is not merely a chance that one Judge has headed more than one Commission. The public perception is such that these Inquiry Commissions are becoming post retirement placement schemes for the favourite retired Judges. We have a long list of such Commissions, which have made inordinate delay in submitting their reports. Many of them have taken decades in so called “conducting inquiries” and even then the report which was submitted were so voluminous that we required another committee to find out ays to implement the recommendations. For example, as many as ten Commissions or committees have so far been set up with regard to the anti-Sikh riots in Delhi after the assassination of former Prime Minister Indira Gandhi. First of all it was the Marvah Commission headed by Additional Commissioner of Police Ved Marvah, that was set up in November, 1984. The Commission was about to finish the assigned task when it was abruptly wounded up in May 1985 and a new Commission headed by Justice Rangnath Misra was constituted. The new Commission was asked to carry out further inquiry hitherto done by the Marvah Commission.

The Justice Ranganath Mishra Commission which was appointed under Section 3 of The Commissions of Inquiry Act, 1952, was asked to inquire into “allegations” of violence and not to inquire into the “nature” of violence, a departure from the terms of reference of over a dozen other commissions on communal disturbances since Independence. It is needless to mention that what has happened to reports and how much amount have been spent on these exercises. Has any prominent leader been punished so far? Many persons, against whom leveled charges were being inquired into, have died.

Such are the frustrating results of these Commissions and Committees. As far as time and money aspect of these Commissions are concerned, its enough to look into the expenses of just couple of Commissions to understand the quantum of impact—both in terms of the amount and time spent. The one that tops the chart is the Liberhan Commission. Set up under retired Justice M S Liberhan on 16 December, 1992 to probe into Babri mosque demolition, the Commission has so far been given more than 41 extensions. Overall the government has already spent Rs 90 million on this single man inquiry Commission, which is yet to come out with its report.

Similarly, Justice B N Kripal Commission of inquiry was set up on 13 July, 1985 to probe into the bombing of the Air India Flight 182 on 23 June, 1985 which led to the crash of this plane into the Atlantic Ocean leaving 329 passengers including crew dead. The Commission submitted its report after extensive tours of countries like Canada and USA but when the prosecution began, nothing could be proved and none could be punished. The entire ‘investigation and inquiry’ went in vain. It is needless again, to calculate the amount which was spent on such inquiries.

Phukan Commission was set up to probe the Tehelka expose into fictitious defence deals. Everyone saw the tape on television and the then Government just to avoid immediate legal course, set up this Commission. In May 2005 the Newsweek reported that Justice Phukan along with his wife and eight officials used IAF plane and went to Pune, Mumbai and Shirdi. The Ministry later said that the Judge was not entitled to use the military plane and it was made available to him by the then government in order to influence the Judge. Such allegations and incidents definitely erode public faith in such Commissions.

The situation is such that every Government in power uses this provision to oblige the retired judges. In Bihar for example, Justice Amir Das Commission was set up to probe into the alleged connections of political leaders with a banned outfit called Ranveer Sena in 1997. The Commission was finally wounded up in 2006 as it could hardly do anything except for some tours and recording the statements some leaders in over eight years of its existence. Similar is the case of Justice Ali Ahmed Commission that was set up to look into excess withdrawal in 1996.

In fact, very little is known about the outcome of the Commission, including the recommendations that it submited or the actions taken by it. Commission under Justice R C P Sinha and Justice Samsul was set up on Bhagalpur communal riot in 1989. Reports were submitted in 1995. But when the new government came to power it set up N N Singh (retired Justice) Commission to investigate the matter again. In 2008 a Commission under retired judge Sadanand Mukherjee was set up to probe into the Kahalgaon police firing. This commission is still a non starter vis-a-vis investigation of the incidence.

Not to miss the fact that when the recent breach in Kosi embankment that caused a major flood in Bihar led to lot of allegations and counter allegations, the state government was quick to constitute a Commission under Rajesh Walia, again a retired Judge to probe into it. And while there is no bias against the judiciary or the retired judges, who are a national repository of knowledge as far as judicial matters are concerned, the question needs to be examined is whether a Commission can substitute the country’s criminal investigation system.

How can a Judge be better equipped to do forensic test, do scientific investigations than a professionally trained police officer? Has the Commission power to make arrests to the persons likely to tamper evidences? The answer to these and many such questions has been provided by a two Judge commission itself. Set up by in 1987 to investigate the Fairfax Deal, the Justice Thakkar and Natarajan Commission in its report have said that the Commission of Inquiry Act was “ineffective and toothless”. They two, in fact, devoted one full chapter on the inadequacies of this Act.

It is important to note that India has a criminal justice system, which is based on the twin pillars of investigation and dispensation of justice. How can the Judiciary be asked to do the work of investigation, which is the work of the State as enshrined the law of the land? The Criminal Procedure Code and for that matter entire Criminal Justice System is erected on this principle (Article 50 of Chapter IV on Directive Principles of State Policy) and perhaps it is due to this principle, that the judiciary and executive have been completely separated in 1973, when the Code of Criminal Procedure was amended.

Besides, most of these Commissions, after years of its investigation, usually submit reports that are so voluminous that it again requires some committees to suggest measures to implements the recommendations. Not to talk about the fact that such reports are not obligatory and mandatory for the government to implement. It is also worthwhile to mention here that the Judiciary in India is an independent system and that is precisely the reason why Article 220 restricts practise by retired Judges. The idea is that there should not be any scope, whatsoever, of favour or disfavour by the serving Judges.

By appointing the retired Judges in these Commissions or for that matter in any other body tends to clearly violate the spirit of the Constitution itself. What is more shocking is that instead of modernising and equipping the investigating agencies to probe into such serious issues of national shame, the country has been a mere spectator to the cosmetic make ups. In India, every one knows about the ‘normal’ pace of the court proceedings, and so all these commissions, needless to say have virtually become black holes.

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A Passage to India: Culture Clash

CONTEXT British context ?Forster was a British writer and most of his readers were British. His work reflects also England and the period in which Forster lived and wrote. He is commonly regarded as an Edwardian novelist, because his first four novels were published during the reign of King Edward VII (1901-1910); in this period his values and outlook were developed. ?England had undergone the traumatic experience of the First World War; more than 750000 soldiers were killed, along with another million from other parts of British Empire. Between 1912 and 1924, the British policy had also changed: there were two main parties, the Liberal and the Conservative. ?British Empire was changing. The change was more evident in Ireland. Ireland gained the indipendence in 1921. KEY POINTS ?FULL TITLE: “A Passage to India” ?AUTHOR: Edward Morgan Forster ?TYPE OF WORK: Novel ?TIME AND PLACE WRITTEN: 1912-1924 England ?DATE OF FIRST PUBLICATION: 1924 ?TENSE: Past ?THEMES: Culture Clash; Friendship; Ambiguity; Religion ?CHARACTERS: Dr Aziz, Mr Fielding, Adela Quested, Mrs. Moore, Ronny Healsop ? SETTING ( TIME ): 1910s or 1920s SETTING ( PLACE ): India, specifically the cities of Chandrapore and Mau. Carico… CHARACTERS Dr Aziz ?Is the central Indian character in the novel. ?He works at the government hospital in Chandrapore. ?He writes poetry and his favorite poetic themes are: the Decay of Islam and the brevity of Love. ?He’s described as a true “Oriental” person. ?He’s very goodwill and his impulsive nature get him into situations that cause him trouble. ?Like many of his friends prefers to communicte throught confidences, underlying words and indirect speech ? Like many other Indians struggles with the problem of the English in India.

CHARACTERS Mr Fielding ?The principal of the Government College (that is, a British? run school) in Chandrapore. ?He has “no racial feeling“. ?He’s far and away most the successful at developing relationships with native Indians. ?He’s less comfortable in teacher – student interaction than he is in one -on- one conversation with another individual ? Serves as Forster’s model of liberal humanism. ?At the and of the novel Forster seems to identify with Fielding less. CHARACTERS Adela Quested ?Her character develops in parallel to Mrs Moore’s one ?She’s an individual and educated free thinker Adela hopes to see the “real India” ?She puts her mind to the task, but not her heart and therfore never connects with Indians. CHARACTERS Mrs. Moore ?Mrs. Moore serves a double function in “A Passage to India” ? She’s initially a literal character. ?She becomes more a symbolic presence. ?The solution to the problem in India. ?Her name becomes more associeted with Hinduism ?She’s the heroine of the novel CHARACTERS Ronny Heaslop ?Forster ‘s emphasis is on the change that happened, when Ronny first arrived in India. ?Ronny’s character is a sort of case, an exploration of the restrictions of English colonial. Ronny’s tastes, opinions and even his manner of speaking are no longer his own, but those of older, ostensibly wiser British Indian officials. ?Clash with both Adela and his mother, Mrs. Moore. CHARACTERS There are also some characters that are less important that the previous and are: ? Mahmoud Ali: a Moslem and a close friend of Dr Aziz. ?Major Callender: the head of the government hospital in Chandrapore. ?Professor Godbole: an Indian who teaches at the college of Chandrapore. ?Hamidullah: a Moslem, educated at Cambridge University. ?Mr. McBride: the district superintendent of police in Chadrapore.

Carico… DEEPENING ON FEMALE CHARACTERS ?Adela Quested ?A young Englishwoman who comes to India With Mrs. Moore. ?She is expected to marry Mrs. Moore’s son Ronny Heaslop. ?Her behavior radically affects the lives of the characters around her. ?On a symbolic level, Adela may also represent most people’s inability to communicate or to understand the deeper patterns and meaning of life. While she is at Fielding’s tea party, she remarks that she is not planning to stay long in India. ?She breaks off her engagement with Ronny and stays with Fielding for a while before leaving India and returning to England.

She does not reappear after this. DEEPENING ON FEMALE CHARACTERS ?Mrs. Moore. ?She is the most sensitive and reflective of the English characters. ? An elderly widow, she is the mother of Ronny Heaslop, She also has another son, Ralph, and a daughter, Stella, by her second marriage. ?Mrs. Moore is introduced in Chapter two when she meets Dr. Aziz in the mosque in Chandrapore. Her they talk, and a friendship develops: Aziz is happy to have met an English person who is sympathetic toward him and India, while Mrs. Moore finds Aziz charming, intelligent, and interesting. ?In the meantime, Mrs.

Moore argues with Ronny and when it becomes clear that Ronny and Adela will not marry, Mrs. Moore realizes that her duties there were evidently finished. She doesn’t want to see India; Mrs. Moore has lost interest in the trip. For her, the echo’s message is “Everything exists, nothing has value. ” Shortly thereafter? just before Aziz’s trial? she leaves India; we later learn that she has died on the voyage back to England However, her presence continues to be felt after her death. ?At the end of the novel, the spirit of Mrs. Moore returns to India symbolically in the form of her daughter Stella, who has married Mr.

Fielding. THEMES Culture Clash ?The clash between two differents cultures, those of the east and those of the West. ?The West is represented by the Anglo – Indians in Chandrapore. ?Their social life centers around the Chandrapore Club. ?They have no desire to “understand” India or Indians. ?The East is represented by the Indians. ?We have a clash also between two distinct group of Indian: Moslems and Hindus. ?“Hindus have no idea of society”. THEMES Friendship ?Is one of the most important things in life. ?There are many friendships : 1. Dr Aziz and his friends Hamidullah and Mahmoud Ali . Dr Aziz and Mrs. Moore 3. Aziz has a curious friendship with Professor Godbole. 4. British and Indians ?Impersonal forces at work in India will not yet allow the friendship between English and Indians. THEMES Ambiguity ?“A Passage to India” is full of ambiguity. ?In chapter 7 are introduced two terms that are repeated several times througthout the novel: “mistery” and “muddle”. ?Doubt and ambiguity surround two different events in the book that occur at the Marabar Caves: 1. Those of Adela. 2. Those of Mrs. Moore. THEMES Religion ?Religion is the major preoccupation in the book. The three parts of the book; Mosque – Cave and Temple, generally correspond to these religions: 1. Aziz loves the cultural aspects of his Islamic heritage. 2. The Anglo – Indians are spokemen of Christianity 3. Professor Godbole is the central Hindu figure in the book. His belief is the most representative of the true spirit of India. STYLE ?“A Passage to India” is written in the third person, with an impersonal narrative voice. ?The narrator is apparently omniscent. ?The narrative focus shifts from a description of external events and enters the consciousness of one character or another. At the same time, however, the narrative withholds a full explanation of certain events, most notably the misadventures that befall Mrs. Moore and Adela Quested at the Marabar Caves. Indeed, in recounting these details, the narrator is ambiguous rather than omniscient. STRUCTURE ?“A Passage to India” is divided into three parts or sections: 1. Part 1 , titeld “Mosque”, takes place during the cool, dry season. 2. Part 2, titeld “ Caves”, takes place during the hot season. 3. Part 3, titled, “Temples”, takes place during the rain season. ?Part 3 is the shortest of the three sections of the novel and might be considered as an epilogue.

SETTINGS ?Chandrapore and in the Marabar Caves ?Within the town itself the author identifies several settings: 1. Civil Station 2. Chandrapore Club 3. Public places ?The third section is set in the town of Mau, a Hindu state several miles from Chandrapore. SETTINGS Although Forster uses poetic license in naming places, the settings correspond to real places in India. The novel’s main city, Chandrapore, is actually based on the Indian suburb Bankipore, part of the city of Patna in the northern region of Bihar. The invented name, however, is not so far fetched.

Forster probably chose this city for its different representation of India: its culture, history, and nature are all noteworthy. The town of Mau, is an example of an Indian hill station, a retreat from Indian plains that offers a serene place of beauty to both tourists and natives. The Marabar Caves about which Aziz knows so little are based on the Jain Temples on the Barabar Hills, once considered a retreat for Jain monks. The most impressive of the four caves on the Barabar Hills is Loma Rishi. The three other caves on the Barabar Hill are Sudama), Karnachopar, and Visvajhopri. SYMBOL ?The most obvious symbols are mosque and cave.

Both for Aziz and Mrs. Moore, the mosque is a symbol of refuge and peace, a sanctuary. The first meeting of Aziz and Mrs. Moore takes place in the mosque at night, under the moonlight. Mrs. Moore has gone to the mosque because she is bored with the play she has been attending at the Chandrapore club. ?The mosque, is a symbol of the “real” India. ?The cave bears some resemblance to the mosque, in that both are closed spaces. Here, however, the resemblance ends. The cave is dark, featureless, and menacing. Although there are many caves at Marabar, it is impossible to distinguish one from another; they are all alike. We don’t know the real meaning of this symbol but It is at least certain that whatever else they might suggest, they stand for misunderstanding and meaninglessness, or what Mrs. Moore calls “muddle. ” THE UNCERTAINTY IN THE CENTRAL EPISODE. ?One of the most unique aspects of Forster’s novel is the uncertainty, the sense of not defined, which is focused on the central episode of the book: the alleged attempted rape in Marabar caves. In fact, the writer says nothing about what actually happened in the caves; in the novel there is a contrast between the before and the after that leaves the door open to interpretation. Forster himself said so very ambiguous, “In the caves there is, a man an hallucination or the supernatural. If I say it becomes whatever the answer, a different book. “ ? This uncertainty is also present in the film: between the before and the after there’s a sharp cut that the viewer can interpret as he wishes, by carefully observing the scene we can feeling that Aziz is actually entered the cave with Adela but we aren’t sure of what he did. EXTRAS Islam Hinduism In Islam, belief in one God is the most important belief.

Their God is called ALLAH, the Almighty, Creator and Sustainer of the universe, who is similar to nothing and nothing is comparable to Him Hinduism is commonly percived as a politheistic religion. Indeed, most Hindus would attest to this, by proffessing belif in multiple Gods. Islam exhorts man to consider himself and his surroundings as examples of Divine Creation. The trees belongs to God, The sun belongs to God… The mayor differences between the Hindu and the Muslim perception of God is the common Hindus’ belif in the philosofy of Pantheism. The common Hindu considers everything as God.

The major difference between the Hindu and Muslim belifs is the difference of the apostrophe “s” Hinduism has a caste system, with four major castes. Members of each are required by strict religious laws to follow hereditary occupations and to refrain from intermarriage or eating with members of another castes. The highest or priestly and intellectual caste is that of Brahmans,. The remain three are: Kshatriya (warrior caste), Vaisya (agricultural caste) and Sudras ( the low caste) In Islam, all humans are created equal, infact Islam rejects characterizing God as favoring certain individuals or nations.

Everyone may distinguish himself and get His favour through virtue and piety. Cow is a sacred animal. Cows can’t be killed or eaten Muslims belive that each person has a body and a soul. Your faith and actions in this life will determine your fate in the life after Death. Hiduists believe in body and soul. Your soul returns to your body after death. Your status of caste in next life depends on your deeds in the previous life.

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State Bank of India vs Icici

? STATE BANK OF INDIA. SBI Debt-Equity ratio : 12. 43 (march’12) A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders.

However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing. The debt/equity ratio also depends on the industry in which the company operates. For example, capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, while personal computer companies have a debt/equity of under 0. 5. ICICI BANK LTD. ?

ICICI Debt Equity ratio: 4. 23 (march’12) Which is the better bank? As we said earlier, SBI’s government backing makes it the more ‘safer’ entity. ICICI by itself does not have the reputation of good quality assets. But it is certainly striving to achieve the same. Both in terms of margins and returns, SBI has had an edge and will continue to have it in the medium term. Having said that investors must carefully weigh the future prospects of both the entities vis-a-vis their respective valuations before taking their pick. DEBT INSTRUMENTS IN INDIA.

Debt Instruments are obligations of issuer of such instrument as regards certain future cash flow representing Interest & Principal, which the issuer would pay to the legal owner of the Instrument. They can also be said to be tradable form of loans. Debt Instruments are of various types like Bonds, Debentures, Commercial Papers, Certificates of Deposit, Government Securities (G secs) etc. The Government Securities (G-Secs) market is the oldest and the largest component of the Indian debt market in terms of market capitalization, trading volumes and outstanding securities.

The G-Secs market plays a vital role in the Indian economy as it provides the benchmark for determining the level of interest rates in the country through the yields on the government securities which are treated as the risk-free rate of return in any economy. The reserve Bank of India has permitted Primary Dealers, Banks and Financial Institutions in India to do transactions in debt instruments among themselves or with non-bank clients. Debt instruments provide fixed return declared as coupon rate.

Retail investors would have a natural preference for fixed income returns and especially so in the current situation of increasing volatility in the financial markets. Now, retail investors are also showing keen interest in Debt Instruments particularly in the Central Government Securities (G-secs). For an individual investor G-secs are one of the best investment options as there is zero default risk and lower volatility in case of G-secs. SBI DFHI is a major player in G-Secs market and widely deals in other debt instruments also. STATE BANK OF INDIA: ) GOVERNMENT SECURITIES: (dates government securities-long term, treasury bills are short term) SBI DFHI Ltd. is a leading Primary Dealer in Government Securities. SBI DFHI Ltd gives investors an opportunity to buy G-Sec / SDLs / T-Bills at primary market auctions of RBI through its SBI DFHI Invest scheme (details available on website ). Investors may also invest in high yielding Government Securities through “SBI DFHI Trade” where “buy and sell price” and a buy and sell facility for select liquid scrips in the secondary markets is offered. ) TREASURY BILLS: SBI DFHI Ltd, is an active player in the both the primary and the secondary market for Treasury Bills with an impressive total outr. ight turnover of Rs. 7,892 crores. 3) Money market instruments : Commercial paper, Certificate of Deposit: 4) non-slr bonds like public sector undertaking (PSU bonds) or corporate bonds 5) Debentures ICICI: 1) Bonds (regular income, tax saving, deep discount bonds etc. ) 2) Unsecured Debentures 3) Commerical Papers 4) certificate of deposit LISTINGS: STATE BANK OF INDIA: NSE . CODE: SBIN BSE CODE : 500112 LSE CODE: SBID ICICI: NSE: ICICIBANK,

BSE: 532174, NYSE: IBN STATE BANK OF INDIA: The declaration and payment of dividends is recommended by the Bank’s Central Board of Directors and approved by its shareholders. The Bank’s decision to declare a dividend depends on a number of factors including but not limited to its profits, capital requirements and overall financial condition. The Central Board may also pay interim dividends from time to time. All dividend payments are made in cash to the shareholders of the Bank. The Bank’s dividend policy is to declare dividends only at the conclusion of the fiscal year. ? ICICI ?

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Indian Education

Felippe Wancelotti Mrs. Amelkin AP Lang 10/4/2012 “Indian Education” Subject: Sherman Alexie delivers an essay portraying his life from a yearly view-point encompassing the 1st to 12th grade. Occasion: Indian misconceptions, mistreatments, stereotypes, and discriminations all affected Alexie on his educational highway and served as a basis for the writing of “Indian Education”.

Audience: Alexie’s audience is primarily those interested in the lifestyle of Native Americans. Purpose: Alexie highlights how he ultimately overcame the hardships suffered during his early years due to his Indian ethnicity and displays how Native Americans were, and continue, to suffer from discrimination. Tone: His tone is saddened and bitter, almost as if he feels sorry for those who couldn’t achieve success alongside him.

Thesis In his essay, “Indian Education”, published in the story collections The Lone Ranger and Tonto Fistfight in Heaven in 1993, Sherman Alexie highlights how he ultimately overcame the hardships suffered during his early years due to his Indian ethnicity and displays how Native Americans were, and continue, to suffer from discrimination.

With the use of clever identically constructed sentences to contrast his academic ascendency with the decline of those around him, powerful segment conclusions to create a spatial effect between different periods of his life in relation to environment and discrimination, and a thematic transition to display how discrimination became imprinted in his mind through consecutive years of mistreatment, Alexei portrays the bitterness associated with the loss of a society. Writing Strategy 1. Alexie sets the scenes up in separate sections with labeled headings to further differentiate each period of his yearly “life”.

His narrative technique provides a spatial effect; each section feels like a new or different period in his life, something that cannot be easily achieved with continuous sentences. He does so to show how rapidly his environment could change, but how his treatment as an individual and the discrimination he received remained the same. 2. The brief conclusions all serve to indicate cold, harsh, and impactful conclusions to his yearly cycle which further emphasize the schism between school years. Some of the conclusions serve different functions, though.

For example, when he ends his third grade segment with “I’m still waiting. ” it is short and impactful; but, when he ends the fifth grade segment with a rhetorical question “Oh, do you remember those sweet, almost innocent choices that the Indian boys were forced to make? ” the segment seems to linger on for a moment longer, portraying that the event had a stronger impression than the previous, shorter conclusion. 3. The thematic transition in the seventh grade segment occurs when he kisses the white girl, and almost as if he betrays his tribe, is sent away to a farm town.

Through the seventh grade transition, the theme transcends from social outcast and discrimination to somewhat unconscious discrimination but social acceptance. Prior to the seventh grade segment, he is explicitly mistreated and bullied, alienated from society. After the seventh grade though, at the farm town, he doesn’t display any direct discrimination, everything he relates and portrays as discrimination is completely indirect and taken as such. 4.

I think he ends with the Class Reunion section to display how the drastic change in his life during seventh grade affected his outcome. The effect this image shows is that the author had to alienate himself from his own society in order to succeed. Those he left behind stayed behind. Language 1. No capitalization serves the purpose of not identifying Indians as a racial ethnicity; the teacher views Native Americans as severely inferior to both herself and society. 2.

Alexie uses the hyperbole to display how no one wanted to be seen around an Indian; they avoided him for “500 years” when they discovered he was Native American. The hyperbole exaggerates the factuality of the event, but it probably felt like 500 years to him. 3. The irony in paragraphs 67 and 68 is that the “Indians” (the school) lost a football game due to him, an Indian. Alexie cannot seem to eradicate these indirect discriminations, and associates them at an emotional level. 4.

Alexie uses the similarly structured sentences to compare himself to those around him. He is different to his environment and its population in almost every way. In paragraphs 29 and 31, Alexie’s sentence regarding himself shows an interest in mathematics, whilst the sentence regarding his cousin, although related to sciences, has a derogatory connotation. In paragraphs 70 and 72 the same style of writing occurs. Alexie is looking “toward the future” whilst his classmates “look back toward tradition”. He is the only one moving forward.

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Stress Management Among Working Womens in India

Stress refers to the pressure and reactions to our environment which results inpsychological and physical reactions. Whilst some stress is good for motivationand increasing efficiency, too much stress can result in negative impacts such asreduced effectiveness and efficiency. More and more people are feeling isolatedand disrespected at work, and this has led to greater occupational stress. Manycompanies have taken to consulting experts and professionals on ways toincrease connectedness and motivation of their employees. Some companies organize parties and make their employees feel valued atwork.

These are measures to motivate employees and help them to feel secureat their jobs, translating into greater productivity. However, not all companieshave such measures in place, and some have not gotten it quite right. Hence, itis up to you to make sure that you can cope with stress at your workplace, anduse it to help you work better. Here are 3 simple steps to help you with copingwith stress in the workplace. Step 1: Raising Awareness Help yourself to identify when you are facing rising levels of stress, tipping thescales from positive to negative.

This is important, as being able to identify signsof being stressed can help you to take steps to ensure that your overall quality of life does not drop. If left unacknowledged, the problem will only snowball, leadingto disastrous consequences to your health and overall wellbeing. You can identify if you are feeling stressed by checking if you have any physicalor psychological reactions, such as excessive sweating or heart palpitations, or the onset of headaches, irritability or the need to escape. If you experience anyof these reactions, identify if you are feeling any overwhelming negativeemotions, and if you are constantly worried.

Step 2: Identify the Cause You need to be able to analyze the situation and identify what is causing the risein stress. These stressors can be external and internal. External stressors refer 18 to things beyond your control, such as the environment or your colleagues atwork. Internal stressors refer to your own thinking and attitude. Often, we onlystart reacting to stress when a combination of stressors working together exceeds our ability to cope. Keep a diary or a list of events that have caused you to feel strong negativeemotions, or that are likely stressors.

This will help you to identify the causes of your stress. Whilst it is not always possible to eradicate them, we can change theway that we cope with it. Step 3: Coping with Stress In order to deal with the situation that is causing you stress, you need to calmyour mind and body so as to stave off the reactions and cope with it in a positiveway. This can be through different methods, such as taking time off. If a situationis triggering your stress and you are unable to calm down, remove yourself fromit. Go outside and take a walk to calm down.

Alternatively, you can tryimplementing relaxation techniques such as deep breathing. If it is an internalstressor, stop your thought process until you are able to deal with it logically. The key to making these 3 steps work for you is to practice them. These are notinstantaneous solutions, and you need to condition your mind and practice themso that you can implement it when you are feeling stressed. (1. 2. 5) Stress Management Stress management is the need of the hour. However hard we try to gobeyond a stress situation, life seems to find new ways of stressing us out andplaguing us with anxiety attacks.

Moreover, be it our anxiety, mind-bodyexhaustion or our erring attitudes, we tend to overlook causes of stress and theconditions triggered by those. In such unsettling moments we often forget thatstressors, if not escapable, are fairly manageable and treatable. 19 Stress, either quick or constant, can induce risky body-mind disorders. Immediate disorders such as dizzy spells, anxiety attacks, tension,sleeplessness, nervousness and muscle cramps can all result in chronic healthproblems. They may also affect our immune, cardiovascular and nervoussystems and lead individuals to habitual addictions, which are inter-linked withstress.

Like “stress reactions”, “relaxation responses” and stress managementtechniques are some of the body’s important built-in response systems. As arelaxation response the body tries to get back balance in its homeostasis. Somehormones released during the ‘fight or flight’ situation prompt the body to replacethe lost carbohydrates and fats, and restore the energy level. The knottednerves, tightened muscles and an exhausted mind crave for looseness. Unfortunately, today, we don’t get relaxing and soothing situations withoutasking. To be relaxed we have to strive to create such situations. Recognizing a stressor:

It is important to recognize whether you are under stress or out of it. Many times,even if we are under the influence of a stressful condition and our body reacts toit internally as well as externally, we fail to realize that we are reacting under stress. This also happens when the causes of stress are there long enough for us to get habituated to them. The body constantly tries to tell us throughsymptoms such as rapid palpitation, dizzy spells, tight muscles or various bodyaches that something is wrong. It is important to remain attentive to suchsymptoms and to learn to cope with the situations. 20

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Marketing Research on Tea Industry in India

MARKET RESEARCH ON MAJOR TEA BRANDS IN INDIA Siddhartha Lodha PG-A History of Packed Tea in India The history of tea dates back to 750-500 BC. Researchers have found that the cultivation and consumption of tea has been taking place since more than a thousand years. However, commercial consumption of tea started with the British rule. It has now become a part of the Indian culture. Tea laid it’s foundation in India at the turn of the 20th century, when the major emphasis was on the exports of Tea.

Earliest reference to a domestic market came from MacKay of Brooke Bond. Equipped with capital and premises, Mackay settled down to serious business. Mackay clearly identified his objectives as to pick up teas suitable for Brooke Bond blends at home, rather than getting them at London and to create and make profitable, a packet and blended tea trade in India and generally in the East. In the early 20th Century, much of India was orthodox and all foreign habits were considered alien and against Indian ethos and culture.

In fact, later, when tea was officially promoted by the Tea Market Expansion Board, strong religious pressure groups launched antitea campaigns against tea drinking. The domestic market was very small and hardly able to sustain. Packing material, mainly caddies and cardboard cartons, were imported the UK and the tea was floor-blended and hand-packed. Sales totalled around 17,000 lbs. and the whole operation produced a loss without inclusion of overheads and other costs.

It therefore needed a great commitment to persevere this kind of a venture. Backed by the promotion and propaganda efforts of the Tea Market Expansion Board that became the Indian Tea Board through the pioneering efforts of Brooke Bond (more about this later), a strong demand was created for tea as a beverage and the Indian masses avidly took to tea. However, much of the fallout of this phenomenon went to loose teas because of the price factor, so we see a strange development in the packet teas trade in India.

In the early years, i. e. the first three decades of the century, the trade was predominantly in the hands of foreign companies and the incipient demand was centered on a small segment, introduced to tea through the Western industrial civilization. The early brand names were based on colors — Red label, Violet label, Green label. The first sale record in India was in April 1903 and the entry reads: Red Label … 720 lbs. Violet Label … 300 lbs. Green Label …180 lbs. The fact that Brooke Bond Red Label recorded 720 lbs. as a very auspicious augury for this famous brand, which attained dizzy heights in later years to become the largest selling brand in the world. The early entrepreneurs of packet tea marketing realised that if the trade had to expand, the purchase price of the tea had to be more affordable for their Indian consumer and the tea had to be better presented. In India however, the main consideration was price, one that the lower economic section of the Indians could afford.

When the brands were first launched in the first decade of the century, the cost of the tea in the packet was roughly 60% of the total price. Despite this, prices were considered high. But the demand had been created and was snowballing — opening the floodgates to loose teas, which were at least 20% cheaper than the corresponding tea in packets. Opinions on the worth and prospects of the internal business seemed gloomy. One opinion was that “Indians can never become tea-minded”.

This was based on the English custom of brewing tea in pots, using a long leaf — a leisurely and luxurious habit. It is interesting to note that very early in the century, the marketers of packet tea recognised that if tea had to be made popular among Indians, it had to be presented differently, keeping in mind the Indian cooking habit of boiling. So dust tea was born. ‘Kora’ was the first brand to be introduced by Brooke Bond in paper form packets. The real expansion of the packet business in India came in the early l920s, with the introduction of the direct selling system by Brooke Bond.

As was said earlier, the distribution was left in the hands of distributors and stockists who could do a maintenance job but could not do anything to create demand. The depot system or direct selling system helped in introducing tea to the vast population of India but it meant a heavy investment in marketing in the earlier years. It helped in establishing a two-way communication between the salesman and retailer and cemented a personal relationship between them. For a product like tea, where freshness was an important factor, it helped in ensuring stock rotation.

Under this system, the companies like Brooke Bond and Lipton, who followed suit through their own personnel, called on all retail outlets on a regular basis and supplied tea on a cash-on-delivery basis. There was no need for the retailer to carry any large inventory, as the calls were on a weekly basis. The system backed by the effective propaganda by the Tea Board really sparked off a consumption explosion, taking India to the position of the largest tea-drinking nation in the world. Today tea has become established as a food habit in all socio-economic sections.

In India, tea is an essential item of domestic consumption and is the mostly consumed beverage. Further, tea is the cheapest beverage amongst all the beverages that are available in India and it is very popular amongst all sections of India society. The Indian tea industry engages around 20 lakh of workers, directly and they mainly represents the under privileged sections of the India society. The Tea Business in India registered a total turnover of Rs. 10,000 crore in the previous year. Top Tea Brands in India

Brooke Bond has touched millions of consumers with a range of tea offerings appealing to the diversity of their tastes. It has the strongest foothold amongst any of the tea brands in India and touches the homes of over 500 million consumers. The values and personality of the master brand Brooke Bond reflect a warm, sociable, approachable, perceptive and dependable entity. Brooke Bond is the tea expert that selects the best at every stage – from the garden to the cup. The brand, therefore, is seen to offer the appropriate teas for all tea moments in the consumers’ lives.

Brooke Bond offers a strong portfolio of four sub-brands namely, Brooke Bond Taj Mahal, Brooke Bond Red Label, Brooke Bond Taaza & Brooke Bond 3 Roses. The range offers a full variety of benefits as well as price points to cater to diverse sections of society. For over 4 decades, Taj Mahal has been the gold standard of tea in India. It has been a pioneer of innovations in the Indian tea market First Premium Tea Brand First to introduce tea bags First to usher in new formats and concept, like instant tea – Dessert Tea Brand ambassadors personify the true essence of Taj Mahal (Ustaad Zakir Hussain, Saif Ali Khan)

Red Label contains natural flavonoids that helps improve blood circulation and keeps you healthy. Red Label Natural Care has a mix of 5 Ayurvedic ingredients like Tulsi, Ashwagandha, Mulethi, Ginger and Cardamom. Red Label Dust has strength, taste and comes with the Red Label promise of great quality. Red Label Special has extra-long leaves to give you great taste, colour and superior aroma. Entered the lives of the contemporary Indian housewife in the 1990s. Unique and refreshing blend of tea that’s sprinkled with fresh green tea leaves.

It’s her daily cup of joy that helps her to refresh and connect with her inner self and aspirations. The advertising communication for Taaza is a reflection of this relationship. Chronicle of the aspirations of a housewife over the past two decades. 4th largest tea brand in India with a portfolio spanning in both leaf and dust segments. 3 Roses which was synonymous to the trinity of perfect colour, perfect strength and perfect taste 3 Roses stood as the bedrock for strengthening a married couple’s relationship with each other 3 Roses has redefined the nature of relationship shared between married couples in India

Brooke Bond Sehatmand (Arogya) was launched in early 2010. Brooke Bond Sehatmand with Vitamin Power, helps to keep families healthier through their favourite daily beverage 3 cups of Brooke Bond Sehatmand helps to satisfy 50% of the Recommended Dietary Allowance (RDA) of Vitamins B2, B6, B9 and B12 Brooke Bond Sehatmand successfully runs the ‘Sehatmand Parivaar, Sehatmand Bharat’ movement – an initiative to reach and make a difference to 500 million families across villages in India through education on health and nutrition. nd most trusted beverage brand in India Market leader measured by volume and value branded packet tea Has transformed the way beverages are marketed by positioning tea as a catalyst for social change Promotes social awakening and action through its landmark ‘Jaago Re’ marketing campaigns References: 1. History of Packet Tea : http://www. contemporarybrokers. com/item. aspx? id=100 2. Brooke Bond Brands : http://www. brookebondhealth. com/our-brands. asp 3.

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Multiplex Industry in India

Consulting Industry Overview • • The Indian film industry is the largest film industry in the world in terms of the number of films produced and admissions each year. Revenue for 2004 was estimated at Rs. 59 billion (US$1. 3 billion), which was less than 1% of global film industry revenue and a fraction of the U. S. Film industry revenue, which was US$9. 49 billion in 2003. (Source CII ) Film Industry Revenues 12% 4% 57% 9% 2% 2% 14% Domestic Theatrical Leakages piracy In Cinema Ads Music Satellite / DTH / IPTV DVD / VCD / Overseas Cable Overseas Theatrical

Nearly 80% of Indian Industry revenues come from Domestic and Overseas Theatrical. On the contrary US Film Industry earns only 35% from box office sales and remaining 65% is derived from other revenue sources This clearly signifies the onset and potential of Multiplexes in the Indian Film Exhibition Sector. Consulting Consulting The Film Exhibition Industry • • The Indian film exhibition sector had revenues of Rs. 34 billion in 2004. (Source:CII) The Film Exhibition Industry can be divided into two segments: – – single and double-screen cinemas and multiplex cinemas, i. e. hree screens or more. • As of March 2005, there were approximately 12,000 cinemas in India of which 73 were multiplexes with a total of 276 screens. Multiplexes constitute only 0. 6 % of about 12,000 cinema halls in India, but account for 28% to 34 % of the box office take for the Top 50 films in 2004. (Source Yes Bank) • Consulting The Film Exhibition Industry: Multiplex More than 60 additional multiplexes with more than 220 additional screens are slated to commence operations by the end of 2006, a growth rate of 80-100% Average price of a ticket for a multiplex cinema is Rs. 5 – 85 but the number of screens in multiplexes represented only 2. 3% of total screens in India as of March 2005. (Source:Industry Estimates) An increase in the number of Multiplex screens should result in an increase in film exhibition revenues, so the opening of new Multiplexes represents a significant growth opportunity for the industry. S c re e ns P e r M illio n P o pula tio n 140 120 100 80 60 40 20 0 India UK Belgium Ger many Spain Italy Ir eland Denmar k Fr ance USA 117 77 52 30 12 43 45 46 53 61

In India, the number of screens per million of population is just 12 whereas the average in western countries is 40. India needs 20,000 screens to cater the entire cinema viewing population Consulting The Film Exhibition Industry: Multiplex No of Multiplex in Cities 16 12 8 4 0 12 6 5 4 4 3 3 Nasik Multiplexs Across Regions as on March 2005 (source Yes Bank) 3 Pune 23 North South East Delhi Kolkata Mumbai & Suburbs Ahmedabad Ghaziabad Gurgaon 42 3 5 West Geographic Distribution of Theatres Across India Ficci – E&Y Report 2004

Andhra Pradesh 24% 21% Kerala Karnataka Maharashtra Uttar Pradesh Tamil Nadu Others 10% 19% 8% 9% 9% Number of Screens 3 Screens 4 Screens 5 Screens 6 Screens More than 6 Screens Number of Number of Number of Seats / Multiplexes Screens Seats Screens 40 120 43143 360 21 84 25862 308 6 30 10148 338 4 24 6991 291 2 18 3326 185 73 276 89470 1482 Majority of multiplexes have 3 screens. The table enlists the number of multiplexes sub-divided by the number of screens and seats. Consulting Consulting Key players

Company PVR Cinemas * Inox Leisure Limited Adlabs Films * Shringar Cinemas Wave Cinemas E-City Cinemas Total % of India # of Properties # of Screens 7 34 5 25 4 14 3 14 3 13 3 14 25 114 34% 41% # of Seats 7333 7344 5666 4588 4380 3952 33263 37% * Only film exhibitio n pro perties with 3 o r mo re s creens have been co ns idered fo r this analys is So urce: Bo llywo o d Emerging Trends & Gro wth Drivers – Yes Bank Repo rt 2005 Kindly note that the No of Properties , Screens and Seats have been updated in the subsequent slides * from respective Company Web Sites as new properties have come up after report was published.

Six largest multiplex operators of India tabulated above operate 114 screens spread across 25 properties with a cumulative seating capacity of 33,263. This constitutes 34%, 41% and 37% of India’s total multiplex properties, screens and seats respectively. (Source: Market Estimates) Consulting Key player : Adlabs Films Adlabs Upcom ing Multiplexes Nam e City Screens Cineplex Adlabs Ansal Vaishali Plaza Metro Adlabs Mangal Adlabs Goldspot Adlabs Adlabs Palm Beach Himalaya Adlabs RDB Boulevard IMAX, Mani Square Ansal Mall Gopalan Legacy Adlabs Dattani Mall Nam e

Seats 1,076 1,003 1,491 1,102 1,362 1,008 1,200 1,050 1,350 1,200 1,100 1,100 Adlabs Upcoming Multiplexes Name City Screens Seats Sangam Adlabs Mumbai 4 1250 R Town Fortune City Mall Ansal Plaza Maheshwari Parmeshwari Adlabs RAP, Borivali Rap Mirage RAP Media Ltd RAP Media Ltd RAP Media Ltd RAP Media Ltd Mumbai Bangalore Gurgaon Hyderabad 8 to 10 8 to 10 3 5 to 6 2200 2,200 1,000 1600 Mangalore Ghaziabad Mumbai Indore Hyderabad New Mumbai Ahmedabad Kolkata Kolkatta Greater Noida Bangalore Thane 3 6 4 4 4 5 3 4 4 4 4 RAP Metropolitan RAP Media Ltd Patiala Little world Mall Kharghar Paras Zirakhpur Downtown Total upcoming Mumbai Agra Amritsar Jalandhar Ludhiana Mohali (Chandigarh) Moradabad 4 3 6 5 7 5 3 5 4 to 5 4 122 – 128 1250 1004 1,700 1,500 2,000 1,500 1016 1,450 1,200 1300 36,212 Adlabs Film s Ltd Exis ting M ultiple xe s Location City Scre e n Kalyani Nagar CIDCO Wadala Mulund Kanjurmarg Andheri Sahibabad Industrial Estate Pune Nashik Mumbai Mumbai Mumbai Mumbai Ghaziabad 3 3 5 4 4 5 4 28

Se ats 1,109 1,200 1,832 1,353 1,263 1,282 1,313 9,352 Gold Adlabs Divya Adlabs Imax Adlabs R-Adlabs Huma Adlabs Fame Adlabs Aerens R Imax at Rap Adlabs Adlabs Films Ltd was founded by Mr. Manmohan Shetty and Mr. Vasanji Mamania In 2005, (Reliance – ADA Group) acquired a 50. 16% stake in Adlabs Films Limited Consulting Key player : E-City Entertainment E – City Entertainment (Essel Group)

Nam e Sigma Mall Fun Republic Fun Republic City Centre Cross River Mall Ansals Plaza II Pacif ic Mall Nand Plaza Fun Republic Fun Republic TDIChandigarh Fun Republic Malnz Times Square (Jagat Cinema) Axis Mall Lake Mall Times Square Dindayal City Mall Fun Republic Dreams Mall Kukreja Mall AEZ Carnival Country North Square TDI Mall V3S Mall Mittal’s Mega Mall Ansals Plaza Mittal’s Mega Mall Sun City Mall Ansals Royale Plaza Grand Total Location Bangalore Hyderabad Lucknow Mumbai New Delhi Punjab Agra, Uttar Pradesh Agra, Uttar Pradesh Ahmedabad Chandigarh Chandigarh Coimbatore G. T. Road Jaipur Kolkatta Kolkotta Kota M.

P Mumbai Mumbai Mumbai NCR (Uttar Pradesh) New Delhi New Delhi New Delhi Panipat, Haryana Punjab Punjab Rajasthan Rajasthan Since /Targe t Date March, 2006 Planned 2007 April, 2006 Planned 2007 March, 2006 Planned 2008 May, 2006 Planned 2006 June, 2001 November, 2003 Planned 2007 Planned 2006 Planned 2008 December,2005 Planned 2008 Planned 2007 Planned 2006 Planned 2006 August, 2003 Planned 2006 June, 2006 March, 2006 February, 2006 December, 2005 February, 2006 Planned 2006 Planned 2007 Planned 2009 Planned 2007 Planned 2007 No of Scre e ns 3 6 4 4 4 4 4 3 6 4 3 6 6 2 4 4 4 4 6 5 4 3 3 3 3 3 4 4 4 3 120

E-City Entertainment is a business segment of the Essel Group. In Film Exhibition they have 2 Brands 1. Fun Republic Entertainment 2. Fun Multiplex. • E City Entertainment has made a prominent appearance Metros across Regions like Mumbai and Delhi. • And is seen to be targeting Tier 2 Tier 3 Cities like Coimbatore, Rajasthan, Punjab, Kolkata Consulting Key player : Shringar Cinemas

Shringar Cinemas Ltd Existing Multiplexes Fame Adlabs 5 screens , 1342 seats Fame Malad 6 screens, 1571 seats Fame Nasik 3 Screens, 1407 Seats Fame Kandivali 4 Screens, 1275 Seats Fame Kolkata 4 Screens, 900 Seats Fame Pune 3 Screens – 1009 Seats Grand Total 25 Screens 7504 Seats • Shringar Cinemas, managed by promoters who have been one of the largest film distributors in Western India for Hindi films. Company is focusing on Western India i. e. Mumbai, Pune, Nashik, Aurangabad as well as Eastern Indian i. e. Kolkata Shringar Cinemas Ltd Upcoming Projects FAME FAME FAME FAME FAME FAME Allahabad Ghatkopar Aurangabad Hyderabad Surat – Raj Empire Thane 4 screens and 1250 seats 3 screens and approximately 1000 seats. 3 screens and approximately 900 seats 6 Screen 5 screens Consulting Key player :Inox Leisure Ltd

Inox Leisure Ltd Existing Multiplexes No of screens City Location Mumbai Nariman Point 5 Bangalore Magrath Road 5 Vadodara Race Course Circle 4 Pune Bund Garden 4 Goa Panaji 4 Kolkatta Salt Lake 4 Kolkatta Elgin Road 4 Indore Sapna Sangeeta 3 Darjeeling Laden La road 3 Jaipur Vaibhav Nagar 2 Grand Total 38 No of seats 1335 1103 1318 1316 1271 1144 1016 1080 811 787 11181 Inox Leisure Ltd

Upcoming Projects Location Screens Seats Vishakhapatnam Raipur Lucknow Kolkatta Kharagpur Jaipur Jaipur Hyderabad Chennai Bangalore Bangalore Bangalore Grand Total 4 4 4 5 4 3 3 6 5 4 7 7 56 1300 1250 1000 1042 1200 750 750 1470 1156 1100 1860 1720 14598 Inox Leisure plans to target very specifically cities in South India Like Bangalore, Chennai, Hyderabad, Vishakhapatnam. Consulting Key player : PVR

PVR Cinemas Existing Locations Name PVR Bangalore PVR Priya PVR Saket PVR Vikaspuri PVR Narania PVR Gurgaon PVR EDM PVR Faridabad PVR SRS Faridabad PVR Plaza Spice PVR PVR Hyderabad PVR Rivoli PVR Lucknow PVR Indore PVR Mumbai Grand Total Location Screens Seats Bangalore 11 NA Delhi NA 944 Delhi 4 1000 Delhi 3 921 Delhi 4 830 Gurgaon 7 1300 Ghaziabad 3 720 2 480 Faridabad (Ha NCR Delhi 3 776 Delhi NA 300 Noida NA 1821 Hyderabad 5 812* Delhi 3 329* Lucknow 4 928 Indore 5 1199 Mumbai 2+3 NA 57 approx 12360 Approx PVR Cinemas Upcoming

Cinemas PVR C INEMAS Mumbai PVR C INEMAS New Delhi PVR C INEMAS Mumbai PVR C INEMAS Mumbai PVR C INEMAS New Delhi PVR C INEMAS C hennai PVR C INEMAS Mumbai PVR C INEMAS Ludhiana PVR C INEMAS Gurgaon Prashant Vihar, Delhi Latur Aurangabad Silver Arc, Ludhiana TOTAL Screens 6 Screens 6 Screens 7 Screens 8 Screens 6 Screens 7 Screens 4 Screens 4 Screens 2 Screens 3 Screens 3 Screens 3 Screens 3 Screens 71 Screens Seats 1750 1269 2050 2200 1500 1600 1250 1000 450 800 1050 1100 1000 Expected In Fiscal 2006 Fiscal 2007 Fiscal 2007 Fiscal 2007 Fiscal 2008 Fiscal 2007 Fiscal 2007 Fiscal 2007 Fiscal 2006 Fiscal 2006 Fiscal 2006 Fiscal 2006 Fiscal 2008 9310 Seats • PVR Cinemas setup India’s first multiplex in 1997 at Delhi. • The Company has been funded by ICICI Venture and is in final stages of closing second round of equity funding for future expansion • PVR Cinemas is focusing on developing multiplex properties in Northern, Western and Southern India (Bangalore & Hyderabad) Consulting Key player : Wave Cinemas Wave Cinemas is a part of The Chadha Group. Currently operates 13 screens spread across 3 properties. With existing operations in Noida, Kaushambhi and Lucknow. Wave Cinemas is a regional player focusing on Northern India. enetrating in untapped raw territory in UP and Ghaziabad. Wave Cinemas Existing Cinemas Location Screens Noida 5 Kaushambi ( Ghaziabad) 4 Lucknow 4 Grand Total 13 Seats 1804 1192 1394 4390 Wave Cinemas Upcoming Projects Mohali ALL LOCATIONS ARE Ludhiana IN NORTHERN INDIA Raja Garden Delhi Consulting Consulting Summary: Growth Drivers Growth drivers responsible for the expected increase in the number of multiplex cinemas are as follows: • An increase in disposable income in the hands of an ever expanding Indian middle class demographic changes tax benefits for multiplex cinemas retail boom Favourable • Organised • Entertainment • Increase in the number of high grade Hindi films. Consulting Favourable Demographics Demographics • • (source CIA fact sheet July 2005 Est) Current Population: 1 billion+ (1,080,264,388) growing between 1. 4% to 1. 8% annually Age structure: 0-14 years: 31. 2% 15-64 years: 63. 9% 65 years and over: 4. 9% Median age: 24. 66 years A younger population tends to have higher aspirations, and will spend more as it enters the earning phase. • • Consulting Increase in Disposal Income

Classes Rich Consuming Climbers Aspirants Destitutes Between Above USD 4,600 USD 970 – 4,600 USD 470 – 970 USD 340 – 470 Less USD 340 Households in Households in Households in 1995 2000 2006E 1 million 3 million 6 million 29 million 66 million 75 million 48 milliom 66 million 78 million 48 million 32 million 33 million 32 million 24 million 17 million URBAN CONSUMER SPEND % (Source KSA Technopak) Categories 1999 2002 Savings & Investments 14 5. 2 Consumption Shopping 22 24. 3 Leisure & Entertainment 21 29. 1 Grocery 43 41. 4 Sub total of Consumption 86 94. Total 100 100 Source: CII – KPMG Report 2005 accredited NCAER Multiplexes generally cater to High and Middle income Groups, with an increase in the number of households within this earning group, will result to higher consumption and spending patterns. Similarly migration of households from lower income to middle income levels will further drive the consumption patterns. Urban consumers have increased their expenditure on leisure & entertainment. Simultaneously spends on eating out, movies and theater, and books and music will increase. Consulting

Onset of Retail Activity • Though Organised retail comprises of 3% of the total retail pie of USD 200 Billion, it is growing at 25 to 30% CAGR Number of malls in India is expected to increase from approximately 50 as of the end of 2004 to around 250 by the end of 2006. (Source: BW Marketing Whitebook, 2005, attributed to KSA Technopak. ) • • • There will be approximately 600 malls by 2010 Securities study) (Source Edelweiss Multiplexes are one of the anchor tenants in large format malls, as their presence increases footfalls by approximately 40-50%. Source: CII) Consulting Entertainment tax benefits Entertainment Tax Exemption / Benefit Minimum Minimum Seating No of Screens 1250 4 1000 1000 1000 NA NA 3 3 3 NA 3 STATE Delhi Gujrat Maharashtra Mumbai Kalyan, Thane, Dombivali, Navi Mumbai, Nasik, Aurangabad, Nagpur Vasai, Virar, Nallasopara Karnataka UP Tamil Nadu West Bengal ENTERTAINMENT TAX 30% 100% 45% 45% 40% City Mumbai Rest of Maharashtra Punjab Kolkatta Rajasthan UP Bhopal/Indore/ Jabalpur/Gwali or Yr 1 100% 100% 100% 100% 100% 100% Yr 2 100% 100% 100% 100% 100% 100% Yr 3 100% 100% 100% 100% 90% 100%

Yr 4 75% 75% 100% 100% 80% 100% Yr 5 75% 75% 100% NA 70% 100% 34% 40% 60% 15% 30% 100% 100% 100% 75% 50% 1000 3 Source PVR Cinema Research • In order to encourage investment many state governments have announced policies offering entertainment tax benefits. • This has encouraged the growth of Multiplex Cinemas and also encouraged singlescreen theaters to convert into Multiplexes. • Quantum of entertainment tax benefit would be dependant on compliance with certain conditions specified by the relevant state. Consulting Increase in Hindi Movies 001 Average number of high grade Hindi films released per week 1. 15 2002 1. 46 2003 1. 58 2004 1. 71 Source: Bollywood Emerging Trends & Growth Drivers – Yes Bank Report 2005 The number of Hindi movies has increased from year 2001 to 2004. This signifies immense potential and is definitely a sign of being a crowd puller and generating more revenue. Consulting Regulatory • • • The Indian film exhibition sector is highly regulated and changes in regulations may have an adverse effect on business. Regulations by both the central and the state governments.

Policies extend to aspects of building and safety requirements, licensing requirements, tax and entertainment tax registrations and grant of exemptions from the payment of entertainment tax. Provisions of laws include: – Requiring a minimum distance between the screen and the front row seats, which distances were set based on large screens used in singlescreen cinemas and not the smaller screens used at most Multiplex Cinemas. – The permissible pressure at which the electrical current may be supplied to a projector, which provision does not reflect the technological advances in respect of Multiplex Cinemas. The reservation of playing times for a scientific film, educational film, news reel or documentary. , – Restrictions on ticket prices in certain states. • Consulting Break-Up of Revenues REVENUE Patron’s Spend Ticket Revenue Advertising F&B Revenues Conducting Fee Parking Charges Management Fee Consulting Break-Up of Cost Cost Direct Cost Distributors Share Entertainment Tax F&B Cost A 1250 seater Multiplex in a metropolitan city would cost anywhere between Rs80-90mn. This does not include the cost of land because the land may be leased Personnel Cost

Depreciation Interest Consulting Way Forward • Over the next 18-24 months, 6 of the largest multiplex operators in India mentioned earlier are likely to commercialize approximately 200-240 screens spread across 50- 60 new multiplexes. • These multiplexes will have a cumulative seating capacity in excess of 55000-60000. • There will also be an increase in number of multiplexes operated by smaller players, who constituted 66% of total multiplexes as of march 2005. • It is estimated that number of operating multiplexes in India will increase by 80-100% by end of 2006. By the end of 2006, 135+ multiplexes will house more than 160,000 seats spread across 500+ screens. • These multiplexes will have significant direct positive impact on the business economics of film production, financing, distribution and exhibition and indirectly on other ancillary markets. (Source: Yes bank) Consulting D’Essence Consulting, New MHADA Complex, Bldg no. 1 , Office no. 2, Near PMGP Colony, Andheri East Mumbai 400093 Fax- 28228142 / Tel-28347425 www. dessenceconsulting. com EmaiL: [email protected] com [email protected] com

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India and Pakistan: Most Different Systems

It is a cardinal truth that one of the most important factors in the political environment of the Asiatic region is the relationship between India and Pakistan. The system analysis with regard to India and Pakistan is a most interesting affair for an obvious reason. It shows how a people who had lived together for centuries can drift apart on communal question. Not only that, it also shows that due to differences in political culture the two states have, in spite of an equal start, chosen two divergent ways.

As such, their fundamental differences have become clearly visible and practically speaking, it is very difficult, if not impossible to bridge the gulf. Particularly, their conflict has, in the meanwhile, turned this Asiatic region into a storm centre which may at any time trigger off a nuclear holocaust. Above all, this political tension has merged with global politics and, hence, the problem has become more acute.

Before August 15, 1947, India was a unified state. The two dominions – India and Pakistan – came into being as separate states on that very day as a result of communal frenzy and blood-strained riots. It is a significant fact that the British rule was introduced in India by overthrowing the Muslim rulers and, hence, the Muslim community had a bitter hatred of the British. This hatred soon turned into an enmity with the western culture as well as their science and literature. But the Hindus accepted English and, thus, soon they were acquainted with the western culture and their thoughts – specially the concepts of liberty.

As such, political consciousness grew up rapidly and in 1885, the Congress came into being as a national organization for political agitation. Though it was a secular entity and many Muslims joined it with a genuine eagerness, some Muslim leaders dubbed it as a Hindu organization and Sayid Ahmed, in particular, taught the Muslims that their interests were different and even at cross purposes. Thus, a counter movement came to the fore, swearing loyalty to the British. “The British also pulled strings behind the scene” (De, 103). In this way, the British authorities pursued the ‘Divide and Rule’ policy for its own interests and, thus, the gulf began to enlarge.

With the British encouragement, the Muslim League was formed in 1906 for acting as a counterpoise for the Congress. Lord Dufferin, the Viceroy, once observed that ‘fifty millions of men were themselves a nation and a very powerful nation’. Similarly, Lord Salisbury, the Secretary of state for India announced that ‘it would be impossible for England to hand over the Indian Muslims to the tender mercies of hostile majority’. The British government was, thus, sowing the seeds of Pakistan more than half a century before it was actually born (Chopra, 16).

But the elections of 1937 under the government of India Act hastened the crisis. While the Congress captured power in eight provinces, the league was totally disillusioned. The poor election results convinced Jinnah, the League-leader, that the only way to counteract the Congress was to inflame communal feelings among the Muslims (Sen, 263). Soon, in 1940, the League passed the Pakistan resolution for a separate state (Moon, 41).

The rift soon reached the boiling point. The differences bitterly came up during the Cripps Mission and Cabinet Mission. Jinnah called for the ‘Direct Action Day’ on 16th August 1946 which resulted in a terrible blood bath. Soon an interim cabinet was formed – but it was torpedoed by the League Ministers (Bose, 135). It was, thus, realized that the two communities would not be able to live together – on August 15, 1947, two Dominions came up after a partition.

Basic Differences

Though both India and Pakistan had an equal start, the differences have become discernible which are discussed hereunder as follows:

Political: Constitutional

India has adopted a democratic system in which the actual power resides on the people. The central and provincial cabinets are, under Art 75 (2) and  Art 164 (1), responsible to the Lok Sabha and local Assembly respectively, which are composed by popular election. Moreover, Art 326 has granted the right to vote to each person irrespective of class, creed, religion etc. after reaching the age of 18. Thus, this is a dynamic representative democracy (Basu, 23).

However, soon after the birth of Pakistan, it came under military dictatorship. Though on occasions, civil governments came to power, it is primarily a military system virtually from 1969 (Agarwal, 422).

Foreign Policy:

India has adopted the principal of non-alignment in its foreign policy when in the post war period most of the states joined either of the two power blocs, India, along with a few other nations, adopted the policy of equidistance from them. It means the independence of action. India’s foreign policy does not allow herself to follow a previously defined path. This independence of action enables India to judge each issue in its own merits and without any prejudice (Keswani, 512).

But, in order to enlist American support on the Kashmir issue, Pakistan, soon after its birth, joined the American bloc. Pakistan sought artificial strength by her alliance with America and through SEATO and the Baghdad pact (Khanna, 78). But, curiously, after the Sino-Indian war of 1962 (when America came forward with its men, machines and money to save India from a probable Chinese destruction), Pakistan entered into a friendly treaty with China, a stalwart of communist camp. It means, unmistakably, that Pakistan has no consistency in its foreign policy. Most surprisingly, while Pakistan resorted to a friendly relation with America, it is also maintaining (at least reportedly) a positive relation with the Middle Eastern states – some of whom are even arch rivals of the United Sates. Its main consideration is enmity with India.

Party System

India had, initially, a ‘one party dominant system’ (Morris-Jones, 215). However, with its gradual eclipse, coalition politics has spread over the country. It obviously implies some alliances and compromises among the leaders of various parties for directing the political affairs.

But, Pakistan is dominated not by the political leaders, but by the military Generals. One General has captured power by removing another through military coup. Thus, politics has been dominated there by militarism and an understanding between the Government and the Opposition has been a rare affair.

Religious

India has accepted the principle of secularism which implies governmental impartiality in religious affairs. Its Preamble has granted ‘liberty of thoughts, expressions, faith, beliefs and worship’. Moreover, Articles 25, 26, 27 and 28 have been the sheet anchor secularism (Johari, 394). Above all, by the 42nd amendment of 1976, it has inserted the term ‘Secular’ in the Preamble. Thus, religious tolerance is the basic feature of the Indian system.

But, Pakistan is an Islamic country which has accepted Islam as the state religion. However, on the morning of July 13, 1947, Jinnah declared

Minorities, to whichever community they may belong, will be safeguarded. Their religion, or faith or belief will be protected in every way possible. Their life and property will be secure. There will be no interference of any kind with their freedom of worship. They will have their protection with regard to their religion, their faith, their life, their property, and their culture. They will be, in all respects, citizens of Pakistan without any distinction of caste or color, religion or creed. (qtd. in Kauba 89)

However, being a typical Islamic state, Pakistan accepted Islam as the state-religion and, in most cases, knows no tolerance of other faiths. The laws are based on ‘Sheriyat’ which is claimed to be derived from the sacred Quran. In such states, ‘Ulemas’ and ‘Imams’ guide the social and religious life and a sharp discrimination exists between the Muslims and the other subjects living within the state.

People belonging to other creeds such as the Christians, the Buddhists, and the Hindus etc. are looked down upon and seldom treated with dignity and honor. The public sectors hardly tolerate any of these creeds at higher designation in the organizational hierarchy. Moreover, the educational syllabus is over burdened with religious lessons instead of practical industrial requirements.

Economic

Economic systems of the two countries are quite different. India adopted a unique blend of the ideals of socialistic and capitalistic economies. Since the early 1950s it has been proceeding towards economies of development through Five Year Plans (Bhattacharya, 1). It is thus a planned economy with big private sectors. Since its globalization and liberalization policies of 1992, giant multinationals throughout the world has shown serious interest on the Indian market. Resultantly, India has emerged as the fastest growing and the fourth largest economy of the world (Paul, 215).

However, Pakistan has adopted purely a capitalistic economy where planning has no place at all. Due to its religious intolerance, political disorders, and dictatorial environment the foreign companies are often too much hesitant to invest in that market.

Natural Resources

India is much richer in natural resources. It has a vast territory where different types of agricultural crops are produced and mineral resources are harvested.

In comparison, Pakistan is surly poor. Rice and wheat are the main crops. It has some mineral wealth, textiles, jute and tea – (Clement, 64).

Some Problems

Problems

Both India and Pakistan are disturbed by some acute problem. After the gradual erosion of the Congress, a multi – party chaos has gripped India and it has evoked political atmosphere. There are nearly 350 political parties and most of them are leased upon narrow opportunism. Naturally, the task of nation-building has been cast down by such trifling conflicts.

Economically also, India is facing a crisis. In spite of planned endeavor for five decades, a gross disparity of income and wealth has been. Communalism is also a formidable problem. Hindu-Muslim conflict has become a common affair and there may be riots just for anything or nothing (Das, 400) In foreign affairs too, some problems seem to be insoluble. With America and China, two super-powers, its relationship is less than normal. Pakistan, its neighbor, is the worst enemy and, Bangladesh, for which it fought in 1971, has drifted far away.

Pakistan is, similarly, disturbed with some crucial problems. The conflict between the Siyas and Sunnis often result in severe blow-birth. Moreover, some political parties often agitate against the autocratic Government and it ultimately results in awful bloodshed. But, above all, while there is a large-scale poverty, a considerable part of the national income is to be diverted to the war-preparation.

In fact, the Government has to encourage a frenzied bellicosity in its relations with India in order to mobilize public support. In 1949, Pakistan was pushed back in Kashmir and in 1951, 1965 and 1971 it suffered a terrible defeat by India. So the Pak-rulers have been forced to adopt a war-economy, though the national poverty badly needs a peace-time growth-program.

Nuclear Preparation  It is interesting to note that fear of war has compelled both India and Pakistan to enter into a race of armament. Thus, through a prolonged endeavor both of them have now become atomic power. But, it is well known that fear of war increases armament and increase of armament increases the fear of war. In this way, their rivalry has ushered in an era of permanent panic.

If a war actually breaks out, it would be profitable to none, because the nuclear bombardment would surely bring about a total catastrophe for not only the belligerents but also for the entire region. For this reason, some sort of understanding is urgently necessary. Of course, Kashmir is the bone of contention between them and none is prepared to give up its claim over this strategic spot. But, unless some compromise is reached, the conflict of Kashmir might one day, obliterate the both of them from the global map.

Conclusion

But, by any means, they must find out a way towards the lasting peace. It is interesting to note that though Germany was divided into two parts after the Second World War. However, they have, after five decades, merged together. In this sense, India and Pakistan cannot, perhaps in the near future, mingle together in this way. But, for realistic reasons, they must come nearer and build up a workable relationship.

Of course, Kashmir has stood up as the stumbling obstacle. But mutual war and conflicts can never bring about a peaceful solution. Only an understanding on the basis of ‘give and take’ policy can solve the problem which has thrice dragged them into armed conflict. Particularly, Pakistan must remember that it has no legal claim over Kashmir. Before the partition of undivided India, the Instrument of Accession offered the Princely states the right to join either of the two Dominions.

The king of Kashmir (Hari Sing) duly signed a treaty with India for joining it. (Mahajan, 343). The portion of Kashmir (Pak occupied Kashmir) which is now under Pakistan’s control, was captured only by illegal infiltration by several terrorist groups. Hence, it is beyond any iota of doubt that history can go a long way in setting the problem to the right perspective.

Works Cited

Agarwal, R.G. Political Theory, Chandra Books, Allahabad, 1996, 422

Basu, D.D. Introduction to the Constitution of India, Prentice Hall, 1978, 23

Bhattacharya, D.C. India’s Five Year Plans, Joy Library, Calcutta, 1996, 1

Bose, N.S. Indian National Movement, Pharma K.L.M. Pvt. Ltd, 1974, 135

Chauba, K.L. India and Pakistan, Raj Kamal Publications, New Delhi, 1948, 49

Chopra, P.N. India’s Struggle for Freedom, Publications Division, 1984, 16

Das, H.H. India: Democratic Government and Politics, Himalaya Publications, New Delhi, 1991,

400

De, B. Freedom Struggle, Publications Division, New Delhi, 1992, 103

Johari, J.C. Indian Government and Politics, Vishal Publishing House, New Delhi, 394

Kauba, K.L. Inside Pakistan, Raj Kamal Publications, New Delhi, 1948, 89

Keswani, K.B. International Relations, Himalaya Publishing, Mumbai, 1996, 512

Khanna, V.H. Foreign policy of India, Vikas Publishing, Chennai, 1997, 78

Mahajan, V.D. The Constitution of India, Modern Books, New Delhi, 1979, 343

Moon, P. Divide and Quit, Modern Books, Mumbai, 41

Morris-Jones, W.H. Government and Politics of India, B.I. Publications, New Delhi, 1979, 215

Sen, S.N. History of Freedom Movement in India, New Age Publications, 1978, 263

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India After 20 Years

Draft January, 2007 INDIA’s GROWTH: PAST AND FUTURE by Shankar Acharya* * Honorary Professor and Member Board of Governors, Indian Council for Research on International Economic Relations (ICRIER) Paper for presentation at the Eighth Annual Global Development Conference of the Global Development Network, January 14-16, Beijing. 0 India’s Growth: Past and Future By Shankar Acharya1 This paper is divided into five sections. Section I briefly reviews India’s growth performance since 1950 and indicates a few salient features and turning points.

Section II discusses some of the major drivers of India’s current growth momentum (which has averaged 8 percent in the last 3 years) and raised widespread expectations (at least, in India) that 8 percent plus growth has become the new norm for the Indian economy. Section III points to some of the risks and vulnerabilities that could stall the current dynamism if corrective action is not taken. Section IV appraises the country’s medium term growth prospects. The final section assesses some implications of India’s rise for the world economy. I Review of Growth Performance, (1950-2006)

Table 1 summarizes India’s growth experience since the middle of the twentieth century. For the first thirty years, economic growth averaged a modest 3. 6 percent, with per capita growth of a meager 1. 4 percent per year. Those were the heydays of state-led, import-substituting industrialization, especially after the 1957 foreign exchange crisis and the heavy industrialization bias of the Second Five Year Plan (1956-61). While the strategy achieved some success in raising the level of resource mobilization and investment in the economy, it turned out to be hugely costly in terms of economic efficiency.

The inefficiencies stemmed not just from the adoption of a statist, inward1 The author is Member, Board of Governors and Honorary Professor at Indian Council for Research on International Economic Relations (ICRIER). He was Chief Economic Adviser to Government of India (1993-2000). This paper draws liberally on his recent paper, “India’s Growth: Past Performance and Future Prospects”, presented at the Tokyo Club Macro Economy Conference on “India and China Rising”, December 6-7, 2006, Tokyo. 1 ooking policy stance (at a time when world trade was expanding rapidly) but also from the extremely detailed, dysfunctional and corruption-breeding controls that were imposed on industry and trade (see, for example, the classic study by Bhagwati and Desai (1970)). Table 1: Growth of GDP and Major Sectors (% per year) Year 1951/521980/81 (1) 1981/821990/91 (2) 1992/931996/97 (3) 1997/982001/02 (4) 2002/032005/06 (5) 1992/932005/06 (6) 1981/822005/06 (7) Agriculture and Allied Industry 2. 5 3. 5 4. 7 2. 0 1. 9 3. 0 3. 0 5. 3 7. 1 7. 6 4. 4 8. 0 6. 6 6. 5 Services 4. 5 6. 7 7. 6 8. 2 8. 9 . 2 7. 4 GDP 3. 6 5. 6 6. 7 5. 5 7. 0 6. 4 5. 9 GDP per capita 1. 4 3. 4 4. 6 3. 6 5. 3 4. 4 3. 8 Source: CSO . Note: Industry includes Construction. At the same time, one should not forget that the GDP growth rate of 3. 6 percent was four times greater than the 0. 9 percent growth estimated for the previous half century of British colonial rule (Table 2). Moreover the growth was reasonably sustained, with no extended periods of decline. Nor were there inflationary bouts of the kind which racked many countries in Latin America. However, growth was far below potential and much less than he 7-8 percent rates being achieved in some countries of East Asia and Latin America. Worst of all, the proportion of the Indian population below a (minimalist) poverty line actually increased from 45 to 51 percent (Table 3). Table 2: Economic Growth: Pre -independence (% per year) Year 1900-46 1900-29 1930-46 GDP 0. 9 0. 9 0. 8 Population 0. 8 0. 5 1. 3 Per Capita GDP 0. 1 0. 4 -0. 5 Source: Sivasubramonian (2000) 2 Table 3: Percentage of People Below Poverty Line, 1951-52 to 1999-00: Official Estimates Year Rural Urban All India 1951-52 47. 4 35. 5 45. 3 1977-78 3. 1 45. 2 51. 3 1983 45. 7 40. 8 44. 5 1993-94 37. 3 32. 4 36. 0 1999-2000 26. 8 24. 1 26. 1 Source: Planning Commission, Government of India G rowth accelerated significantly in the 1980s to 5. 6 percent, entailing a more than doubling of per capita growth to 3. 4 percent a year. This acceleration was due to a number of factors, including: the early efforts at industrial and trade liberalization and tax reform dur ing the 1980s, a step- up in public investment, better agricultural performance and an increasingly expansionist (almost profligate! ) fiscal policy.

Fiscal controls weakened and deficits mounted and spilled over to the external sector, requiring growing recourse to external borrowing on commercial terms. Against a background of a low export/GDP ratio, rising trade and current account deficits and a deteriorating external debt profile, the 1990 Gulf War and consequent oil price spike tipped India’s balance of payments into crisis in 1990/91. Although the policy reforms of the 1980s were modest in comparison to those undertaken in the ensuing decade, their productivity “bang for the buck” seems to have been high (see Table 4) 2 .

Perhaps this 2 Several different factor productivity studies support this conclusion, including: Acharya-Ahluwalia Krishna-Patnaik (2003), Bosworth and Collins (2003) and Virmani (2004). 3 w as a case of modest improvements in a highly distorted policy environment yielding significant gains. Table 4: Growth of GDP, Total Factor Input and Total Factor Productivity (% per year) 1950/511966/67 3. 8 GDP 1967/68 – 1981/82– 1980/81 1990/91 3. 4 5. 3 1991/92 – 1999/2000 6. 5 Total Factor Input (TFI) 2. 4 2. 7 3. 3 3. 9 Total Factor Productivity (TFP) . 4 0. 7 2. 0 2. 6 Proportion of Growth Explained by TFP (%) 37. 6 20. 8 37. 7 39. 7 Source: Acharya, Ahluwalia, Krishna and Patnaik (2003). Note: For each sub-period, GDP, TFI and TFP are trend growth rates. The new Congress government of June 1991, with Manmohan Singh as finance minister, undertook emergency measures to restore external and domestic confidence in the economy and its management. 3 The rupee was devalued, the fiscal deficit was cut and special balance of payments financing mobilized from the IMF and the World Bank.

Even more importantly, the government seized the opportunity offered by the crisis to launch an array of long overdue and wide-ranging economic reforms. They encompassed external sector liberalization, deregulation of industry, reforms of taxation and the financial sector and a more commercial approach to the public sector (see Table 5 for a summary of key reforms in 1991-93). 4 3 There has been a great deal written on India’s economic reforms and the consequent performance of the economy, including Acharya (2002a and 2004), Ahluwa lia (2002), Kelkar (2004), Kochhar et. l (2006), Panagariya ( 2004a and 2006) and Virmani (2004). There is a tendency to view the post-1991 economic performance as a single unified experience. I prefer the more nuanced and disaggregated view outlined here. 4 As I have pointed out elsewhere (Acharya, 2006a), these reforms are better characterized as “medium bang” than “gradualist” (as by Ahluwalia, 2002). 4 Table 5: Main Economic Reforms of 1991-93 Fiscal • Reduction of the fiscal deficit. • Launching of reform of major tax reforms. External Sector • Devaluation and transition to a Market-determined Exchange Rate. Phased reduction of import licensing (qua ntitative restrictions). • Phased reduction of peak custom duties. • Policies to encourage direct and portfolio foreign investment. • Monitoring and controls over external borrowing, especially short term. • Build-up of foreign exchange reserves. • Amendment of FERA to reduce restrictions on firms. Industry • Virtual abolition of industrial licensing. • Abolition of separate permission needed by “MRTP houses”. • Sharp reduction of industries “reserved” for the public sector. • Freer access to foreign technology.

Agriculture • More remunerative procurement prices for cereals. • Reduction in protection to the manufacturing sector. Financial Sector • Phasing in of Basle prudential norms. • Reduction of reserve requirements for banks (CRR and SLR). • Gradual freeing up of interest rates. • Legislative empowerment of SEBI. • Establishment of the National Stock Exchange. • Abolition of government control over capital issues. Public Sector • Disinvestment programme begun. • Greater autonomy / accountability for public enterprises. 5

The economy responded swiftly and positively to these reforms. After virtual stagnation in 1991/92, GDP growth surged in the next five years to clock a record 5-year average of 6. 7 percent. It is noteworthy that in this high growth Eighth Plan period all major sectors (agriculture, industry, services) grew noticeably faster than in the pre-crisis decade. The acceleration in the growth of agricultural value added is particularly interesting in the light of oft-repeated criticism that the economic reforms of the early nineties neglected the agricultural sector.

The factors which explain this remarkable and broad-based growth surge in the period 1992-97 appear to include: • • • • • • • Productivity gains resulting from the deregulation of trade, industry and finance, especially in the sectors of industry and some services; The surge in export growth at about 20 percent per year (in dollar terms) for three successive years beginning 1993-94, attributable to the substantial devaluation in real effective terms in the early nineties and a freer policy regime for industry, foreign trade and payments;

The investment boom of 1993-96 which exerted expansionary effects on both supply and demand, especially in industry. The investment boom itself was probably driven by a combination of factors including the unleashing of ‘animal spirits’ by economic reforms, the swift loosening of the foreign exchange bottleneck, confidence in broadly consistent governmental policy signals and easier availability of investible funds (both through borrowing and new equity issues);

The partial success in fiscal consolidation, which kept a check on government borrowings and facilitated expansion of aggregate savings and investments; Improvement in the terms of trade for agriculture resulting from a combination of higher procurement prices for important crops and reduction in trade protection for manufactures; Availability of capacity in key infrastructure sectors, notably power; A buoyant world economy which supported expansion of foreign trade and private capital inflows.

The momentum of growth slowed noticeably in the Ninth Plan period, 1997-2002, to an average of 5. 5 percent, compared to the 6. 7 percent achieved in the previous five years. Among the factors which contributed to this deceleration were: the significant worsening of the fiscal deficits (mainly due to large public pay increases following the Fifth Pay Commission) and the associated decline in public savings, the slackening of economic reforms after 1995 as coalition governance became the norm, a significant slowdown in 6 gricultural growth for a variety of reasons, a marked downswing in the industrial cycle and an increasingly unsupportive international economic environment (including the Asian financial crisis of 1997-98, rising energy prices and the global recession of 2001). Indeed, India’s economic growth in 1997-2002 might have been even weaker but for the unexpected and somewhat inexplicable strength of services sector growth, which clocked an average of 8. 2 percent, despite industrial growth of only 4. 4 percent. The services sector accounted for almost 70 percent of all growth in this period. Economic reforms picked up pace in 2000-04, fiscal deficits trended down after 2002 and the world economy rebounded strongly in 2002-06. These factors supported a broadbased upswing in Indian industrial output and investment from the second half of 2002. Growth of industrial valued added surged to 8 percent in 2002-06. With continued strong growth of services (at nearly 9 percent), GDP growth climbed to average 7 percent, despite continued sluggishness of agriculture.

In the three years, 2003-06 overall economic growth has averaged over 8 percent and the outlook for 2006/7 is equally bright. This latest economic surge has raised the interesting issue of whether India’s trend growth rate has accelerated to 8 percent (or higher) from its previous level of around 6 percent. The ensuing sections of this paper explore this question. II. Main drivers of Recent Economic Growth What are some of the main ingredients of the recent surge in economic growth? I would suggest the following seven major elements: ) The momentum of a quarter of a century of strong economic growth; 2) A much more open economy (to external trade and investment); 3) A growing “middle class” fuelling domestic consumption; 4) The “demographic dividends” of a young population; 5 Acharya (2002a and 2003) noted this unusual phenomenon and raised questions about both the quality of the data and the durability of such sharply divergent growth rates of industry and services. More recently, similar doubts have been expressed by Bosworth-Collins -Virmani (2006). 7 5) Strong companies in a modernized capital market; 6) Some recent economic reforms. ) A supportive international economic environment. Let me elaborate briefly on each of these factors. The Momentum of Growth The last thirty years’ experience suggests that very few developing countries have sustained decent per capita growth for two decades or more (Acharya, 2006b). Specifically, out of 117 developing countries with population over half a million, only 12 countries achieved per capita growth of more than 3 percent per year in 1980-2002, with at least 2 percent growth in each decade of the eighties and nineties. These twelve countries were: China (8. 2), Vietnam (4. 6), South Korea (6. 1), Chile (3. ), Mauritius (4. 4), Malaysia (3. 4), India (3. 6), Thailand (4. 6), Bhutan (4. 3), Sri Lanka (3. 1), Botswana (4. 7) and Indonesia (3. 5). (The number falls to 9 if we specify a minimum population of 3 million). Nine of these 12 countries are in Asia and, fortunately, they include the three most populous: China, India and Indonesia. (See Table 6). If we take the full 25 years (1981-2006), India’s per capita growth has averaged 3. 8 percent or almost 4 percent per year. 8 Table 6: Good Growth Performers of Recent Decades Average Annual Per Capita Growth (%) Country 1980-2002 1990s 1980s Population in 2000 (Millions) 1. China . 2 8. 6 7. 7 1262 2. Vietnam 4. 6 5. 7 1. 9 78 3. South Korea 6. 1 5. 0 7. 4 47 4. Chile 3. 3 4. 3 2. 1 15 5. Mauritius 4. 4 4. 1 4. 9 1 6. Malaysia 3. 4 3. 7 3. 1 23 7. India 3. 6 3. 6 3. 6 1016 8. Thailand 4. 6 3. 4 6. 0 61 9. Bhutan 4. 3 3. 4 5. 4 1 10. Sri Lanka 3. 1 3. 1 3. 1 18 11. Botswana 4. 7 2. 7 7. 2 2 12. Indonesia 3. 5 2. 6 4. 4 206 Source: World Bank (2005) Sustained improvements in standards of living of this order embody their own growthreinforcing elements. People come to think more positively about the future and base their savings, investment and production decisions on an expectation of continued growth.

Electorates in India’s democracy come to expect development and hold government performance to higher standards, despite disappointments. Companies think big when they invest. And so on. A More Open Economy The Indian economy in 2006 is far more open to external trade, investment and technology than it was fifteen years ago. 6 Table 7 presents some key comparative 6 The story of India’s external liberalization may be found in several places, including Acharya (2002b) and Panagariya ( 2004b). 9 indicators. Peak import duties on manufactures have come down from over 200% to 12. 5%, a remarkable reduction by any standards.

The regime of tight, detailed and discretionary import controls has been almost completely dismantled. The exchange rate was devalued and made market-responsive (1991-3). The policies towards foreign portfolio and direct investment have been greatly liberalized. As a result, the ratio of traded goods to GDP has more than doubled from less than 15 percent to nearly 33 percent. Because of the sustained boom in software exports and worker remittances, the ratio of current receipts (goods exports plus gross invisibles) has more than tripled from 8 percent to over 24 percent of GDP.

Foreign investment has risen from negligible levels to US $ 20 billion in 2005/6. Table 7: Towards A More Open Economy 1990/91 2005/06 200% plus 12. 5% Tight, detailed Almost gone Trade (goods) / GDP Ratio (%) 14. 6 32. 7 Current Receipts / GDP (%) 8. 0 24. 5 Software Exports ($ billion) Nil 23. 6 Worker Remittances ($ billion) 2. 1 24. 6 Foreign Investment ($ billion) Negligible 20. 2 2. 2 145. 1 35. 3 10. 2 Peak Import Duties (manufacturers) I mport Controls Foreign Currency Reserves ($ billion, March 31) Debt Service Ratio (%) Source: RBI, Annual Report, 2005 /06, except for first two rows.

After initial periods of sometimes painful adjustment in the 1990s, Indian industry has thrived in the more open and competitive environment. The explosion in software ITenabled service exports is well-known, having risen from nil in 1991 to $ 24 billion in 2005/6. Anecdotal evidence suggests that small-scale units have benefited greatly from 10 the much freer access to traded raw materials, components and designs. Perhaps most important, the old mindset of “foreign exchange scarcity” (and the welter of bad economic policies it spawned) has been effectively banished.

Interestingly, the “opening up” has also strengthened the prudential yardsticks of foreign exchange reserves and debt service ratios. Rise of strong companies in a modernized capital market The 1990s ushered in far-reaching reforms in India’s capital markets. The Securities and Exchange Board of India was statutorily empowered in 1992 and quickly moved to improve standards of disclosure and transparency. The new electronic-tradebased National Stock Exchange was established in 1993 and set high technical and governance standards, which soon had to be emulated by the much older (and, sometimes scam-hit) Bombay Stock Exchange.

Depositories legislation was enacted and soon paperless trading became the norm. Brokers were encouraged to corporatize. Futures markets were nurtured. These and other reforms transformed Indian capital markets into one of the best in the developing world. The combination of a modernizing capital market, an increasingly liberal and competitive environment for investment, trade and production, a wealth of entrepreneurial talent and sustained economic growth has helped the rise of strong new companies and supported the expansion of the more agile and aggressive among the established firms.

By way of example, Airtel, the leading private telecom, went from nothing to a multi-billion dollar company in a decade. The same was true for the leading domestic airline, Jet and the IT icons like Infosys, Wipro, TCSand HCL. Old pharma companies, like Ranbaxy, transformed themselves. New media companies like Zee and NDTV bloomed. Established corporates houses restructured and flourished (such as some Tata companies, Reliance, Bajaj, Mahindra and Hero Honda) or saw their market shares decline.

In recent years quite a few Indian companies have expanded through overseas investments and acquisitions, facilitated by direct investments abroad averaging $1. 5 to $ 2 billion in the past five years. The recent bid for Corus by Tata Steel is a well-publicized example. 11 Aggregate financial data also point to the strength and expansion of India’s corporate sector in recent years. The market capitalization of companies listed on the Bombay Stock Exchange rose nearly 14-fold from $ 50 billion in 1990/91 to $ 680 billion in 2005/6 (Table 8).

In the last five years, the growth of profits has outpaced the growth of sales of private corporates, indicating rising profit margins. With falling interest rates and growing recourse to internal funding, the share of interest outgo in gross profits dropped sharply from above 50 percent in the late 1990s to 15 percent in 2005/6 (Reserve Bank, 2006, Box 1. 7). Unsurprisingly, data for the top 1000 listed companies showed net profits as percent of net sales rising from 4. 5 % in 2001/2 to 8. 9 % in 2004/5 (Business Standard, 2006). Table 8: Rising Middle Class 1990/91 Cars + UVs sold # Two Wheelers sold #

Telephone [email protected] (million) 15 million 100 million $50 billion $680 billion 205 thousand People in households with income (Rs. 2,00,000 – 10,00,000 OR PPP $20,000- $1,00,000 approximately)a Bombay Stock Exchange Market Capitalisation* 2005/06 1319 thousand 1800 thousand 7570 thousand 5 125$ a Based on data from NCAER (2005) * RBI, Handbook of Statistics on the Indian Economy, 2005-06 # Business Beacon, CMIE and Monthly Review of the Indian Economy, CMIE, October 2006 @ Business Beacon CMIE and Economic Survey, 2005-06 $ December 2005 A Growing Middle Class In the mid-1990s, shortly after the major economic reforms of 1991-4, there as premature exuberance about India’s rising middle class and their acquisitive aspirations. Today there is a much firmer basis for emphasizing the importance of the growing middle class in transforming consumption, production and investment in the Indian economy. Table 8 provides a few indicators. Based on surveys by the NCAER, about 100 million people now live in households with annual incomes between Rs. 200,000 and Rs 1 12 million (approximately PPP$ 20,000 to 100,000), compared to about 15 million in 1990/91. With a lower defining threshold, the size of the middle class would be greater.

For example, if the middle class cut-off is defined as the “non-poor” by standards of developed economies, then Bhalla (2007) estimates that 34 percent of India ’s population was “middle class” in 2005 compared to about 10 percent in 1990. Purchases of iconic middle class consumption items have certainly soared in the last 15 years (Table 8). Annual sales of cars (including multi- utility vehicles) have risen more than six times to 1. 3 million in 2005/6. Two wheeler sales have increased mo re than four times to 7. 6 million in 2005/6. In 1990/91 India had just 5 million telephone connections (all fixed).

By the end of 2005 the number was 125 million (about two-thirds were mobile connections). Indeed, in October 2006 the new mobile connections were close to 7 million, more than the total of phone connections fifteen years ago! The Demographic Dividend It has become commonplace to emphasize the growth potential of India’s young population and declining dependency ratio. According to most population projections the share of working age population in total population will continue to rise for the next 30 years or so, long after the decline has set in other major countries like China, USA, Western Europe and Japan (Table 9).

These demographics point to a large potential for higher growth through augmented supply of labour and savings. Indeed, these trends have already been at work over the 15 years or so, helping to raise India’s household savings from around 15-16 percent of GDP in the late 1980s to 22-24 percent in recent years. 7 7 This could be an important part of the explanation to the puzzle: How does India sustain high growth despite aggregate fiscal deficits above 7 percent of GDP over the last twenty years? 13 Table 9: Share of Working Population (15-59 yrs) Country 1950 1975 2000 2025 2050 India 55. 5 54. 0 58. 9 64. 3 59. 7 China 59. 53. 6 65. 0 62. 1 53. 8 Japan 56. 9 64. 0 62. 1 52. 8 45. 2 US 60. 5 60. 0 62. 1 56. 6 54. 6 Western Europe 61. 7 58. 1 61. 3 54. 8 50. 4 Source: http://www. un. org/esa/population/publications/worldageing19502050/countriesorareas. htm Some Recent Policies As noted above economic reforms slowed after 1995 and then revived to some extent in the period 2000-04. Also, real interest rates declined worldwide and in India too. In India this may have been helped by renewed efforts to reduce burgeoning fiscal deficits, including through enactment of the Fiscal Responsibility and Budget Management Act (2003) at the central level.

The fiscal position of the States also improved from the dire straits plumbed following the Fifth Pay Commission. The states too adopted fiscal responsibility laws following the recommendations (and conditional debt write-offs) of the Twelfth Finance Commission (Government of India, 2004). Furthermore, tax revenues at both levels of government were buoyed by resurgent economic (especially industrial) growth after 2002/3. The net result was a decline in the gross fiscal deficit from almost 10 percent of GDP in 2001/2 to 7. percent in 2004/5 and an even larger decline in the revenue deficit from 7 to 3. 7 percent of GDP (Table 10). This was the single most important factor explaining the increase in aggregate savings from around 24 percent of GDP in 2001/2 to 29 percent in 2004/5, which, in turn, helped finance the current investment boom. 14 Table 10: Deficits, Savings and Investment (as % of GDP) Year 1995-96 Gross Fiscal Deficit 2001-02 2004-05 6. 5 9. 9 7. 5 3. 2 7. 0 3. 7 25. 1 (-2. 0) 26. 9 23. 6 (-6. 0) 23. 0 29. 1 (-2. 7) 30. 1 (Centre and States) Revenue Deficit (Centre and States)

Gross Domestic Savings (of which Government) Gross Domestic Investment Source: RBI, Handbook of Statistics on the Indian Economy, 2005-06 and CSO website • • (http://mospi. nic. in/mospi_cso_rept_pubn. htm ) (http://mospi. nic. in/mospi_press_releases. htm ) International Economic Environment Despite the war in Iraq and the high oil prices of recent years the world economy has grown at almost 5 percent over the last four years, propelled by strong growth in US and China and some recovery in Japan and Europe. World trade in goods and services has expanded rapidly.

This favorable environment has helped rapid growth of exports (of goods and services) from India, which, in turn, has been a significant driver of economic growth in this recent period. 8 III Risks to Future Strong Growth There are some well-known risks or constraints to the sustenance of the 8 percent growth enjoyed by India since 2003. These include: 1) Renewed fiscal stress from populist policies; 8 Panagariya (2006) emphasizes this point. 15 2) Infrastructure bottlenecks; 3) Labour market rigidities; 4) Weak performance of agriculture; 5) Pace of economic reforms; ) Weaknesses in human resource development programmes; 7) The international economic environment. Each of these merit brief elaboration. Populism and Renewed Fiscal Stress The recent progress in fiscal consolidation, noted above, is real but modest. The overall fiscal deficit remains high at 7. 5 percent of GDP in 2005/6, as does the government debt to GDP ratio at 80 percent (compared to about 60 percent in 1995/6). While the fiscal responsibility laws enacted by central and state governments (22 out of 28 states have passed such laws so far) are promising, they are not immune to populist pressures.

Especially since the advent of the UPA government in 2004, populist expenditure programmes, such as the National Rural Employment Guarantee scheme, have gained fresh momentum. The Sixth Pay Commission has been constituted and is expected to submit its report by mid-2008, with governmental action likely before the next general election. The possibility of significant public pay increases is obviously high. On the revenue side, the state level VATs have contributed to revenue buoyancy. But the recent scheme for Special Economic Zones is fraught with unduly generous tax concessions.

So the prospects for fiscal consolidation are mixed, at best. Infrastructure Bottlenecks India’s infrastructure problems are legendary and also reflect failures in public sector performance and governance. A recent appraisal (World Bank, 2006) points out that “the average manufacturer loses 8. 4 percent in sales annua lly on account of power 16 outages”, over 60 percent of Indian manufacturing firms own generator sets (compared to 27 percent in China and 17 percent in Brazil) and India’s combined real cost of power is almost 40 percent higher than China’s. The quantity and quality of roads is also a serious bottleneck.

While there has been some progress in recent years with national highway development, the state and rural road networks are woefully inadequate, especially in poorer states (Figure 1). Urban infrastructure (especially water and sewerage) is another major constraint for rapid industrial development and urbanization (Figure 2). The successful example of rapid telecom development is very promising. But unlike telecom, the sectors of power, roads and urban infrastructure are burdened by long histories of a subsidy culture and dual (centre and states) constitutional responsibilities.

Unless the various infrastructure constraints are addressed swiftly and effectively, it is difficult to see how 8 percent (or higher) economic growth can be sustained. Fig 1:Percentage of habitations not connected by roads, by Indian state Haryana Kerala Andhra Pradesh Punjab 0% 3% 4% 7% Karnataka 8% Tamil Nadu 8% Maharashtra Gujarat Uttar Pradesh Rajasthan 12% 23% 43% 51% Bihar 58% Orissa 58% Jharkhand Madhya Pradesh West Bengal 59% 62% 69% Chattisgarh 82% Source: Ministry of Rural Development, Government of India, as cited in World Bank (2006). 17 Fig 2: Percentage of the population with access to sewerage facilities, by Indian state

Rajasthan 8 Orissa 9 Chattisgarh 10 Madhya Pradesh 10 Andhra Pradesh 15 West Bengal 17 Tamil Nadu 29 Karnataka 33 Uttar Pradesh 37 Uttaranchal 37 Maharashtra 49 Gujarat 63 0 10 20 30 40 50 60 70 Source: Central Public Health and Environmental Engineering Organization, 2000, as cited in World Bank (2006). Labour Market Rigidities According to official data, India’s non-agricultural employment in the private organized (units employing more than 10 workers) sector has stagnated below 9 million for over 20 years, although the labour force has grown to exceed 400 million!

A major cause has been India’s complex and rigid labour laws, which hugely discourage fresh employment while protecting those with organized sector jobs. 9 Investment climate surveys by the World Bank indicate that India has some of the most restrictive labour laws in the world, which, in effect convert labour (in organized units) into a fixed factor of production (lay-offs are extremely difficult) and thereby discourage fresh employment in the organized sector while promoting more “casualization” and insecurity among the 9

The skill and capital-intensive pattern of development of India’s modern industrial and services sectors (despite the endowment of abundant unskilled labour) has been noted by many analysts, including Kochhar et. al. (2006), Panagariya (2006) and World Bank (2006). All of them point to restrictive labour laws as a major culprit. 18 93 percent of workers in the unorganized sector. The laws are not just rigid but also numerous (“a typical firm in Maharashtra has to deal with 28 different acts pertaining to labor”, World Bank, 2006).

Without significant reform of existing labour laws, India’s cheap labour advantages remain hugely underutilized. Looking to the future, the challenge will increase as the “demographic dividend” brings further large increases in the labour force. In fact, as I have pointed out elsewhere (Acharya, 2004), the economic and political challenge is far greater than normally appreciated because the bulk of the demographic bulge will occur (in the next few decades) in the poor, slow-growing and populous states of central and eastern India (notably, Uttar Pradesh, Bihar, Orissa and Madhya Pradesh).

Weak Agricultural Performance Since 1996/97 the growth of agriculture has dropped to barely 2 percent, compared to earlier trend rate ranging between 2. 5- 3. 0 percent. The reasons are many and include declining public investment by cash-strapped states, grossly inadequate maintenance of irrigation assets, f lling water tables, inadequate rural road networks, a unresponsive research and extension services, soil damage from excessive urea use (encouraged by high subsidies), weak credit delivery and a distorted incentive structure which impedes diversification away from food grains.

Tackling these problems and revitalising agriculture will take time, money, understanding and political will. It will also require much greater investments in (and maintenance of) rural infrastructure of irrigation, roads, soil conservation, etc. and reinvigoration of the present systems of agricultural research and extension. While the central government can play a significant role in revamping systems, the main responsibility for strengthening rural infrastructure lies with the states. However, their financial and administrative capabilities have weakened over time. The share of agriculture in GDP has declined to hardly 20 percent.

But agriculture is still the principal occupation of nearly 60 percent of the labour force. Thus better performance of this sector is essential for poverty alleviation and containment of rising regional and income inequalities. 19 Pace of Economic Reforms There is little doubt that economic reforms have slowed since the UPA government assumed office in May 2004 10 . The privatization programme has been halted, although Government remains the dominant owner in banking, energy and transport and the usual ills of public ownership afflict the performance of many enterprises in these key sectors.

The legislative proposals of the previous government to reduce government ownership in public sector banks to 33 percent have lapsed and not been renewed. There has been some revival of interest rate controls and directed credit. Follow-up action on the reformist new Electricity Act (2003) passed by the NDA government has been slow. The pricing of petroleum products has become more politically administered than before. Education policy has focused on introducing caste-based reservations in institutions of higher education. Introduction of such reservations in private sector employment are also being considered.

Reform of labour laws remains stalled. There has been little forward progress in reform of agriculture policies. Indeed, the wonder is that the economy’s growth momentum has remained so strong despite the stalling of economic reforms. If the growth dividends of econo mic reforms occur with a lag, then the paucity of reforms in the period 2004-06 may take their toll in the years ahead. Weak Human Resource Policies The long-run performance of the Indian economy must surely depend on successful policies and programmes f r education, skill-development and health service o rovision. Yet the government- led programmes in these sectors suffer from very serious weaknesses and lack of reform impetus. For example, World Bank (2006) cites a number of surveys which show that less than half of government teachers and health workers are actually to be found in schools and clinics they are serving (the situation is typically worse in poorer states) . Even though school enrolment rates have climbed over time, the actual cognitive skill acquired in schools (even simple reading and arithmetic) is still very 10 For a recent review see Acharya (2006c). 0 low (Pratham, 2006). In health, a survey shows that medics in primary health clinics in Delhi had a greater than 50 percent chance of prescribing a harmful therapy for specified, common ailments (Das and Hammer, 2004a and 2004b). The competence of these medics was found to be less than comparably situated counterparts in Tanzania and substantially worse than counterparts in Indonesia. Even in higher education, an area of supposed competence, studies point to enormous problems of quality, quantity and relevance (see, for example, Aggarwal, 2006).

Quite clearly, the current portfolio of policies and programmes in these critical sectors need urgent improvement if India is to retain her competitive edge in an increasingly globalized, knowledge-based, world economy. International Economic Environment The latter half of 2006 has witnessed a distinct slowing in the growth of the US economy, still the single most potent locomotive of global growth. The Doha Round of multilateral trade liberalization remains mired in limbo. Oil prices, though off their peaks, remain high with little prospect of falling below $50 a barrel.

The chances of some slackening in the growth of world output and trade are clearly rising. Just as the Indian economy has benefited from strong global expansion in the last four years, so it may expect to bear some downside risks from slower world growth in the years ahead. IV Medium Term Growth Prospects Since 2003/4 there have been quite a few studies projecting sustained, high growth of the Indian economy in the long-run, including the Goldman Sachs “BRICs” report (Wilson-Purushothaman, 2003), Rodrik-Subramanian (2004) and Kelkar (2004).

Their specific projections and time-periods differ: Goldman Sachs foresaw near 6 percent growth for 50 years; Rodrik-Subramanian projected a minimum of 7 percent for the next 20 years and Kelkar was even more optimistic with his growth expectation of 10 percent. 11 More recently, with a three-year 8 percent average already achieved and the 11 See Acharya (2004) for a critical assessment of these bullish growth expectations. 21 current year likely to register a similar rate, the Government’s Planning Commission (2006) has outlined GDP growth projections for 2007/8-2011/12 of 8 to 9 percent.

Bhalla (2007, forthcoming) goes further and foresees 10 percent growth as almost inevitable. Most probably, the majority of serious economists in India would today expect economic growth in the medium term (say, 2007-12) to average at least 8 percent. Such optimism is not wholly misplaced. It is based on the continuing strength of the positive factors outlined in section II above, especially globalization and “catch-up”, the demographic dividends, the rising middle class, a vibrant entrepreneurial culture, positive expectations of future economic reforms and a generally benign international economic environment.

The optimists are not blind to the risks and threats outlined in section III. They simply expect the growth-enhancing tendencies to prevail or, more subtly, for the dynamics of growth to generate solutions to constraints such as infrastructure and education. Figure 3 provides encouragement to the bullish outlook. 22 Figure 3: India’s GDP Growth 8 7 Percentage 6 5 4 3 2 1 2006-07 2003-04 2000-01 1997-98 1994-95 1991-92 1988-89 1985-86 1982-83 1979-80 1976-77 1973-74 1970-71 1967-68 1964-65 1961-62 1958-59 1955-56 0 Year Rolling Average (5 year)

In my view, the downside factors outlined in section III, should carry more weight in assessing India’s medium term growth prospects. There is a good chance that the currently bullish view of growth expectations is overly influenced by the recent past (2003 onwards), a period of strong cyclical upswing in both the global economy and Indian industry. The strength of the cycle could abate in the next couple of years and India’s growth could revert to a trend rate in the range of 6 to 7 percent, perhaps closer to the higher figure.

Even then, under this “pessimistic” scenario, annual per capita growth would be at a historical peak for India (Table 11). If this is “pessimism”, then I plead guilty to the charge (though it does place me among a small minority of Indian economists today)! 23 Table 11: Medium Term Growth Expectations 1992/3 –2005/6 2002/3 -2006/7 2007/8 – 2011 /12 “Optimist” “Pessimist” GDP % 6. 4 7. 2 * 8 – 10 6. 5 – 7. 0 GDP per capita (%) 4. 4 5. 5 6. 5 – 8. 5 5 – 5. 5 * Assuming Reserve Bank projection of 8. percent GDP growth for 2006/7 Perhaps the most noteworthy point is that medium- term growth expectations for India are so buoyant that the range between optimists and pessimists is placed so high, within a fairly narrow band of about 7 to 9 percent. Only time will tell who is closer to being right. V Some Implications of India’s Rise India’s growth at an average rate of almost 6 percent a year over the past quarter of a century (with per capita growth of nearly 4 percent a year) is both remarkable and commendable.

Certainly, back in 1980, there was almost no respectable scholar or institution predicting such sustained development of this poverty-ridden, populous country. At the same time, the prevailing fashion of bracketing India’s rise with China’s exceptionally dynamic development under rubrics like “China and India Rising” may mask more than it reveals. If India’s development in the last 25 years has been good, China’s has been extraordinary. Furthermore, while India has been a gradual “globalizer”, China’s surging development has been far more intensively based on global trade and capital flows.

As a consequence, the global economic impact of China’s rise has been much more dramatic in terms of the usual metrics of international economic relations: trade, capital flows and energy. A glance at Table 12 illustrates this obvious point. The comparison of columns 5 and 6 of the table is especially instructive. It highlights both the 24 dramatic increase in China’s engagement with the world economy over the five years 2000 to 2005, as well as the much milder rise in Ind ia’s international economic integration. For example, China’s goods exports increased by an amount which was five times the level of India’s total goods exports in 2005.

Similarly, the increase in oil consumption in China was almost equal to India’s total oil consumption in 2005. Table12: China and India: Global Impact China India Increment (2000-05) 2000 (1) 2005 (2) 2000 (3) 2005 (4) China (5) India (6) 249. 1 762. 4 45. 5* 104. 7* 513. 3 59. 2 Share of World Exports (%)e 3. 9 7. 3 0. 7 0. 9 3. 4 0. 2 Service Exports ($ billion) a,b 30. 4 74. 4 16. 2* 60. 6* 44 44. 4 Current Account Balance ($ billion) a,b 20. 5 160. 8 -2. 7* -10. 6* 140. 3 -7. 6 Foreign Exchange Reserves ($ billion) a 165. 6 818. 9 37. 2 131. 0 653. 3 93. 8

FDI inflow ($ billion)c 30. 1# 72. 4 1. 7# 6. 6 42. 3 4. 9 FDI stock (Inward, $ billion) c 193. 3 317. 9 17. 5 45. 3 124. 6 27. 8 Oil Consumption (million tonnes)d 223. 6 327. 3 106. 1 115. 7 103. 7 9. 6 Primary Energy Consumption (million tonnes oil equivalent) d 966. 7 1554. 0 320. 4 387. 3 587. 3 66. 9 Merchandise Exports ($ billion) a,b Note: * Data for India refer to fiscal year 2000-01 and 2005-06 # 1990-2000 (Annual Average) Sources: a International Financial Statistics, December 2006 (http://ifs. apdi. net/imf/) b RBI, Handbook of Statistics on the Indian

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Modernism in “A passage to India”

Modernism refers to a classification of literature that was written between 1914 and 1965.  E. M. Forster’s A Passage to India was published in 1924, placing it in the early years of the Modernist Period as well as within the Georgian Age (Harmon 597).  In art and literature, Modernism paralleled the rise of industrial technology and advances in science. In music, atonalism – that is, music which deliberately avoids key centers and is often dissonant – was produced by composers such as Arnold Schoenberg. Visual art found expression in cubism. Theories by Sigmund Freud also had a powerful influence on this movement.

In literature, the Modernistic writing style is characterized by breaking with tradition.  It is inner-self oriented, and that inner-self is often explored using a stream of consciousness manner.  Modernism rejects traditional values and assumptions.  The individual takes pride of place while the social and outward are cast aside.  Some scholars see Modernism as a reaction to the practical and systematic sensibilities of Realism and Naturalism (Harmon 326).

Not surprisingly, the Modern Era was also when Existentialism came into prominence – a related philosophy in which human beings are expected to create their own meaning for existence.  Forster’s “Oriental-leaning” characters in this novel provide examples of a Modernistic mindset contrasting with the traditional English Imperialist mindset provided by other characters. Forster uses the symbol of water to represent the idea of renewal in the “Temple” chapter.

There is an event in which the Hindus are “preparing to throw God away” (Forster 308), and part of the ceremony involves a replica of the village of Gokul that is placed on a tray and is to perish.  Meanwhile, the British and others are in boats out in the water, observing the festivities, and the boats collide, expelling the passengers.  The symbolic village perishes so that it can be renewed, and is representative of the renewal of mindsets of some of the passengers in the boats.

Aziz in particular in the latter portion of the “Temple” section, exhibits several examples of stream of consciousness thinking.  In one instance Fielding asks Aziz to meet with Stella and Ralph, and Aziz does not reply.  Instead, the reader is allowed into his thoughts, which are not linear but circular, and is one example of how a human mind jumps around from topic to feeling to emotion and back (Forster 314).

Because Forster is examining traditional values through a Modernistic lens in this novel, material detail is much less important than what the characters are thinking.  The action in this story is in each character’s mind, and how they grapple with new ideas concerning culture, religion, and morality.

Professor Godbole and Mrs. Moore express their inner character and the workings of their minds in an “Oriental” manner, embodied in the Hindu sensibility.  Mrs. Moore, although a Christian, is accepted into Oriental culture, and she clashes with Heaslop prior to Aziz’s trial.  Heaslop does not understand his mother because he does not recognize her spirituality, and he sides with the English Imperialist mindset against Aziz, the

Oriental.  Mrs. Moore will have no part in helping her son succeed to the detriment of an Oriental.  She ultimately leaves India and the trial (Forster 201).

In A Passage to India, Forster uses Modernism to explore the inclusive attitude of the “Oriental” and how diverse people make their passages in coming to terms with this sensibility.  Forster makes use of a Modernistic approach to help him tell a story with great depth, complexity and surprise.

Works Cited

Forster, E. M.  A Passage to India.  New York:  Harcourt, 1924.

Harmon, William and C. High Holman.  A Handbook to Literature. 7th ed.  Upper Saddle River, New Jersey:  Prentice Hall, 1996.

 

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How Wwii Effected the Indian Independence Movement

Rebecca Martinez 18 November 2012 Professor Sutherland ANTH 4002 World War II’s Impact on the Indian Independence Movement The success of the Indian Independence movement is, by some scholars, largely attributed to efforts of Mahatma Gandhi. As stated by BBC, “Gandhi was the leader of the Indian nationalist movement against British rule, and is widely considered the father of his country” (India. wikia. com). However, this revolutionary movement, a dream that had been growing since the mid nineteenth century, was the infusion of a wide spectrum of Indian political organizations, philosophies, and rebellions.

For example, the events and aftermath of the Second World War posed an economic crisis and political confrontation that transformed nationalism and colonialism for many colonies, including India. Even less credit is given to the various international events that shaped the movement, as well as those involved. Regardless of the divisions in Indian nationalist efforts, both in support and against violence, they all contained one common goal: independence from Britain.

Were historians correct in their proposition that India’s independence was largely attributed to Gandhi’s peaceful anti-war efforts, or were Gandhi’s strategies ultimately ineffective? If proven effective, should India’s rapid progress in independence during World War II be seen as affected most by Gandhi, or were bigger actors involved? I believe that the source of India’s successes in their 100-year struggle for independence should not be correlated with one man.

Rather, by paying close attention to key events, powerful political players, critical economic changes, and motivating political factors from around the globe during this period, historians will gain a better understanding of how India’s independence movement was rapidly accelerated, and ultimately successful, during the period surrounding World War II. When war initially broke out in September of 1939, Britain’s grip on India was as fierce and stubborn as ever (Bose and Jalal, 130).

Although Congress leadership in India implored Great Britain to define their war aim before declaring India’s support, viceroy Linlithgow avowed the British Indian Empire a belligerent against the axis powers without consulting prominent Indian leaders (Bose and Jalal, 130). Once it became clear that the British were unconcerned with Indian nationalist aspirations, the entire Congress leadership resigned from the local government councils in protest. However, this protest was not simply an opposition to Britain’s decision.

Many Indian nationalists believed that Britain’s fight for democracy and freedom in the Second World War contradicted their rule over a multitude of colonies (wiki. com). Mahatma Gandhi, for example, termed Britain’s “war to save democracy” as hypocrisy since it was denying democratic rights and individual liberties to Indians (wiki. com). Despite the atrocities faced by Indians under British rule, many Indians supported the British war effort and fought with the Allied Forces.

In hopes that the British would leave India after the Second World War, the Indian National Congress cooperated with the British war efforts, making the British Indian Army was one of the largest volunteer forces during the war (India. wikia. com). However, when it became clear the Britain had no intention of relenting their hold India after the war, Gandhi called for a determined but passive resistance to foster a peaceful negotiation with the British government.

Ultimately, Gandhi and the Congress Party proposed a “Quit India Movement,” which declared that if the British did not accede to the demands for Indian independence, a massive Civil Disobedience would be launched (Bose and Jalal, 133). However, once Britain arrested the top Congress Party leaders, the Quit India Movement fizzed out entirely before it even had a chance to gather steam.

That being said, although Mahatma Gandhi’s initial civil disobedience movements were driving forces that ultimately shaped the cultural, religious, and political unity of a Indian diverse nation, they did not have a significant impact on Indian independence following the Second World War. Although history’s spotlight for Indian nationalist ideas during this time is set on Gandhi, the fight for freedom during World War II saw the rise of two independence movements. Some leaders of the revolutionary Indian independence movement collaborated with the Axis powers to overthrow the British Raj.

Although largely ignored by historians, the Azad Hind movement, in collaboration with Japanese forces, successfully created the Indian National Army in 1942. Indian military alliances with Axis nations also included the Legion Freies Indien in Nazi Germany and the Battaglione Azad Hindoustan in Fascist Italy (wiki. com). Although Adolf Hitler saw Indians as racially inferior and had no interest in India’s future, he believed that if India gained its independence it could become a valuable ally of the Axis powers and help it gain dominance in the Indian Ocean area (Kumar).

As a result, Germany and Japan actively provided support to Indian independence movement leaders. The Indian Nation Army, led by Subhash Chandra Bose, was based on the principle that “An enemy’s enemy is a friend” (India. wikia. com). Bose also formed what came to be known as the Azad Hind Government, with Indian prisoners of war and Indian expatriates in South-East Asia, with the help of the Japanese (Bose and Jalal, 134). Its aim was to reach India as a fighting force that would build on public resentment to inspire revolts among Indian soldiers to defeat the Raj (Bose and Jalal, 134).

However, due to poor arms and supplies from the Japanese and lack of support and training, the Indian National Army and entire Azad Hind ultimately failed. Although defeated, Bose’s initiative gave hope to the Indian public and turned the support and loyalty of the native soldiers of the British Indian Forces from the crown to the Indian National Army soldiers. In doing so, the British Army, whose ultimate goal was to replace the loyalty of Indian soldiers to the crown, was replaced by the Indian National Army (Bose and Jalal, 134).

Bose also succeeded in developing a larger participation and unity in the Indian community, one that crossed religious and gender boundaries, than Mahatma Gandhi’s Quit India movement. In his book The Indian Struggle, Bose described his first meeting with Gandhi in 1921, “there was a deplorable lack of clarity in the plan which the Mahatma had formulated and that he himself had no clear idea of the successive stages of the campaign which would bring India to her cherished goal of freedom” (Kumar).

However, although Bose’s efforts did aid India’s independence movement, it did not create an impact large enough for historians to declare its actions as the main source of India’s accelerated independence. The most effective factor in Indian independence during World War II, therefore, could not have been the result of Indian nationalist efforts. It was British prime minister Clement Atlee who, when granting independence to India, said that Gandhi’s non-violence movement had next to zero effect on the British.

In corroboration, Chief Justice P. B. Chakrabarty of the Kolkata High Court, disclosed the following in a letter addressed to the publisher of Ramesh Chandra Majumdar’s book A History of Bengal, “You have fulfilled a noble task by persuading Dr. Majumdar to write this history of Bengal and publishing it … In the preface of the book Dr. Majumdar has written that he could not accept the thesis that Indian independence was brought about solely, or predominantly by the non-violent civil disobedience movement of Gandhi.

When I was the acting Governor, Lord Atlee, who had given us independence by withdrawing the British rule from India, spent two days in the Governor’s palace at Calcutta during his tour of India. At that time I had a prolonged discussion with him regarding the real factors that had led the British to quit India. My direct question to him was that since Gandhi’s “Quit India” movement had tapered off quite some time ago and in 1947 no such new compelling situation had arisen that would necessitate a hasty British departure, why did they have to leave?

In his reply Atlee cited several reasons, the principal among them being the erosion of loyalty to the British Crown among the Indian army and navy personnel as a result of the military activities of Netaji [Subhash Chandra Bose]. Toward the end of our discussion I asked Atlee what was the extent of Gandhi’s influence upon the British decision to quit India. Hearing this question, Atlee’s lips became twisted in a sarcastic smile as he slowly chewed out the word, “m-i-n-i-m-a-l! ”(Kumar).

In reality, the political confrontations and negotiations between Indian nationalists and the British were immensely influenced by an atmosphere of deepening economic crisis. In the aftermath of World War II, Britain’s economy was destroyed to such an extent that they were no longer able to financially maintain their military forces, making Great Britain incapable of containing the incessant freedom movements in their colonies. Therefore, due to its collapsed economy, Great Britain would have left India much later than they did after World War II, regardless of Gandhi, Bose, or any nationalist leader.

The most influential character in India’s independence, therefore, would evidently be Adolf Hitler. Despite his selfish reasons for war, Hitler inadvertently created the perfect economic atmosphere needed for the Indian Independence Movement to take flight. Had Hitler not begun World War II, India’s independence, with only nationalist determination as a driving force, would most probably have taken much longer than it did. In the aftermath of World War II, India had increased its political, economic and military influence, which paved the way for its independence from Great Britain in 1947.

Although the main factor in Britain’s retreat in India was its economic turmoil, India would not have been able to create or sustain a healthy economy, government, or military without the help of key nationalist leaders. For example, previous tensions between Indian castes were eased by Gandhi, who launched the Haijan movement, a campaign to improve the lives of the untouchables, whom he named Harijans, the children of God. Gandhi also influenced India’s blossoming political ideology. According to Jim Yardley, “Gandhi is given full credit for India’s political identity as a tolerant, secular democracy. Likewise, Indian military precedent was also set by Bose in his creation of the Indian National Army. Bose also succeeded in uniting various religious entities in India. For example, when he first three of Bose’s officers to be tried were a Hindu, a Muslim, and a Sikh, Indians of all three religions became united against the British in a national movement against the Indian National Army officers’ trial (india. wikia. com). Nationalist efforts, specifically Mahatma Gandhi, may have not been the leading force in India’s independence in 1947, but it did make independence easier. British historians P.

J. Cain and A. G. Hopkins described the hopeless situation of the British in India as follows, “By the end of war, there was a loss of purpose at the very center of the imperial system. The gentlemanly administrators who managed the Raj no longer had the heart to devise new moves against increasing odds, not least because after 1939 the majority of the Indian Civil Service were themselves Indian. In 1945 the new Viceroy, Wavell, commented on the “weakness and weariness of the importance of the instrument still our disposal in the shape of the British element in the Indian Civil Service.

The town had been lost to opponents of the Raj; the countryside had slipped beyond control. Widespread discontent in the army was followed in 1946 by a mutiny in the navy. It was then Wavell, the unfortunate messenger, reported to London that India had become ungovernable [which finally led to the independence of India” (Kumar). Furthermore, although the Indian Independence Movement was greatly hastened by Britain’s economic crisis posed during the aftermath of World War II, India’s identity would not be the same without the influential works of Indian nationalists. Works Cited:

Bose, Sugata & Jalal, Ayesha. 2011, Modern South Asia: History, Culture Political Economy, Third Edition. Routledge Taylor and Francis Group, London and New York. http://india. wikia. com/wiki/Indian_Independence_Movement http://en. wikipedia. org/wiki/India_in_World_War_II Kumar, Susmit. 2012. ‘Hitler, NOT Gandhi, Should Be Given Credit for the Independence of India in 1947’, [Online] Available at: http://www. susmitkumar. net/index. php? option=com_content&view=article&id=100&Itemid=86 Yardley, Jim. 2010, ‘Obama Invokes Gandhi, Whose Ideal Eludes India. ’ New York Times. 6, Nov.

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French and Indian War Dbq

The aftermath of the French and Indian War triggered unpredictable changes in the relationship between Britain and its American colonies. The immense debt and re-engagement of Britain in the American politics caused tensions and discontent among the colonists. After the war, Britain and its colonies seemed to have grown closer together politically, but the economic and ideological differences caused numerous conflicts that eventually led to the American Revolution. The French and Indian War brought the colonies much closer to Britain than they had been in for over a century.

Together they fought off a common enemy, the French; and were celebrating a joyous victory. They had eliminated the French presence from the North American continent, as the map in document A portrays, which caused the settlers to celebrate the involvement of Britain. In Rev. Thomas Barnard’s sermon and George Washington’s letter, the patriotic feelings they have towards their King and their country are quite visible. However, the people’s contentment did not last long. The British thought themselves superior over the colonists.

As exemplified in a Massachusetts soldier’s diary; it was clear that the colonists were not treated as real Englishmen. This caused infuriation amongst the colonial soldiers who deserved to be recognized as much as the English subjects were. When the Parliament began to pass unwanted acts on them, the colonists furiously protested the sudden changes. After more than a century of Salutary Neglect, the colonies were used to managing their own affairs. The French and Indian War caused the British to reappear once more in their lives.

Since the war produced a major debt, Britain decided to tax the colonies. The mother country believed they should share the burden of taxation with the people of England. The colonists were outraged at the taxes, as they believed they were not equally represented in the Parliament. In document H, a newspaper masthead portrays how upset the early Americans were about the Acts; especially the hated Stamp Act. The masthead was obviously hoping to encourage the readers to stand against the taxes. To gain capital and protest the unjust taxes the colonists began trading illegally with non-British nations.

Britain was outraged at this apparent betrayal which was demonstrated by the British Order in Council. It stated that the Commissioners of the Treasury were witnessing fraud and expansion in the colonies. When the French and Indian War ended, the colonists were sure they would finally have freedom to expand as far as they want. However, the Parliament quickly passed the Proclamation of 1763 which forbid them from crossing the Appalachian Mountains. This upset the settlers immensely as they had expected a reward for their victory, not a series of Acts.

In reality, Britain passed the Proclamation to stop further conflicts with Native Americans. In Canassatego’s speech to the representatives of Pennsylvania, Maryland, and Virginia, the tensions between the Indians and British colonists were easily noticeable. The Parliament wanted to avert more disagreements over land. Nonetheless, the colonists decided to ignore the law and cross the line anyway. The French and Indian War altered the relations between the colonists and Britain in staggering ways.

After the changes took place, there was no going back to the way things were before. The initial failures of the British army showed the colonists that even the greatest military in the world was not invincible. When the pressures from the Parliament became too unbearable, the colonists had the courage to stand up to its mother country. They met in gatherings like The Stamp Act Congress and discussed their grievances. In the end their mutual discontent and desire for independence eventually led to the American Revolution.