IJRMSS Volume 6, Issue 1 (V) January - March 2018-1

UGC
University Grants Commission

Journal No.: 48996
(Conference Special)
Volume 6, Issue 1 (V)

January - March 2018
2nd INTERNATIONAL BUSINESS
&
FINANCE CONFERENCE, 2018
Organized
By
CENTRE FOR MANAGEMENT STUDIES (CMS)
JAMIA MILLIA ISLAMIA
(A Central University)
New Delhi, India
21st February 2018
In Association with
Indian Academicians and Researchers Association (IARA)
website: www.iaraedu.com
About the Conference
The second international conference is called at the time of great transformation in the domain of
international business, finance, operations and supply chain management (SCM). The neo-liberal
economy set at different pace in order to sustain its fundamental objectives and operations. The nation
states across globe are connected via trade blocs and agreements which are also administered by the
multilateral trading systems such as WTO. The recent trends in European Union such as Brexit,
emergence of TPP (Trans pacific Partnership) led by United States. BRICS’s expansion and
development Bank, China’s growth as an alternate power, reverse logistics, demonetisation in India,
reviewing silk route by Turkey and ever-growing trade imbalance between north and south are most
happening contemporary events. The IPR (Intellectual Property Rights), IFRS (International Financial
Reporting System), Environment & Trade, Ethical issues etc., are debated across globe. The
international Organisations do their best in disseminating global issues which need to be documented,
measured and researched. The basic objectives of the conference are to address above mentioned
issues through drawing attention from academicians, intellectuals, researchers, student community for
further debate.
The experience of developing, emerging economies has to be addressed carefully in order to develop
universal understanding on the global issues. The neo- liberal economic model empowers markets and
diminishes state which leads to ambiguous situation. The economic inclusiveness and empowerment
of society at large through business development is need of the hour. There are numbers of questions
arises while dealing with international trade/Business; that is slowdown in international trade – a cause
for concern? ; Critical review of success and failure of WTO in relation to international trade?
Whether WTO achieved its set objectives in facilitating international trade? Stumbling Bloc Vs
Building Bloc? Strategies for developing countries to remain an effective partner in international
trade? Has globalisation really benefited emerging economies? Is globalisation moving in to right
direction? International trade a stepping stone for economic growth. And the area of logistics and
supply chain management is another important domain which needs to be debated and researched.
Jamia Millia Islamia one of important centre of learning in India, which have been serving the nation
for almost a century. The second international conference appeals to the world of researchers to come
forth and put their views to strengthen and enrich the debate the issues surrounded with international
Business and Finance.
About IARA
Indian Academicians and Researchers Association ( IARA ) is an educational and scientific research
organization of Academicians, Research Scholars and practitioners responsible for sharing information
about research activities, projects, conferences to its members. IARA offers an excellent opportunity
for networking with other members and exchange knowledge. It also takes immense pride in its
services offerings to undergraduate and graduate students. Students are provided opportunities to
develop and clarify their research interests and skills as part of their preparation to become faculty
members and researcher.
Conference Coordinators and Guest Editors
Dr. S.Veeramani Dr. Taufeeque Ahmad Siddiqui Mr. Syed Shaamikh Ahsan
Assistant Professor Assistant Professor Assistant Professor
Centre for Management Studies Centre for Management Studies Centre for Management Studies
Jamia Millia Islamia Jamia Millia Islamia Jamia Millia Islamia
New Delhi New Delhi New Delhi
International Journal of Research in Management & Social Science
Volume 6, Issue 1 (V) : January - March 2018
Chief Patron Mr. Zahirul Alam Ahmed

Director, Empyreal Institute of Higher Education.
President , Bhramaputra Welfare Organization
Editor- In-Chief Dr. Tazyn Rahman
Members of Editorial Advisory Board
Mr. Nakibur Rahman Dr. Mukesh Saxena
Ex. General Manager ( Project ) Pro Vice Chancellor,
Bongaigoan Refinery, IOC Ltd, Assam University of Technology and Management, Shillong
Dr. Alka Agarwal Dr. Archana A. Ghatule

Director, Director,
Mewar Institute of Management, Ghaziabad SKN Sinhgad Business School, Pandharpur
Prof. (Dr.) Sudhansu Ranjan Mohapatra Prof.(Dr.) Sharad Kumar Goel

Dean, Faculty of Law, Director,
Sambalpur University, Sambalpur Indirapuram Institute of Higher Studies, Ghaziabad
Dr. P. Malyadri Prof. (Dr.) Monoj Kumar Chowdhury

Principal, Professor, Department of Business Administration,
Government Degree College, Hyderabad Guahati University, Guwahati
Prof.(Dr.) Shareef Hoque Prof. (Dr.) Baljeet Singh Hothi

Professor, Professor,
North South University, Bangladesh Gitarattan International Business School, Delhi
Prof.(Dr.) Michael J. Riordan Prof. (Dr.) Badiuddin Ahmed

Professor, Professor & Head, Department of Commerce,
Sanda University, Jiashan, China Maulana Azad Nationl Urdu University, Hyderabad
Prof.(Dr.) James Steve Dr. Anindita Sharma

Professor, Dean & Associate Professor,
Fresno Pacific University, California, USA Jaipuria School of Business, Indirapuram, Ghaziabad
Prof.(Dr.) Chris Wilson Prof. (Dr.) Jose Vargas Hernandez

Professor, Research Professor,
Curtin University, Singapore University of Guadalajara,Jalisco, México
Prof. (Dr.) Amer A. Taqa Prof. (Dr.) Himanshu Pandey

Professor, DBS Department, Professor, Department of Mathematics and Statistics
University of Mosul, Iraq Gorakhpur University, Gorakhpur
Dr. Nurul Fadly Habidin Prof. (Dr.) Agbo Johnson Madaki

Faculty of Management and Economics, Faculty, Faculty of Law,
Universiti Pendidikan Sultan Idris, Malaysia Catholic University of Eastern Africa, Nairobi, Kenya
Dr. Neetu Singh Prof. (Dr.) D. Durga Bhavani

HOD, Department of Biotechnology, Professor,
Mewar Institute, Vasundhara, Ghaziabad CVR College of Engineering, Hyderabad, Telangana
Prof. (Dr.) Shashi Singhal Prof. (Dr.) Aradhna Yadav
Professor, Professor,
Amity University, Jaipur New Horizon College of Engineering, Bengaluru
Prof. (Dr.) Alireza Heidari Prof.(Dr.) Robert Allen

Professor, Faculty of Chemistry, Professor
California South University, California, USA Carnegie Mellon University, Australia
Prof. (Dr.) Badar Alam Iqbal Prof. (Dr.) S. Nallusamy

Adjunct Professor, Professor & Dean,
Monarch University, Switzerland Dr. M.G.R. Educational & Research Institute, Chennai
Dr. Dhananjay Prabhakar Awasarikar Dr. Sarmistha Sarma

Associate Professor, Associate Professor,
Suryadutta Institute, Pune Institute of Innovation in Technology and Management
Dr. Mohammad Younis Dr. Pranjal Sharma

Associate Professor, Associate Professor, Department of Management
King Abdullah University, Saudi Arabia Mile Stone Institute of Higher Management, Ghaziabad
Dr. Kavita Gidwani Dr. Lalata K Pani

Associate Professor, Reader,
Chanakya Technical Campus, Jaipur Bhadrak Autonomous College, Bhadrak, Odisha
Dr. Vijit Chaturvedi Dr. Sunita Dwivedi

Amity University, Noida Symbosis Center for Management Studies, Noida
Dr. Marwan Mustafa Shammot Dr. R. Navaneeth Krishnan

King Saud University, Saudi Arabia Bharathiyan College of Engg & Tech, Puducherry
Dr. Juhab Hussain Dr. Namita Dixit

Assistant Professor, Assistant Professor,
King Abdulaziz University, Saudi Arabia ITS Institute of Management, Ghaziabad
Dr. V. Tulasi Das Mr. Sukhvinder Singh

Acharya Nagarjuna University, Guntur, A.P. Institute of Innovation in Technology & Management
Dr. Urmila Yadav Dr. Nidhi Agrawal

Sharda University, Greater Noida Institute of Technology & Science, Ghaziabad
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Volume 6, Issue 1 (V) : January - March 2018
CONTENTS
Research Papers
A REVIEW OF LITERATURE ON INTERRELATIONSHIP BETWEEN STOCK MARKET 1 – 10
DEVELOPMENT AND ECONOMIC GROWTH
Nivedita Srivastava and Tanuj Nandan
ASSESSING PREDICTIVE POWER OF MACROECONOMIC VARIABLES FOR STOCK 11 – 12

PRICES: ARTIFICIAL NEURAL NETWORKS APPROACH IN INDIAN CONTEXT
Dr. Taufeeque Ahmad Siddiqui and Yusuf Abdullah
BILATERAL TRADE BETWEEN INDIA- EU: WITH SPECIAL REFERENCE TO GARMENT 13 – 22

EXPORTS TO EU IN THE MFA TRANSITION PERIOD
Dr. S. Veeramani, Syed Shaamikh Ahsan, Sheenam Ayyub and Sonakshi Singh
DETERMINING THE OUTCOME OF NEWS ON THE STOCK MARKETS OF EMERGING 23 – 27

ECONOMIES: A CASE OF BRICS
Dr. Taufeeque Ahmad Siddiqui and Mazia Fatima Khan
E-COMMERCE AND THE GROWTH OF GLOBAL RETAIL BUSINESS - A CASE STUDY OF 28 – 36

AMAZON.COM, INC
Karishma Arora
EFFECTIVE DECISION MAKING USING ADVANCEMENTS IN BUSINESS ANALYTICS 37 – 40

WITH MACHINE LEARNING MODELS: IMPLICATION TO SPORTS ANALYTICS
K. Subhash and E. N. Vihari
FACTORS AFFECTING FEMALE EXPATRIATES: A REVIEW OF LITERATURE 41 – 47
Dr. Sunayana Kumar and Nadia Ashraf Khan
FINANCIAL INCLUSION THROUGH BUSINESS CORRESPONDENT MODEL- 48 – 52

OPPORTUNITIES AND OPERATIONAL ISSUES OF CUSTOMER SERVICE PROVIDERS
Dr. Amal Kumar Agarwala and Lonibha Deka
IMPACT OF CAPITAL STRUCTURE ON PROFITABILITY AND MARKET VALUE: STUDY 53 – 57

OF BSE S&P 100 LISTED FIRMS
Dr. Priti Sharma
TRENDS AND PATTERNS OF INDIAN OUTWARD FOREIGN DIRECT INVESTMENT 58 – 62
Dr. Veeramani, Mariam Jamaleh and Sonakshi Singh

NEXUS BETWEEN FINANCIAL INCLUSION AND TELECOMMUNICATION: A 63 – 67
STRUCTURAL EQUATION MODELLING ANALYSIS WITH SPECIAL REFERENCE TO
JAMMU& KASHMIR
Dr. Taufeeque Ahmad Siddiqui and Kashif Iqbal Siddiqui
DETERMINANTS OF BANK PROFITABILITY: AN EMPIRICAL STUDY FROM INDIA 68 – 82
Kanika Dhingra
MODELLING VOLATILITY OF SELECT TELECOM COMPANIES OF CNX 500 83 – 89
Dr. Taufeeque Ahmad Siddiqui and Zahoor Ahmad Mir
RELATIONSHIP BETWEEN COMMODITIES & STOCK MARKETS IN INDIA – AN 90 – 95

EMPIRICAL TESTING
Rajesh R and Dr. A. Satya Nandini
THE CRITICAL NEED FOR RIGHT-SKILLING OF HUMAN RESOURCE: THE CASE OF THE 96 – 104
INDIAN WORKFORCE
Dr. Yasmeen Rizvi and Raksha Garg
SMART RETAIL DEVELOPMENT THROUGH USE OF SMART SUPPLY CHAIN ENABLERS 105 – 118
IN INDIA
Fahima Sherwani and Dr. Saiyed Wajid A
THE IMPACT OF DEMONETIZATION ON CONSUMERS PURCHASE ON RETAIL STORE 119 – 126
Amgad S. Khaled, Fatehi Ali Mohammed Almugari and Prof. Salma Ahmed
VOIDS AND ABYSSES IN INFORMATION TECHNOLOGY ACT, 2000 VIS-A-VIS 127 – 133
E-COMMERCE: DEFIES AHEAD
Unanza Gulzar
TRADE AND INVESTMENT POLICIES OF INDIA AND BIMSTEC COUNTRIES: CURRENT 134 – 142
TRENDS AND EMERGING CHALLENGES
Jyotsna and Prof. N. U. K Sherwani
IMPACT OF INFORMATION &COMMUNICATION TECHNOLOGY ON CUSTOMER 143 – 148

RELATIONSHIP MANAGEMENT: PERSPECTIVES AND ROAD AHEAD
Dr. S. Veeramani, Syed Shaamikh Ahsan and Sonakshi Singh
INFLUENCE OF CONSUMERS’ CHARACTERISTICS ON IMPULSE BUYING TENDENCY 149 – 159
Dr. Saiyed Wajid Ali and Swati Sudan
COMPULSORY LICENSING AND GENERIC DRUGS: HEALING OR HARMING INDIAN 160 – 166
ECONOMY
Dr. S Z Amani and Nisha Dhanraj Dewani
TEXTILE AND CLOTHING EXPORT COMPETITIVENESS OF INDIA AND PAKISTAN IN 167 – 176
WORLD TEXTILES MARKET: A POST MFA SCENARIO
Dr. Sabiha Khatoon

IMPACT OF DEMONETIZATION ON INDIAN EXPORTS: A CASE STUDY OF 177 – 184
HANDICRAFTS INDUSTRY
Dr. S. Veeramani, Anam and Sonakshi Singh
A COMPARATIVE STUDY ON DIFFERENT STYLES OF MANAGEMENT: A CASE OF INDIA 185 - 190

AND CHINA
Dr. Sunayana Kumar, Rakhshanda Parveen and Anam Aslam

Volume 6, Issue 1 (V): January - March, 2018 ISSN 2322 - 0899
A REVIEW OF LITERATURE ON INTERRELATIONSHIP BETWEEN STOCK MARKET

DEVELOPMENT AND ECONOMIC GROWTH
Nivedita Srivastava1 and Tanuj Nandan2

Research Scholar and Professor2, School of Management Studies, Motilal Nehru National Institute of
1
Technology, Allahabad
ABSTRACT
The role of stock market in the growth and development of an economy has become pivotal in recent years. The
stock market operations have increased considerably in the recent years and have thus become an
indispensable part of the world economy. A significant growth in the market capitalisation of stock markets has
been witnessed globally in the past two decades. The relationship between financial development and economic
growth has been defined in several studies but empirical and theoretical evidence pertaining to the clearly
defining the stock market and economic growth’s interrelationship is still limited. Growth–finance controversy
is limited only to the examination of relationship between financial development (represented by only banking
sector development) and real economy. The present paper aims in assessing the interrelationship between the
two. The study summarises theoretical and empirical work from several papers, comprising various referred
journals and reports, covering different economies and countries. The impact and variables for measuring stock
market development and economic growth have also been identified on the basis of extensive literature review
conducted.
Keywords: economic growth, financial development, interrelationship, market capitalisation, stock market
development
1. INTRODUCTION
Stock market is indispensable for the economic growth of a country. It can be used as an indicator to assess the
growth of a country’s economy. As per Liua and Sinclair (2008), the dramatic and dynamic changes in stock
market in recent years have garnered the attention of both decision makers and academicians’ .The suitability of
stock market as a predictor of economic growth has been an issue of debate for long. (Mun.et.al. 2008) in his
study opined that considerable increase or decrease in stock market indicates future growth or recession in
economy. Matadeen and Seetanah (2015) in their study in Mauritius using VECM concluded that though in
short run stock markets fail to boost economic growth yet they help to significantly accelerate pace of
economic growth in long run. Naik and Padhi (2015) undertook a panel data study on 27 emerging economies
using Panel regression and Granger causality method .They reported the presence of unidirectional causality
and added stock market development significantly boosts economic growth. Owusu and Odhiambo (2014)
conducted a study in Ghana using Wald Statistics and ARDL and concluded that liberalisations of capital
account and growth of stock market fail to have a positive effect on economy in long run. The world recession
due to the 1987 stock market crash and the 1997 Asian crisis raised doubts regarding the credibility of financial
markets in predicting growth of the economy.
In past, many such studies have emphasised mostly on contribution of financial development thereby ignoring
the role of financial market. The contribution of stock market in emerging economy like India has increased
manifold since its inception. As activities of stock markets have direct impact on several other sectors of the
economy, it has attracted academic interest of researchers to study its increasing role and importance .Stock
markets have assumed increased importance in policy formulation and transmission. The present paper aims at
assessing nature and degree of association between growth of economy and stock market. The paper is basically
divided into four sections. Methods and materials are discussed in first section, followed by literature review,
third section is about discussion and findings and finally last section deals with conclusion of the study.
2. METHODS AND MATERIALS USED
The present study adopts a three pass approach developed by Keshav for conducting the literature review. It
eliminates unnecessary and inferior studies in the first two passes and conducts a detailed analysis of potential
studies in the third pass. The process of conducting three pass approach can be diagrammatically expressed as:
1
There are unique goals to be achieved in each pass and path for the next pass is also identified. In the first pass
by merely having a bird’s eye view, a decision of further proceeding with the paper is taken. On the basis of
category, context, correctness such as assumptions, clarity and contributions made, the paper is analysed. In the
second pass, paper is summarised and key points are highlighted, so that it can be conveniently explained to
anyone with the help of supporting evidence. If the conditions are found suitable, the third pass is conducted.
An attempt is made to virtually recreate the paper by putting oneself in place of the author in third pass. The
paper is reconstructed by the reader in his own way by considering and challenging the same assumptions as
taken in the paper. In order to conduct the three pass approach firstly five recent papers in the area were
identified. This was followed by identifying those papers which had repeated citations in the bibliography.
Finally the key researchers, along with the websites and conferences where their papers were published were
also identified to conduct the detailed literature review.
3. LITERATURE REVIEW
As an outcome of extensive research conducted for measuring the impact that variations in stock market can
have on economic activity, two crucial viewpoints arise. Studies for assessing relationship between them
through financial intermediation show ambiguous results. (Schumpeter,1932 and McKinnon, 1973). The way
economic growth is impacted through development of stock market can be summarised as under on the basis of
the results of the studies:
a) Positive impact b) Negative impact c) No impact
On basis of direction of causality, the results can be classified as i) Unidirectional causality (Stock market to
economic growth and vice versa). ii) Bidirectional causality between the two.
The relationship existing between growth and finance is primarily classified into four different schools of
thought. First are supply leading hypotheses advocating the fact that economic growth occurs as a result of
financial development. Many theoretical and empirical studies support the above fact. (Chakraborty and Ray,
2006 and Beck and Levine, 2004).On the contrary, some researchers disagree by saying that volatile and
arbitrary nature of stock market, macroeconomic instability due to sudden economic shocks negatively impact
economic growth. (Lucas,1988 and Singh,1998).
Demand following hypothesis is dealt in next school of thought. As a result of increase in the economic growth,
demand for financial services also arises. To meet the increasing demand of financial services, new financial
institutions emerge. Therefore economic growth promotes stock market development. (Pradhan et al.2013 and
Patrick, 1966).Third is a feedback hypothesis which combines features of both supply leading and demand
following hypotheses. It believes financial development induces growth of economy which in turn accelerates
the pace of financial development. (Greenwood and Smith, 1997).Lastly few studies even suggest of
whatsoever no causal relationship between the two. Further a negligible effect of development of stock market
on economic growth is seen in few studies. (Rioja and Valev,2014; Seetanah et al., 2012; Anwar and Sun,
2011)
3.1. A POSITIVE IMPACT
Ikikii & Nzomoi (2013) in their study on Kenya used VAR and Granger Causality test. They considered market
capitalisation and turnover ratio as measures for development of stock market and GDP for measuring growth
of economy. They concluded growth of stock market is correlated positively to economic growth in Kenya. In
a study on a sample of 41 countries using time series regression, Levine and Zervos (1996) took market
2
capitalisation, turnover ratio, liquidity, GDP, secondary school enrolment, income level and political instability
as variables. They empirically concluded that economic growth is positively impacted as a consequence of
growth in stock market.
Agrawalla and Tuteja (2007) used monthly data for period from 1990 to 2002 and considered market
capitalisation, Index of industrial production, turnover ratio and bank credit to commercial sector as variables of
a study conducted on India. Long run causality and increasing sophistication of stock market, positively
impacting economic growth was seen in the study. Jahfer and Inoue (2014) used quarterly data from 1957-2001
and applying Vector error correction model concluded of an equilibrium relationship among three variables
namely growth of both economy and stock market and financial development in long run in Japan. Market trade
openness and access to larger markets leads to more competition, thus stimulating economic growth.
(Bonfiglioli,2005).
To study the association between stock prices and growth of the economy Liua and Sinclair (2008) conducted a
study on Greater China. Results showed in short run one way causality moves from stock market to economic
growth and in long run direction is just reverse direction in long run .Studies have emphasised on the fact that
effect of macroeconomic variables and economic growth is reflected in prices of stock.(Ritter, 2004 and Mauro,
2003;). Ahmad et al (2011) in their study, post liberalisation (1990) on Pakistan and Bangladesh stock
exchanges found a positive impact of stock market on the economic growth. Further, market capitalisation had
strong influence on Pakistan whereas liquidity and small size were dominant factors for influencing the
economic growth in Bangladesh positively. Demirguc-Kunt and Levine (1996) researched various attributes of
stock markets contributing towards economic growth. The internationally diversified stock markets promote
economic growth through risk diversification and channelizing investments towards productive uses. Ranjan
and Zingales (1998) in their panel regression analysis performed on 24 countries and 36 industries arrived on
the conclusion that externally financed industries flourish more in countries where the level of financial
development is high. The stock market generated liquidity resulting in capital generation, allocation and
investment to firms. (Paudel,2005). In the developing countries domestic savings promotes economic growth
through stock market. This has been well explained by the detailed literature review done by (Lean and Song,
2009). Greenwood and Smith (1997) opined that decreasing the cost of mobilising savings, large stock markets
aid in increasing investment in productive technologies. (Rousseau and Wachtel, 2000 and Beck and Levine,
2003) state stock market development and real GDP per capita growth are highly correlated. Moreover stock
market and banking development both contribute towards predicting economic growth, though in different
ways.
Various arguments favour the fact that growth of equity market results in growth of the economy. Firstly, a
developed equity market promotes economic development through increase in domestic savings by lowering
the cost of foreign capital and increase in liquidity. (Neusser and Kugler, 1998).Secondly incentives given to
managers for promoting investments of the firm through equity market also help in economic growth. (Dow and
Gorton, 1997).Thirdly according to (Acemoglu and Zilibotti, 1997) developed equity market provides the
opportunity to firms to diversify their portfolios and increase their productive efficiency. Lastly through
generation of information regarding technology and entrepreneurs’ innovative ability (King and Levine, 1993),
developed equity markets aid in rapid economic growth. A well developed stock market encourages savings and
efficient allocation of capital. The stock market provides altogether a different set of services different from
banking, thus providing a boost to growth and savings. (Levine and Zervos, 1996).The nexus between prices of
stock and economic growth have been emphasised in the traditional models. This nexus has been well
supported through traditional valuation models of stock prices and ‘wealth effect given by (Comincioli and
Wesleyan, 1996). Benchivenga, Smith and Starr (1996) and Levine (1991) pointed out that stock exchanges
provide liquidity by positively increasing the investments in new real estate. Investors prefer investing in
common stocks due to their easy marketability, thus motivating the corporate to raise their funds through
public, ultimately leading to economic growth. (Holmstrom and Tirole ,1998) stated that liquidity in stock
markets help to increase the incentives for investors by providing information to them about firm and corporate
governance.
By using liquidity, volatility and volume of transactions as indicators of stock market (Deb and Mukherjee,
2008) conducted a time series analysis in India. Bidirectional causality between market capitalisation and real
GDP growth and unidirectional causality between activity of stock market and real GDP growth was found.
Further they added that, when backed by a sound financial system, liquidity in stock market would surely
accelerate the process of economic growth. In Mauritius (Nowbutsing and Odit, 2009) by using analysis based
on time series reported of a positive correlation between stock market development and economic growth in
3
long as well as short run. Liquidity and size were taken as stock market indicators and GDP as indicator for
economic growth for the study.Across 40 countries Beck and Levine (2004) conducted a study to examine
impact of banks and stock market on economic growth. By considering market capitalisation, value of shares
traded and liquidity as stock market indicators and GDP per capita for economic growth, OLS panel regression
analysis was done. They concluded that though stock markets and banks provide different financial services, yet
both promote economic growth positively. In their study on 27 emerging economies, using VAR and
considering capitalisation, aggregate price level, investment rate and GDP as variables for stock market and
economic growth respectively, a strong and long term relationship between the two was found by Ibrahim
(2011) in his study in Thailand .N’Zué (2006) concluded that stock markets help in jobs creation both directly
and indirectly. A good telecommunication systems, developed financial institutions and banks are prerequisites
for a well developed stock market.
3.2. NEGATIVE IMPACT
The existence of any kind of correlation between stock market development and economic growth was denied
by traditional growth theorists. The direction of causality between economic growth and financial development
was not very clearly explained in the studies. (Robinson,1952 and Lucas, 1988). The volatility of stock market
resulted in market failure in developing countries, thus retarding the pace of economic development. The
growth of economic development is prevented because of expansion of stock market activities. (Singh,1997).
He further concludes that arbitrariness and high volatility in stock prices deter efficient allocation of resources
for investment. Akyuz (1993) concluded that neither markets necessarily channelize resources to only
productive uses nor financial deepening always leads to economic growth. It tends to increase speculation in the
economy and may further retard economic growth as financial deepening may have negative impact beyond a
certain extent.
Owusu and Odhiambo (2014) conducted a study in Ghana using ARDL and Wald statistics and didn’t find any
positive effect on economic growth as a result of development in stock market in long run. Ake and Ognaligui
(2010) in their study based on time series data considered turnover ratio, total shares traded value , and stock
market trade value as indicators of stock market and GDP for economic growth respectively. Using Granger
Causality test, no influence and impact of Cameroon stock exchange on its economic growth was seen. By
taking Wholesale price Index, stock price Index ,GDP and gross fixed capital formation of over half a century
in India as variables for study, Sarkar (2006) in his study concluded of no long term relationship between total
gross capital formation expressed as percentage of GDP and share prices both in real and nominal terms. In
similar lines, Nagaraj (1996) in comprehensive study in Indian context empirically proved that rise in stock
market activity is no way correlated to either the increase in financial or gross domestic savings. It was also
found that post 1980s a decline in corporate profitability was witnessed and strangely the performance of small
firms with no access to stock market was far better than large firms with access to the stock market.
4. DISCUSSION AND FINDINGS
From the extant literature review conducted, it was discovered that several variables were used to measure stock
market development. It was found from the literature review that stock market capitalisation was most
frequently used for measuring development of stock market . The total market value of all listed shares divided
by GDP can be defined as stock market capitalisation. (Demirguc-Kunt & Levine, 1996). The market
capitalisation was chosen as a variable because of its ability to not only diversify risk but also for mobilising
capital positively.(Felix, 2006).Several authors like (Jahfer and Inoue , 2014, Ikikii & Nzomoi ,2013; Hossain
and Kamal, 2010; Agrawalla and Tuteja ,2007;)have used this as an indicator in their study. Liquidity was the
second major variable chosen for measuring the development of stock market. Liquidity could be defined as
ease and speed with which investors can indulge in the act of buying and selling securities. (Levine and Zervos,
1996).Liquidity is strongly correlated with development of stock market.( Agarwalla and Tuteja,2007) . It was
measured in two ways in the studies:
a) Total value of shares traded- It is nothing but total number of shares traded in stock market multiplied by
their respective prices. (Ahmad .et.al, 2011) The justification given by researchers for selecting it as a
measure of liquidity was because the size of the stock market transactions with respect to economy as a
whole was represented through it. (Cavenaile et .al, 2014). Since liquidity measures the share of organised
trading of equities, in the total national output , therefore it is also representative of liquidity on a economy
wide basis positively.(Bismal and Kamaiah, 2000)
b) Turnover ratio. – In the studies, it was arrived by dividing the total shares traded value by market
capitalisation (Atapathu and Prabhath, 2012). In the studies, it was also used as an indicator for comparing
market liquidity and for representing the level of transaction costs. It was also believed to measure the size
4
of securities market in relation to the stock market. (Ake and Ognaligui, 2010). Turnover ratio is a better
representative of liquidity of stock market as compared to total shares traded value.( Bismal and Kamaiah,
2000).Some of the authors who have used liquidity as a measure of stock market development are
(Agrawalla and Tuteja ,2007;;Ahmad et al ,2011; Paudel,2005; Benchivenga, Smith and Starr 1996; Deb
and Mukherjee, 2008; Atje and Jovanovic, 1993; Nowbutsing and Odit, 2009; Carp 2012; Beck and
Levine, 2004; Naik and Padhi , 2015). Benceivenga.et.al (1995) and Kyle(1994) stated that because of
liquidity investors are motivated to invest in projects with short term duration which can be easily sold off
before maturity, if the need arises. However (Bhide,1993 and Shleifer and Vishny, 1986) argue that
increased liquidity lowers investors’ incentive as they have to bear the increased cost of paying portfolio
managers.
Few authors have also used Stock Market Index as a variable for measuring development of stock market. (Liua
and Sinclair, 2008). It is a statistic representing the composite value of its components and representing the
listing of stocks. The justification for choosing this as an indicator was that stock market could not be presented
in a better way than any other financial indices. There is some commonality between the characteristics of all
the component stocks. (Tettey,2008).
Volatility is another variable used by some of the researchers to measure growth of stock market. It is measured
by fluctuations in the stock prices. The reason for considering it as a variable is that increasing volatility in the
market discourages investors and firms to invest in the stock market. Few researchers like (Deb and Mukherjee,
2008; Singh, 1997) used volatility as an indicator for measuring stock market development. The increased
liquidity causes volatility which prevents investment thereby reducing growth. The higher volatility increases
the risk and causes upward pressure on prevailing interest rates. (Delong.et.al, 1989 and Federer ,1993)
The most commonly used variable by several researchers for measuring the economic growth was GDP. The
annual growth in GDP at market prices expressed in local currency is called the GDP growth rate (Carp, 2012).
GDP was taken as an indicator of economic growth as it measured the annual growth in standard of living of
people of a country. Some researchers who have used GDP as an indicator for economic growth in their studies
are (Naik and Padhi , 2015; Jahfer and Inoue ,2014; Carp, 2012; Antonios ,2010; Nowbusting and Odit,2009;
Deb and Mukherjee, 2008; Liua and Sinclair, 2008; Bahadur G.C.and Neupane, 2006; Beck and Levine, 2004;
Beck and Levine, 2003; Jefferis & Okeahalam , 2000; Rousseau and Wachtel , 2000; Atje and
Jovanovic,1993).Index of Industrial Production as a measure of economic growth wherein the data of GDP was
not available. (Gupta and Paramati, 2011; Hussainey and Ngoc, 2009; Ahmad 2008; Agrawalla and Tuteja
2007; Padhan, 2007; Neupane, 2006; Adjasi and Biekpe, 2005; Dritsaki and Bargiota , 2005)
For assessing association and causality between growth of economy and stock market Granger causality test
was used by most of the researchers in their studies. (Naik and Padhi ,2015; Ikikii& Nzomoi, 2013; Carp ,2012;
Lean and Song, 2009; Liua and Sinclair,2008 ; Agrawalla and Tuteja ,2007; Felix ,2006; Dritsaki and Bargiota,
2005; Filer.et.al .,2000) .The causality between prices of stock and economy was statistically tested through
“Granger-causality" test which was given by C. J. Granger in the year 1969. He proposes that, Y would be
caused due to X causes Y, provided past values of X predict Y’s value better than by just using the past values
of Y.(Comoncioli, 1995).
Engle and Granger developed error correction mechanism (ECM) for reconciling short and long run behavior
of an economic variable .( Gujrati, 2009).If the variables are co integrated error correction mechanism can be
used to model the long-run relationship between them.
( Atapathu and Prabhath, 2012).When a linear combination of two or more time series is stationary despite
being non stationary individually ,there is an existence of co integration. So to study the long term or
equilibrium relationship researchers have also used VECM and Co integration to test the nature of relationship.
( Matadeen and Seetanah ,2015; Cavenaile .et.al., 2014; Jahfer and Inoue ,2014; Carp, 2012; Hossain and
Kamal , 2010; Lean and Song , 2009; Liua and Sinclair,2008; Agrawalla and Tuteja , 2007; Felix , 2006;
Jefferis & Okeahalam , 2000) The kind of relationship present between stock market and economic growth has
also been found using panel regression analysis by some of the researchers.
Some studies conducted to study the causal relationship conclude development of stock market has positive
impact on economic growth while few studies conclude that stock market negatively impacts economic growth.
5
Table-1: Studies on Impact of Stock Market Development on Economic Growth

Impact of Stock market
Literature Support
development on Economic growth
Naik and Padhi (2015); Cavenaile, Gengenbach and Palm (2014);
Ikikii & Nzomoi (2013); Kim.et.al (2012); Ibrahim (2011); Ahmad
et al (2011); Anyamele (2010); Aboudou(2009); Vazakidis and
Adamopoulos(2009); Brasoveanu .et al (2008); Deb and Mukherjee
(2008); Amaral and Quintin (2007); Naceur (2007); Shahbaz (2007);
Stock market’s development Positive
Capasso (2006); Carporale, Howello and Soliman (2005); Dritsaki
Impact on Economic Growth
and Bargiota (2005); Paudel(2005); Blackburn et. al (2005); Mohtadi
and Agarwal (2004); Beck and Levine (2004); Carlin and
Mayer(2003); Calderon and Liu (2003); Creane et al (2003) ; Arestis
et al. (2001); Rousseau andWachtel (2000), Tsuru (2000); Rajan and
Zingales (1998); Greenwood and Smith (1997); Friedman and
Schwartz (1963)
Stock market’s development Owusu and Odhiambo (2014) ; Ake and Ognaligui (2010); Halkos
Negative Impact on Economic and Trigoni (2010); Sarkar (2007); He (2006); Ram (1999); Singh
Growth (1997); Fry (1997); Corbett and Jenkinson (1994) ; Stiglitz (1994);
Jappeli and Pagano(1994); Bhide (1993); Mayer (1988) ; Shleifer and
Vishny (1986); Pearce (1983); McKinnon (1973); Shaw (1973)
5. CONCLUSION
A lack of consensus still persists among researchers regarding impact stock market development has on
economic growth in different nations. A positive impact of development of stock market on economic growth
was concluded in majority of the papers considered for study. Gurley and Shaw (1955) opined that capital
accumulation was promoted by well developed stock markets, thereby promoting efficient allocation of
resources, thus accelerating the process of economic growth. With the growth in economy, demand for
financial services and institutions increases, further boosting the financial markets’ development along with
the stock markets. A different view regarding the relationship between stock market development and economic
growth was also suggested through the review of literature conducted for the study. It was argued by some
researchers that development of stock market has a negative or no affects whatsoever on the economic growth
of the country. As Singh (1997) stated that arbitrariness and high volatility in prices of stock deter the long term
economic growth in developing countries by preventing efficient allocation of resources. Moreover Morck
.et.al (1990) believed that by promoting counterproductive corporate takeovers that stock market development,
negatively affects economic growth. Further, investment and growth are discouraged as a consequence of
excessive liquidity and volatility of stock market, which reduces the incentives available for investors.
(DeLong.et.al. 1989)
The direction of causality between development of stock market and economic growth has not been clearly
defined, as suggested by empirical literature considered for the study. There had been variation in results
because of the differences in methods applied, context and data used for the study. The choice of time period
and country also resulted in variation of results. (Odhiambo, 2008). Further studies can be undertaken to find
the direction of causality between the two , as this would be really be helpful for policymakers in decision
making. Researchers and academia have become inquisitive to assess their relationship in emerging economies.
El-Wassal (2005) stated in his paper that stock market capitalisation in emerging economies have rapidly
increased (nearly by 32 times) in comparison to only (11 times) in developed economies between 1980-2000.
The activities of stock market have rapidly increased in the last two decades, making stock markets an integral
part of the world. More theoretical and empirical studies are required to be conducted to assess the causality and
direction of relationship between stock market and economic growth, especially in emerging economies like
India.
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10
ASSESSING PREDICTIVE POWER OF MACROECONOMIC VARIABLES FOR STOCK PRICES:

ARTIFICIAL NEURAL NETWORKS APPROACH IN INDIAN CONTEXT
Dr. Taufeeque Ahmad Siddiqui1 and Yusuf Abdullah2

Assistant Professor and Research Scholar2, Centre for Management Studies, Jamia Millia Islamia, New Delhi
1
ABSTRACT
Stock market can be used as yardstick for assessing economy. Stock movement and volatility indicate the
direction of the economy. Therefore, the relationship between stock prices and macro-economic factors is
extremely vital for policy makers, researchers and market investors alike. Macroeconomic variables provide
direction for the economy and good macroeconomic fundamentals has positive bearing on GDP growth and
stock index returns. The present study attempts to assess the impact of macroeconomic variables on stock
returns in India. The study proposes to use various macroeconomic factors (Gold Price, Index of industrial
production, USD INR Exchange rate, 10 years Government bond yield, Price of Brent Crude, Money Supply) to
study their effect on the Indian Stock market using various artificial neural networks algorithms. The results
show that artificial neural network machine learning algorithms have high efficiency in predicting stock returns
in India using macroeconomic variables.
Keywords: Stock Prices, Macro Economic Variables, NSE, Artificial Neural Network
INTRODUCTION
Stock market is a ‘barometer’ of economy and stock movement and volatility reflects the change and direction
of the economy. Therefore the relationship between stock market and macro-economic factors is very important
for policy makers and researchers. The classical asset pricing models do not take into account the fundamental
macroeconomic factors that affect stock market. However modern financial theory since early 1970s (Merton),
asset pricing economists realized the need of factors beyond the performance of the market portfolio. CAPM
uses a time-series regression to measure beta, which is a portfolio’s tendency to align with the market as a
whole. Multifactor models extend this theory by including more variables. Multifactor models use multiple
time series regression variables to quantify an asset’s tendency to move with multiple risk factors.
There is a strong intuition to believe that a relationships exist between macroeconomic fundamentals and equity
returns. The intuition however lacks strong empirical support. Macroeconomic variables are measures reflecting
general economic conditions (IIP, Unemployment rate), interest rate, monetary policy (term spread, money
supply), price level (WPI,CPI)and country’s foreign trade variables (FDI, Forex reserves). The paper aims to
study different macroeconomic variables to examine which factors have the most critical impact upon stock
returns. Financial literature is replete with studies that assess how stock returns get influenced, most of which is
based presumptuously on the fact that macroeconomic indicators are highly influential in predicting stock
returns and asset prices.
The present study attempts to assess the impact of macroeconomic variables on stock returns in India. The study
proposes to use various Indian macroeconomic variables to predict the stock returns in India. Macroeconomic
variables have a large impact on stock returns in India. In the long run the studies have shown that stock returns
are based on a variety of fundamental economic factors. In short run however, the stock returns may deviate to a
large extent due to an unexpected change in a single factor. This provides further cause for study as this
relationship can be different from the fundamental relationship in the past.
The study proposes to use various macroeconomic factors (Gold Price, Index of industrial production, USD
INR Exchange rate, 10 years Government bond yield, Price of Brent Crude, Money Supply) to study their effect
on the Indian Stock market. In view of that, the study tries to address this issue through assessing the returns,
correlation and prediction using artificial neural networks. Recent research activities in artificial neural
networks (ANNs) have shown that ANNs have powerful pattern recognition capabilities (Widrow et al., 1994).
This leads to enabling us to model relationships where no linear relationship exists.
LITERATURE REVIEW
Forecasting financial time series could involve use of several models. Number of tools have beendeveloped
since this discipline has gained attention. It was Bachelier (1914) who firstly proposed the theory of random
walk to characterise the changes of security prices through time and ever since the Efficient Market Hypothesis
has received a lot of empirical support employing classical statistical linear tests. However the inability to
capture the complex patterns of these linear models has made EMH receiving a lot of scepticism.
11
Egeli et al (2003) conducted study on ISE stock market values and build an ANN model that uses previous
day’s index value, exchange rate and simple interest rate as input to forecast ISE price fluctuations. They
constructed a model with the previous day’s index value, the previous day’s Turkish Lira/USD exchange rate,
the previous day’s overnight interest rate and 5 dummy variables each representing the working days of the
week. They tried three different numbers of hidden layers (1, 2 and 4) and acquired the lowest error rate and the
highest accuracy using a single hidden layer. They concluded that ANN models have been superior to the 5-
day/10-day moving averages model.
Yumlu et al (2004) compared ANN with conventional autoregressive model. The authors studied 12 years of
financial data (a set of ISE index closing values, USD values and two interest rates) using a modular ANN
model. The authors concluded that the model outperformed the conventional autoregressive model used qfor
comparison. They stated that the model introduces a powerful way to predict the volatility of financial time
series data, contradicting EMH.
Chancharat et al. (2007)detected the existence of cointegration and causality between the stock market price
indices of Thailand and concluded thatregional South East Asian stock markets and oil prices influences stock
returns in Thailand.
Gregoriou et al. (2009) concluded that a negative relationship exists between interest rate changes and British
stock markets. Li et al. (2010) on the other hand used key policy rates i.e. US’s Federal fund rate and Canada’s
overnight rate and studied the effect of policy shock on stock prices.
Zakrajsek (2009) suggested that economic theory often suggests that certain pairs of economic or financial
variables should be linked by a long term economic relationship and many economic or financial time series
appear to be cointegrated. He provided few examples to support his arguments such as permanent income
hypothesis, money demand model and purchasing power parity.
Buyuksalvarci (2010)found that macroeconomic variables are significant in for stock prices in Turkey,
however no significant relationship was found between stock prices and gold prices. Özlen and Ergun (2012)
examined the relationship for Bosnia and Herzegovina stock market and macro variables using ARDL
technique and evidenced that interest rate and exchange rate have significant factor in stock prices fluctuations
and stock returns are sensitive to changes in factors.
OBJECTIVES OF THE STUDY
The study proposes following objectives
 To study the linear relationship between selected macroeconomic variables and stock prices.
 To model stock prices using the given macroeconomic variables through neural networktraining.
 To compare the neural network prediction accuracy with linear prediction model.
METHODOLOGY
Data
The variables used for the study, from April 2005 to September 2017 are:
Variable Frequency Source
Spot gold Price Monthly World Gold Council website
Index of Industrial production Monthly RBI Website
USD INR exchange rate Monthly RBI Website
Spot price of Brent Crude Monthly CBOT website
Money Supply Monthly RBI Website
10 year Indian Govt Bond yield Monthly RBI Website
The dependent variable is CNX 500 from April 2005 to September 2017 for which monthly data is retrieved
from NSE website.
Regression
A linear regression is performed using the Gold Price, Index of industrial production, USD INR Exchange rate,
10 years Government bond yield, Price of Brent Crude, Money Supply on CNX 500 index return from April
2005 to September 2017
12
Table-1: Summary of regression result

Model Summary
R R Square Adjusted R Square Std. Error of the Estimate
0.161 0.401. .363 677.89075
As per Table 1 it is evident that the independent variables (Gold Price, Index of industrial production, USD INR
Exchange rate, 10 years Government bond yield, Price of Brent Crude, Money Supply) do a good job of
predicting dependent variable (CNX 500). This is due to the fact that regression yielded a high R-Squared value
of 40.1%
Table-2: Regression ANOVA
ANOVA
Model Sum of Squares df MSE F-statistic p-value
Regression 374341009.717 6 62390168.286 135.768 .000
Residual 65713629.288 143 459535.869
Total 440054639.005 149
The p value in table 2 suggests that the regression is highly significant even at more than 99% level.
Table-3: Regression constant and and coefficients:
Regression Summary
Model Unstandardized Coefficients Standardized t-statistic p-value
Coefficients
B Standard Error Beta
(Constant) 2834.299 1199.891 2.362 .020
Gold -2.002 .313 -.414 -6.406 .000
IIP 23.127 5.950 .334 3.887 .000
Exchange rate -49.556 15.988 -.266 -3.100 .002
10 yr yield -261.155 124.062 -.105 -2.105 .037
Crude 1.562 4.572 .021 .342 .733
M3 .380 .043 1.117 8.758 .000
We can infer from table 3 that all the variables except spot price of crude oil are significant at 95% level.
Artificial neural networks
Artificial neural networks are statistical learning algorithms which are akin to biological neurons in their
functioning. Similar to biological neurons ANNs also have Synapse which are the connections between
different neurons. Each synapse has a weight associated which determines the strength of the input signal.
A Multilayered Perceptron is a feed forward ANN model with a single hidden layer having H hidden units
and a single output, y, which can be expressed as follows:
WhereZh is the output of the hth hidden unit, Wh is the weight between the hth hidden and the output unit, and
W0 is the output bias. There are N sensory inputs, Xj. The jth input is weighted by an amount βj in the hth
hidden unit. An MLP uses a supervised learning technique called back-propagation for training the network
(Rumelhart et al., 1986).
The simplest back propagation algorithm follows the direction in which the error function decreases most
rapidly (negative gradient) to update weights and biases. Thus, a single iteration can be written as:
Where is the vector of weights and biases.

The back propagation algorithm looks for the minimum error function on the regressional gradient. The weights
are initially assigned randomly. The output of an MLP is compared to a target output and an error is calculated.
13
This error is back-propagated to the neural network and used to adjust the weights. This process aims at
minimizing the error function between the network’s prediction output and the target output. This is an iterative
process which is repeated several times until the error is minimized. The most common error function is the
mean squared error (MSE) which can be expressed as follows:
Where O is the output of the network and T is the target value.

The activation function of input node defines the output of that node. The activation function determines the
output value of a neuron on the basis of net input and bias. The training data is 705 of the total macroeconomic
time series data while the rest of it is used as testing data. For the study the authors have used different neural
learning functions.functions.
 The Hyperbolic Tangential: function is a function with the range (-1, 1). The domain of Hyperbolic
Tangential function is (-1, 1) hence large values are scaled down to the limits of the functions. This removes
the effect of outliers in the data set to a considerable extent. It can be mathematically expressed as follows:
 Sigmoid function: produces an S-shaped curve and is essentially an extension of Hyperbolic tangential
function. It will yield more better results by smoothing the outliers and hence is considered more accurate
than the Hyperbolic tangential function. It can be mathematically represented as:
 Levenberg–Marquardt algorithm: is a form of quasi-Newton function and was designed to approach

second-order training speed without having to compute the Hessian matrix. When the performance function
has the form of a sum of squares (as is typical in training feedforward networks) it provides better training
and thereby more accurate results.
The present study uses Neural network package of IBM-SPSS and MATLAB neural network tool. These
functions apply artificial intelligence techniques to automatically find the efficient neural network architecture.
The data for the variables is fed into the neural network prediction tool. The structure is determined
automatically by the neural network tools which works on the principle of Keep the best model (KTB). In order
to assess the accuracy of forecast, Mean Squared Error (MSE) has been used as measures of fit (Zhang et al.
2004).
Table-4: Neural network training results
Neural Algorithm MSE RMSE Error %
Hyperbolic Tangential 1178.35 34.33 9.87%
Sigmoid Function 806.78 28.40 8.74%
Levenberg–Marquardt algorithm 709.85 26.64 6.98%
We can observe from Table 4 the accuracy of different neural network function performance. As it is evident
from literature, Levenberg–Marquardt algorithm performs best training as measured using MSE as benchmark.
Levenberg–Marquardt algorithm has the least MSE of 709.85 and the least percentage error of 6.98% measured
as a proportion of RMSE over SSE of the testing data. This is a high increase in predictive power over
suggested by linear regression.
CONCLUSION
As per the results of regression between macroeconomic variables and stock index, which registers a high R-
squared of 40.1%, it can be concluded that macroeconomic variables do a good job of explaining the index
movements. Individual variables are also significant in case of their relationship with CNX 500 index.
The study further provides prediction accuracy for different neural network functions. Levenberg–Marquardt
algorithm performs best with the least MSE of 709.85 while other functions also provide significantly good
prediction performance. The study is vital for market participants. The growth of any stock market is related to
overall growth of the fundamentals of the economy. Macroeconomic variables play a vital role in economy of
any country which provides for GDP growth. This GDP growth is reflected into stock prices to a considerable
extent.
14
REFERENCES
 Bachelier, L. J. B. A., &Bachelier, L. (1914). Le jeu, la chance et le hasard. E. Flammarion.
 Büyüksalvarci, A., &Abdioglu, H. (2010). The causal relationship between stock prices and macroeconomic
variables: A case study for Turkey. International Journal of Economic Perspectives, 4(4), 601.
 Gilchrist, S., Yankov, V., &Zakrajšek, E. (2009). Credit market shocks and economic fluctuations: Evidence
from corporate bond and stock markets. Journal of monetary Economics, 56(4), 471-493.
 Gregoriou, G. G., Gotts, S. J., Zhou, H., &Desimone, R. (2009). Long-range neural coupling through
synchronization with attention. Progress in brain research, 176, 35-45.
 Li, Y. D., İşcan, T. B., &Xu, K. (2010). The impact of monetary policy shocks on stock prices: Evidence
from Canada and the United States. Journal of International Money and Finance, 29(5), 876-896.
 Özlen, S., & Ergun, U. (2012). Macroeconomic factors and stock returns. International Journal of Academic
Research in Business and Social Sciences, 2(9), 315.
 Zhang, W., Cao, Q., &Schniederjans, M. (2004). Neural network earnings per share forecasting models: A
comparative analysis of alternative methods. Decision Sciences, 32(4), 635-653.
15
BILATERAL TRADE BETWEEN INDIA- EU: WITH SPECIAL REFERENCE TO GARMENT

EXPORTS TO EU IN THE MFA TRANSITION PERIOD
Dr S. Veeramani1, Syed Shaamikh Ahsan2, Sheenam Ayyub3 and Sonakshi Singh4

Assistant Professor1,2, Centre for Management Studies, Jamia Millia Islamia, New Delhi
Research Scholar3, School of Management and Business Studies, Jamia Hamdard, New Delhi
M.Phil Scholar4, Department of Rural Management, Babasaheb Bhimrao Ambedkar University (A Central
University), Lucknow
ABSTRACT
The bilateral trade between India and EU has been immensefrom decades. The garment export from India toEU
isa peculiar case where the market potential is booster for Indian producers. India being a labour intensive
nation, garment sector isan appropriate example where manpower/women power is engaged in enormous
amount . The present paper aims to address the pre and post MFA (MultiFibre Agreement) situations, as the
period takeninto consideration is between 2000- 2010 where it can be said as Pre- during and post MFA
period.Another dimension to explore is the GSP (Generalized System of Preferences) which enables developing
nations such as India to pay less duty or duty free exports to EU. The trade blocs across globe are highly in
dynamic relations and sustain to maintain the competitiveness. Every nation and blocs aspire to sustain their
bilateral relations. The EU – India trade relations need to be studied in the time of Post MFA situation as
India’s external trade to EU in general and garments in particular is enormous. The methodology adopted is
descriptive in nature with both primary as well secondary data sources taken into account
Keywords: India, EU, bilateral Trade, Garments Exports.
INTRODUCTION
India gains significant foreign revenue through garment exports. European countries have been potential
markets for Indian apparels industry for quite long time; the bilateral trade relation between India and EU1 (27) 2
and the GSP (Generalized System of Preferences) which is non- reciprocal support which makes developing
nations such as India to have less duty or duty free exports to EU. The neo-liberal economy has created
competitive business environment in the world, where the capital flights move from developed nations to
developing countries. In order to make the production in labour intensive nations and export to Europe and
United States, the quota system which was prevalent in the past periods has been eliminated in order to make
more liberalization of apparels trade. India, one of the Asian nations has got benefits as well as threats in the
post Quota apparel trade because of the less updated industrialization to cope up with the export orders. This
study is an attempt to analyze the status of Indian apparel trade to EU from the period of 2000-2010. The
preferential treatment given by EU to Indian apparels shifts the growth rate of Indian exports on the higher side,
almost all the branded RMG retailers started camping at Indian production sites.
The Indian Export to EU
Garment has been one of the sectors of revenue expansion for India. The Industrial clusters across Indian sub
continent, which specializes in garment / apparel trade are the main focus of many researchers of International
Business in the era of neo-liberal globalization.EU and USA are the two major regions for which Indian
production houses aredestined.The 27 membered EU community makes inter as well as Intra –EU trades after
obtaining the products from India.
Quota categories / Category Definition
4 (incl. 4C) T Shirts, knit
5 Jerseys, Pullovers, knit
6 (Incl. 6C) M&B shorts/ trousers
7 Ladies Blouses
8 Gents Shirts, woven
15 W&G woven overcoat, ctn/ mmf
1
European Union.
2
27 denotes here the European nations, those are member countries in EU.
16
26 W&G dresses
27 W&G skirts
29 W&G3 suits, woven4.
During the decade 1990-2000, textile trade grew at a cagr of 4%, after having grown at a rapid 15% annually
during the quinquennium of 1985-90. The growth rate turned negative in 1998 and in 1999 following the East
Asian crisis, but resumed to a robust growth of 7% in 2000. Clothing trade grew at a faster rate compared to
textile, and clocked 6% annual average rate during the ten years period from 1990-2000. It is noticeable that, on
an average, clothing trade grew at least as rapidly as textile trade in all years since 1980. It is therefore not
surprising that the share of clothing trade in total textile and clothing trade has been rising and now stands at
56%, higher than 50% in 1990.5
During the MFA period, the textile exporters from industrial countries and those from developing countries
merely changed shares between themselves during the 24 years period. The share of industrial countries
declined by almost as much (19.2%) as was the gain in the share of developing countries (18.8%). Clothing
exporters13, however, exhibit significant changes, with the share of top 13 exporters having declined by 13.8%.
New entrants have come in in addition to some old ones have been knocked out. Of these new entrants, most- if
not all- are from developing countries, since the share of industrial countries has declined during the period, and
that of developing countries has increased. The countries that are gaining share in clothing exports are the ones
whose industries are integrated to one or the other advanced country through some policy-induced preferential
arrangements. Mexico, Caribbean region, East European countries and Mediterranean countries are capturing
much of the space vacated. There has been a much deeper globalization in clothing than in textiles. Indeed, that
has been one of the principal reasons for the developed countries agreeing to an eventual phase-out of MFA
quota in the UR of negotiations.
However, it would be useful to mention here that the protection by quotas does not imply assured export
growth, as is often (mis)understood. Exports are a function of export order. However, quotas provide protection
in an indirect fashion, by prohibiting other supplier from exporting more than they are competitively capable of.
From an importer’s perspective therefore, all the order that the importer may like to place with an exporter may
not be importable from that exporter due to quota limits on the exporter. The importer would therefore be
compelled to place the ‘overspill’ order with someone who is second most competitive in the product. In this
sense, the second most competitive suppliers’ exports are “protected” to the extent of the limited quota supply
with the most competitive supplier6.
EUROPE IMPORT STATUS
The potential market for Indian apparels are EU and USA in which EU(27) has been dominent market, though
EU has various sources of obtaining the imports, India gained momentum in the recent past, there are ample
chances to blame the pre 90s for the less connected markets than what we see in the 2000s integrated markets
across globe.
Of the US$ 65.9 billion textile and clothing (T&C) imported by EU15 from extra- EU sources in the year 2000,
US$ 23.5 billion (36%) was imports of textiles and US$ 42.5 billion (64%) was import of clothing. Out of the
total T&C imports, US$ 29.4 billion (45%) was from restrained suppliers, while US$ 20.9 billion (32%) was
from preferential suppliers. Interesting point to observe here is the annual change in EU imports from these
sources. While the total EU imports increased by 4.39% during 1990-2000, its imports from preferential
suppliers grew by 8.95%, while that from restrained sources grew only by 4.9% (reflecting quota restraints).
Clearly, the preferential suppliers are eating away the share of non-preferential suppliers7.
LIFTING OF QUOTA SYSTEM
3
Women and Gents.
4
See.Appendix.A, Verma, Samar, Export Competitiveness of Indian Textile and Garment Industry, working
paper no.94, Indian council for research on International Economic Relations( ICRIER), New Delhi, 2002.
5
Verma, Samar, Export Competitiveness of Indian Textile and Garment Industry, working paper no.94,
Indian council for research on International Economic Relations( ICRIER), New Delhi, 2002, p.5.
6
Ibid. p.8.
7
Ibid . P. 11.
17
The interesting aspects of this work is to address the post quota- garment trade situations in developing nations,
the period given in this research work is 2000- 2010, which shows the global economic crisis at the start of
2004 and its impact in 2008, how the US economy downplayed which caused the currency fluctuations across
globe; the apparels export is not exceptional. The Asian region has become boiling point, where each nation
wanted to stimulate the export industries related with apparels. The competition between countries such as
India, Bangladesh, China, Pakistan, and Sri-Lankan are at our vicinity to study.
Directorate General for Trade of the European Commission in January 2000, argued that, “following
elimination of textile quotas, a shift in production from industrialized countries to developing countries would
create negative environmental impacts in the form of increased water and air pollution”. The paper advocated
“flanking measures” to avoid such perceived negative impacts; Over and above these is a growing trend of
private initiatives because of who the non-price factors of competitiveness are becoming more and more
important. Worldwide Responsible Apparel Production (WRAP) and Apparel Industry Initiative (AIP) are some
of the global movements towards cleansing the global manufacturing and trade in textile and clothing
sectors. And this post-consumerism demand has begun to force a large number of developing country exporters
to adhere to such norms and get their factories and systems ‘ethically certified’ before they could be eligible to
supply some of the world’s biggest retailers. It is in this ‘buyer-driven global commodity chain’ that India has
to position itself8.
GARMENT AND INDIAN ECONOMY
Indian Economy is the second largest producer of textiles and garments after China, Second largest producer of
cotton in the world, Second largest employer in India after agriculture–Direct Employment to35 mn people.
Textile and garment sector constitutes about 12%of India’s exports, Contributes about14% to Industrial
production, Contributes about 4% to GDP, Investment made in Textile sector since launch of TUFs scheme is
Rs. 208000 crore still June 2010. There has been drastic growth of India’s garment trade to Europe. The
statistics about the same is given in this study.
India is one of the few countries that own the complete supply chain in close proximity from diverse fibres to a
large market. It is capable of delivering packaged products to customers comprising a variety of fibres, diverse
count sizes, cloths of different weight and weave, and a panoply of finishes. This permits the supply chain to
mix and match variety in different segments to deliver new products and applications. This advantage is further
accentuated by cost based advantages and diverse traditions in textiles 9.
Scale: Except for spinning, all other sectors suffer from the problem of scale. Indian firms are typically smaller
than their Chinese or Thai counterparts and there are fewer large firms in India.
Some of the Chinese large firms have 1.5 times higher spinning capacity, 1.25 times denim (and
2 times gray fabric) capacity and about 6 times more revenue in garment than their counterparts in India thereby
affecting the cost structure as well as ability to attract customers with large orders.
Skills: Three issues must be mentioned here : (a) there is a paucity of technical manpower –there exist barely 30
programmes at graduate engineering (including diploma) levels graduating about 1000 students – this is
insufficient for bringing about technological change in the sector; (b) Indian firms invest very little in training
its existing workforce and the skills are limited to existing proceses (Chandra 1998); (c) there is an acute
shortage of trained operators and supervisors in India. It is expected that Indian firms will have to invest close
to Rs. 1400 bn by year 2010 to increase its global trade to $ 50 bn10.
This study aims to record the events in Indian exports of garment to European Union. India has its Asian
competitors such as China, Bangladesh, Sri-Lanka etc., it’s interesting to note that GSP scheme of EU to India
and other developing nations played crucial role in the growth of exports.
REVIEW OF LITREATUTURE
1.Chandra, P. (1999), competing Through Capabilities, Economic and Political Weekly, 27
February:Successful firms are changing their technology stock and the organizational structure that uses this
technology simultaneously. The former includes updating machinery, plant infrastructure, transport &handling
8
Ibid. p.16.
9
Chandra, P., “Competitiveness of Indian Textiles & Garment Industry: Some Perspectives,” apresentation, Indian Institute
of Management, Ahmedabad,.2006.
10
Ibid.p. 8.
18
equipment, storage facilities, process control, ventilation & environment control systems, effluent generation &
treatment systems, etc. The later includes reporting &communication structures, manufacturing management
practices, data collection & planning Mechanisms, training & evaluation, grievance handling process, process &
product innovation, Subcontracting networks etc. It is now well established that firms that pursue technological
change along with organizational changes get maximum advantage of investment in technology.
In other words, technology (or codified knowledge) that is not developed in-house is accessible to all
competitors and it does not provide a distinctive advantage to a firm. However, managerial Practices (or tacit
knowledge) that are uniquely designed to take advantage of technology can be
Copied less easily and hence provides competitive advantage. Toyota’s development &implementation of the
JIT is once such example. In textile industry, these managerial practices form the important link between
technology adoption and competitiveness. The key issue is the
Ability of firms to increase their productivity between two epochs of technology acquisition11.
2.McCurry (1997):points out that the textile worker, in times to come, cannot afford to remain uneducated as
new technology demands new skills. He points that successful firms in the US are
holding extensive education programs for their workers and managers. For example, establishing
process capability of machines has become necessary to control defects. This requires operators to plot
statistical charts, interpret them and then modify process parameters accordingly. Many computer assisted
machines generate and capture such performance data automatically. The ability of firms to use such a
technology (and consequently produce a value adding product mix).
3. Andriamananjara, S. (1999), On the Size and Number of regional Integration Arrangements: A political
Economy model, World Bank Working paper Series .2117:Will the current wave of regional integration
arrangements lead to the world being divided into competing inward-looking trading blocs? Or will it lead to a
more open multilateral trading system? Using a multi-country political economy model, and after having shown
that global free trade is optimal, the author investigates the possibility of achieving it through regionalism. An
outsider country considering entering a trading bloc must weigh the tradeoff between the costs of opening its
own market to more foreign competition and the gains from getting better access to the bloc's preferential
market. The gain of access is always larger, so an outsider would always want to apply for membership in the
existing bloc. If the bloc policy is open membership, its expansion would result in global free trade. But if
member countries can accept or reject new members, expansion of the bloc is unlikely to yield global free trade.
4. AnuradhaBalaram, Surendra S. Yadav and Rajat K. Baisya, Competitiveness of Indian Apparel Export
Firms: An Analysis of Select Delhi-based Firms, global business review,No.1, Vol.4, 2003: Indian apparel
exporting firms have proved their competitiveness in some market segments in recent years. Global trade in
apparel is likely to change significantly due to major changes in the international business environment. The
paper takes a view that Indian apparel export firms will have the opportunity to increase their global market
share provided they take the necessary steps to make themselves competitive in a quota- free world after 31
December 2004. The analysis is based on a survey of leading Delhi-based apparel exporting firms. Since the
Delhi region accounts for India's largest apparel export trade, these firms are among the top firms in the country
in terms of apparel export sales turnover. The paper studies select structural and operational parameters of Delhi
firms that could impact their performance in future and brings out critical issues that require immediate
attention. The paper also offers suggestions on how the government can facilitate better management practices
in apparel exporting firms so that they become globally competitive.
5. Ketels, C.H.M. 2006. ‘Michael Porter’s competitiveness framework: recent learnings and new research
priorities’, Journal of Industrial Trade and Competition, 6: 63–66.
Micheal Porter uses verbal descriptions of the different trade theories based on logical reasoning instead of the
mathematical models that dominate the economic profession12. This is easier for policy-makers to understand
11
Pankaj Chandra, Competing through capabilities Strategies for global competitiveness of the Indian textile
Industry, ECONOMIC & POLITICAL WEEKLY" vol.XXXIV, no. 9, M17-M24,
1999.p.
12
Ketels, C.H.M. 2006. ‘Michael Porter’s competitiveness framework: recent learningsandnew research priorities’, Journal
of Industrial Trade and Competition, 6: 63–66.
19
and thus creates the impression that the Diamond Framework can be utilized to enhance the international
competitiveness of countries. The main risk of this is that competitiveness of countries may be understood as a
negative sum game, whereas, according to international trade theory, it is a positive sum game. The last section
draws some generalizations about the validity of Porter’s Diamond Framework as a theory of the international
competitiveness of countries and explains the significant contribution of the framework towards our
understanding of the international competitiveness of firms.
6. RashmiTaneja, Indian Textile Exports: Past and Present, International Journal in Multidisciplinary and
Academic Research (SSIJMAR) Vol. 2, No. 2, March-April (ISSN 2278 – 5973):Textile sector is India’s second
largest manufacturing sector. The textile sector contributes about 4% to the gross domestic product; about 14%
of the total industrial output; 21% of the workforce and about 14% of the gross export earnings. But in the
present scenario non conventional sectors viz engineering, chemicals are replacing this sector especially in
terms of export performance. Textile sector, including apparel, which was the largest export sector and
accounted for almost a quarter of our exports has dropped to being fifth in rank and less than half its earlier
share. This is despite dismantling of the textile quota regime in the developed markets from 01.01.2005 as per
the World Trade Organization (WTO) Agreement on Textiles and Clothing (ATC).In this study, aim is to
analyze the export trend of textile sector in the past and present and would try to identify the possible reasons of
falling exports of one of our key sectors. On the basis of the study, we will make an effort to put certain
suggestions to revive its export growth which might contribute to growth of the Indian Economy.
7. India’s Textile and Apparel Industry: The views expressed in this staff study are those of the Office of
Industries, U.S. International Trade Commission. They are not necessarily the views of the U.S. International
Trade Commission as a whole or any individual commissioner.Growth Potential and Trade and March
2001,Publication 3401.Investment Opportunities Staff Research, India has the second-largest yarn-spinning
capacity in the world (after China),accounting for roughly 20 percent of the world’s spindle capacity. India’s
spinning segment is fairly modernized; approximately 35 to 40 percent of India’s spindles are
lessthan10yearsold. During1989-98, India was the leading buyer of spinning machinery, accounting for 28
percent of world shipments. India’s production of spun yarn is accounted for almost entirely by the “organized
mill sector,” which includes 285 large vertically-integrated “composite mills” and nearly 2,500 spinning mills.
India has the largest number of looms in place to weave fabrics, accounting for64percent of the worlds installed
looms. However, 98 percent of the looms are accounted for by India’s power loom and handloom sectors,
which use mostly out dated equipment and produce mostly low-value unfinished fabrics. Composite mills
account for 2 percent of India’s installed looms and 4 percent of India’s fabric output.
8. Note on Textiles & Clothing Exports of India., Government of India Ministry of Textiles(International Trade
Section):India’s Textiles & Clothing (T&C) exports registered a robust growth of 25% in2005-06, recording a
growth of US$ 3.5 billion over 2004-05 in value terms thereby reaching a level of US$ 17.52 billion and the
growth continued in 2006-07 with T&C exports of US$19.15 billion recording a increase of 9.28% over the
previous year and reached USD 22.15 billion in 2007-08 denoting an increase of 15.7% but declined by over
5% in 2008-09. Exports of Textiles & Clothing grew from USD 21.22 billion in 2008-09 to USD 22.41 billion
in 2009-10 and has touched USD 27.47 billion in 2010-11. In the financial year 2011-12(P), exports of textiles
and clothing, has grown by 20.05% over the financial year 2010-11 to touch USD 33.31 billion. Textiles
exports in the period 2012-13 are witnessing a (-) 4.82 percent growth in dollar terms although there is 8.10
percent growth in rupee terms13.
HYPOTHESIS
1. Indian garment trade has been influenced by GSP mechanism, which enhances the export growth in
European Union.
2. Trade Liberalization had paved path to Indian garment trade to EU moreefficiently than the past.
3. Elimination of Quota (QR) in the Textile and Clothing had stimulated the Asian apparel exporting nations to
have competitive business sustenance.
OBJECTIVES
1. To record the status of Indian garment exports to European Union (EU).
2. To study the changing trends in Indian garment exports.
13
Government of IndiaMinistry of Textiles (International Trade Section)
20
3. To analyze the role of GSP (Generalized System of Preferences) in Indian garment Export to European
Union.
4. To measure the impact of Quota elimination on India garment trade.
5. To analyze the competitive business sustenance in India’s garment trade to International market.
RESEARCH METHODOLOGY
Descriptive in nature, the study primarily focuses on trade history in the mentioned time period. Both Primary
and secondary data are used, by following the unpublished as well as published trade statistics in India and EU.
The sources are primarily 1. Major garment clusters in India. 2. Star garment export houses in India 3. The
authoritative of EPCs (Export Promotion Council)4. The retailers from European Countries. 5. EU- Indian
bilateral mission, the reports of EU frm 2000 to 2010. The test is expected to demonstrate how the period of
MFA abolition does affected the trade relation between India and EU.
ANALYSIS AND CONCLUSION
The MFA and its aftermath have shown mixed reaction among the Trading partners. EU being one of the largest
importers of Indian garments has shown huge competition due to the abolition of MFA agreement. As per the
trade data of EU “ The EU is India's largest trading partner, accounting for €85 billion worth of trade in goods
in 2017 or 13.1% of total India trade, ahead of China (11.4%) and the USA (9.5%).India is the EU’s 9th largest
trading partner, accounting for 2.3% of EU’s total trade in goods, well behind the USA (16.9%) and China
(15.3%).Trade in goods between the EU and India almost doubled in the last decade. Trade in services between
the EU and India increased from €23 billion in 2010. India is now the 4th largest service exporter to the EU and
the 6th largest destination for EU services exports. The EU's share in foreign investment inflows to India more
than doubled from 8% to 18% in the last decade, making the EU the first foreign investor in India.EU foreign
direct investment stocks in its high, which is significant but well way below EU foreign investment stocks in
China (€178 billion).Some 6,000 EU companies are present in India, providing directly 1.7 million jobs and
indirectly 5 million jobs in a broad range of sectors. Indian companies invested over €50 billion in Europe since
2000”14. The competition from the Asian countries when come to garment exports are high every time in the
post MFA situation. India being the GSP member of the EU,has its stake but the neighboring nations such as
Bangladesh, Pakistan, Sri- Lanka and China are rivals who are actually enjoying high level of GSP and
differential treatment by the European Union.
There is growth in garment trade in the post MFA compared to pre MFA period. The increase value during the
post MFA period can be attributed to the positive side of volume of trade after the post quota situation. The
observation here is that there are no restrictions on the volume of exports among the trading partners; and
developing economies of Asia, such as India is highly reliable on EU and USA when it comes to garments and
textiles in special and others in general.
The transition period of MFA and its abolition have created huge scope of research and analysis; hence there is
an ample opportunity to study with different dimension. Indi- EU bilateral relation has been very successful
which need to be sustained and boosted against heaviest odds and competition from the neighboring nations.
The garment and textile trade is the most happening between Asia and Europe, the most populated twin nations
in Asia, China and India respectively are potential competitors when come to labour intensive trade sector such
as garments and textiles.
India continued to enjoy the GSP and other differential treatment from EU. WTO if not mandatorily forces EU
to follow GSP, the growth rate, development index, and per capita income of India will continue to the humble
which indirectly connects with GSP. But India being aspiring nation to be in the top 10 economies and top 5 in
near future, is only possible when favorable balance of Trade and sustain markets such as EU are maintained.
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2. Anson, Robin (1999), Strategies for Global Competitiveness, Textile Intelligence.Paper presented at
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3. Bhatia, S. (1997) Indian Garments Industry in the Post MFA Peiord, Occasional Paper No. 7, Indian
Institute of Foreign Trade, New Delhi.
14
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21
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9. RashmiTaneja, Indian Textile Exports: Past and Present, International Journal in Multidisciplinary and
Academic Research (SSIJMAR) Vol. 2, No. 2, March-April (ISSN 2278 – 5973):
10. WTO (2001)b, Comprehensive Report of the Textiles Monitoring Body to the Council for Trade in Goods
on the Implementation of the Agreement on Textiles and Clothing During the Second Stage of the
Integration Process, G/L/459, 31 July.
22
DETERMINING THE OUTCOME OF NEWS ON THE STOCK MARKETS OF EMERGING

ECONOMIES: A CASE OF BRICS
Dr. Taufeeque Ahmad Siddiqui1 and Mazia Fatima Khan2

1
ABSTRACT
BRICS nations are one of the emerging economies that are attaining a high growth rate. The study models the
volatility of BRICS stock markets to comprehend their volatility patterns so as to inform investors about higher
returns and diversification opportunities .The data employed is from the period ranging 1 January 2006 to 31
December 2016. The tools used for the analysis are Unit Root test namely Augmented Dickey Fuller test which
determines whether the series is stationary or not. To model the time varying features of volatility such as
persistence of volatility and asymmetric responses to the information, GARCH (1,1) and EGARCH models are
employed. The results suggest that China’s SSE is most volatile among its peer countries in the BRICS.
Keywords: BRICS, GARCH, EGARCH, Stationary, Volatility
1. INTRODUCTION
The World Bank distinguishes countries by measuring their GNI per capita (Fantom and Serajuddin, 2016). The
emerging economies are characterized by high growth as compared to developed markets and in the recent
years the research in this area has proliferated. A bloc comprising of five emerging markets was formed in 2008
which came to be known as BRIC and this included Brazil, Russia, India and China. In the year 2010 South
Africa joined the bloc. The combined contribution of its members is directed towards political as well as
economic association and growth.
Modelling of volatility facilitates understanding of the risk and return derived from the stock markets. Moreover
the role that information plays in changing the preference of investors is undeniable. Engle and Ng (1993)
identified that the effect of good news and bad news reflect a different pattern. To comprehend the emerging
markets this study explores the BRICS for in depth analysis of volatility as Goldman Sachs (2010) pointed that
“Although BRIC equity markets outperformed significantly but the outperformance seems much less likely,
even if the BRICS deliver solid returns”.
To estimate volatility clustering GARCH (1, 1) model has been adopted which has been used highly in the
financial literature to model conditional variance and for investigating the impact of news on returns EGARCH
(1, 1) model is used.
Baig and Goldfajn (1999) explain the causes of Asian crisis by empirically examining the source that led to
such a major crisis. They determine that whether the news from other markets played any role in emancipating
of this crisis at the regional level. The conclusion of the study states that there was no major contagion in Asian
stock markets.
Kaur (2004) applied GARCH class of models to indices such as S&P CNX Nifty and SENSEX to find any day
of a week or month of a year effect as identified developed markets and whether it has significant impact on the
level of volatility of these indices and also analyzed the effect of volatility from NASDAQ exchange on these
Indian indices using EGARCH model..
Bhar (2009) investigated BOVESPA, Ak &M composite, SENSEX and Shanghai composite for their degree of
interdependence with the geographical area within which they exist as well as with the whole world equity
markets. The results depict that BRICS have no impact on the regional markets after applying EGARCH model.
Hsing (2011) studied the interactions among market fundamentals of South Africa and their stock exchange and
the impact of former on latter.
Venkatesh (2013) explored the capability of BRICS in terms of their “market capitalization “, “listed
securities “, Circuit breakers” and verify that these markets affect each other after 2000.
Zhang et al (2013) explore the BRICS and G-7 bond and stock markets for spillovers. They argue that the
univariate GARCH and dynamic multivariate models have limitations in estimating spillovers therefore they
followed the LM GARCH approach for estimation which is simply based on LM test. The results suggest there
is unidirectional in some and bidirectional spillovers in markets except Russia.
23
Nguyen (2014) studied volatility in stock and exchange rates of BRICS market to analyze their behaviour and
find causality among them using a regime switching model. The sample is taken from 1997 to 2013.The
outcome suggests that exchange rates cause changes in equity markets.
Theodore et al., (2015) analyzed the trends in BRICS economies by scrutinizing their equity markets. They
employed VAR (1) - GARCH (1, 1) model and observed that these markets are affected by U.S stock market in
the short- run.
Siddiqui and Siddiqui (2015) analyzed the spot and future indices of Indian commodity market, the study
examines whether the volatility as well as the effect of news is symmetrical or not on the indices. GARCH
family models are used to conclude that there is high persistence of volatility along with traces of leverage
effect on Energy spot, Agriculture spot and Metal future.
Kishore and Singh (2016) examined the BRICS stock markets and their linkage with the US economy during
and after the meltdown of 2008.GARCH model is put to use for analyzing the return behaviour. The series
starts from January 2007 till December 2013. The conclusion of the study is that there exists asymmetric
relationship between BRICS stock market and global equity market and Brazil and China are least affected by
the new information.
Siddiqui and Khan (2017) estimated the volatility of the stock markets of two biggest markets, China’s SSE
and India’s NSE. For the modelling of volatility GARCH (1,1) model was used as this model captures the
persistence financial series and satisfies the condition of parsimony. The conclusions made were about the
stability of the volatility process of both SSE and NSE.
3. RESEARCH GAP AND SCOPE
The overview of literature suggests that although there have been numerous studies on BRICS stock markets
and their linkages with other developed markets and others have endeavoured to estimate the relationship of
BRICS equity returns with commodity prices and exchange rates but very few have examined the linkages
within the BRICS block equity returns. Moreover the impact of news plays an immense role in the smooth flow
of financial markets and this aspect is relatively scarce in the written works of BRICS therefore present study
undertakes the examination of leverage effect in these emerging stock markets.
4. OBJECTIVES OF THE STUDY
 To model the volatility prevailing in the BRICS bloc.
 To identify the presence of leverage effect occurring at the arrival of new information.
5. HYPOTHESIS OF THE STUDY
H0: There exists no volatility clustering in the BRICS stock markets.
H1: There exists volatility clustering in the BRICS stock markets.
H0: There exists no leverage effect in BRICS stock markets.
H1: There exists leverage effect in BRICS stock markets.
6. RESEARCH METHODOLOGY
The study uses daily returns of major indices of BRICS for the period of 1 January 2005 to 31 December 2016.
BOVESPA from Brazil, MOEX from Russia, SSE from China and Nifty from Indian subcontinent as well as
FTSE/JSE All Share Index, derived from South Africa are used. The daily returns are calculated with the help
of closing prices without bonus, right issue and dividend adjustments. Large sample data is taken to eliminate
the thin trading bias. The returns are calculated with the help of following equation:-
Rt = ln(Pt/Pt-1)*100
The tool used for analyzing volatility witnessed by these exchanges is GARCH (1, 1) model which is
parsimonious and efficient in the modelling and EGARCH model which explains that the effect of bad news is
more on returns than good news. It allows negative sign to be captured in the estimation.
7. EMPIRICAL ANALYSIS-
Table-1: Descriptive Statistics
Brazil Russia India China South Africa
Mean 52000.51 1432.453 5365.457 2642.371 33624.77
Median 53735.90 1470.350 5285.000 2535.830 31187.70
Std Dev 11654.27 353.0041 1845.206 942.7254 12012.70
24
Skewness -0.568198 -0.833357 0.131603 0.825002 0.248334

Jarque Bera 174.2135 369.0027 77.06142 484.5962 181.0020
Prob 0.000000 0.000000 0.000000 0.000000 1.903945
As per Table1- The descriptive statistics show that Russia is the least volatile market as compared to other
BRICS nations with the lowest standard deviation. Moreover all the series are positively skewed except Brazil
and Russia.
UNIT ROOT TEST OF STATIONARITY
Table-2: Augmented Dickey Fuller Test
At level At first difference
t stat Prob t stat Prob
BOVESPA -2.613042 0.0904 -55.82169 0.0001
MOEX -2.068090 0.2579 -55.08940 0.0001
NIFTY -1.294869 0.6341 -50.93246 0.0001
SSE -2.054559 0.2636 -24.07470 0.0000
JSE -1.164611 0.6918 -41.21617 0.0000
Table-2 shows that all the series of BRICS stock exchanges are non stationary at level but became stationary at
First difference, as all the P values are less than 0.05. It can be concluded that the series are stationary at first
difference.
GARCH model
ARCH model was established by Robert Angle and then one of the most sought after model in time series
forecasting is GARCH (p, q) model which was pioneered by Bollerslev (1986)
A general GARCH specification of the model can be written as under:-
q p
σ2 t = ω0 + ∑ αi ε2 t-i +∑ βj σ2 t-j + Vt
i=1 j=1
“Where σ2 t denotes the variance. The number of lags is represented by i and j. The term ε2 t-I is the squared
error term for period t-i.” Hartman and Wiklander (2012)
The persistence of volatility can be estimated by the sum of parameter estimates α & β, closer it is to one higher
the persistence. Volatility effect due to a shock dies out at (1- α- β)
GARCH ANALYSIS OF BRICS
Table-3
Variable Brazil Russia India China S.Africa
Ω 0.000000613 0.000000683 0.000000287 0.000000166 0.00000198
(0) (0) (0) (0) (0)
Α -0.069222 0.101741 (0) 0.090189 0.057319 (0) 0.094709
(0) (0) (0)
Β 0.90822 0.878377 0.896941 0.938393 (0) 0.892565
(0) (0) (0) (0)
Table-3 illustrates parameters attained through GARCH model. Estimates of coefficients facilitate in better
understanding of volatility. For BOVESPA sum of the parameters is (α+ β) = 0.977. For MICEX the same is
(α+ β) 0.979, in case of NIFTY it is 0.987. For SSE the sum is 0.995. For FTSE/JSE α+ β is 0.987. The
conclusion can be drawn that the persistence of volatility is more in SSE as compared to other BRICS nations
as the sum of α & β is the closest to one
EGARCH MODEL
Nelson (1991) set the ball rolling for EGARCH model. He highlighted the fact that markets have a different
reaction towards positive and negative news. There is more effect on volatility during the decrease in prices as
compared to the increase of same magnitude.
 t 1  
log( t2 )        t 1    log( t21 )
t  t 
25
Poon and Granger (2003) conclude that the asymmetric models yield good results.
EGARCH ANALYSIS OF BRICS
Table-4
Variable Brazil Russia India China S.Africa
Ω -0.261894 -0.34417 -0.353129 (0) -0.16948 (0) -0.258015
(0) (0) (0)
Α 0.121861 (0) 0.205886 (0) 0.193155 (0) 0.132849 (0) 0.127832
(0)
ƛ -0.072907 (0) -0.06174 (0) -0.081448 (0) -0.005908 -0.103259
(0.204) (0)
Β 0.979784 (0) 0.976989 (0) 0.976483 (0) 0.991456 (0) 0.0982707
(0)
Table -4 depicts the parameter that is obtained after application of EGARCH model which is λ. The parameter
captures the asymmetric effect of volatility. All markets except China have significant p values. Moreover
there is negative sign along with the coefficients of λ implying the effect of bad news is more than good news
8. CONCLUSION
This study assists in the comprehension of the volatility among the BRICS stock markets as these are the major
transitional economies and their contribution and impact to the world economy is huge. As history has shown
there have been many economic crises in the past originating in the developing economies, such as, Asian crises
therefore it becomes imperative to study the volatility experienced by such economies. The sample consists of
returns from 1 January 2005 to 31 December 2016. For estimation of variability of returns or volatility GARCH
model was employed which is efficient and parsimonious and Exponential GARCH model was employed to
assess the leverage effect on market returns. The results show that China’s SSE is most volatile and leverage
effect is experienced by all BRICS countries as their estimates show negative sign.
REFERENCES
 Baig, T., Goldfajn, I., (1999), ‘Financial Market Contagion in the Asian Crisis’, IMF Staff Papers, 46(2):
167-195
 Bhar, R., Biljana, N., (2009), ‘Return Volatility Spillovers and Dynamic Correlation in the BRIC Equity
Markets : An Analysis using a Bivariate EGARCH framework’, Global Finance Journal Elseiver, 19(3):
203-218 Bollerslev, T., (1986), ‘Generalized Autoregressive Conditional Heterskedasticity’, Journal of
Econometrics, 31: 307-327
 Fantom , N., (2016), ‘The World Bank’s Classification of Countries by Income. Policy Research Paper;
No.7528.World Bank, Washington ,DC
 Hammoudeh, S., Mensi, W., Nguyen, D.K., Reboredo, J.C., (2014), “Do Global Factors Impact BRICS
Stock Markets? A Quantile Regression Approach”,Emerging Markets Review,Elseiver, 19(c ),1-17
 Hartman, J., Wiklander. O. (2012). Evaluating Forecasts from the GARCH (1,1) model for Swedish Equities
( Bachelor Thesis). Retrieved from https:/ www.diva-portal.org/smash/get/diva 2:5420 Engle, R.F., Ng,V.K.
(1993) ‘Measuring and Testing the Impact of News on Volatility’, The Journal of Finance, 48 (5): 1749-
177829/fulltext01.pdf
 Hsing, Y., (2011), ‘The Stock Market and Macroeconomic Variables in a BRIC Country and Policy
Implications’, International Journal of Economics and Financial Issues, Econjournals, 1(1),12-18
 Kaur, H., (2004), ‘Time Varying Volatility in the Indian Stock Market’, Vikalpa: The Journal for Decision
makers, 29(4): 25-42
 Kishor, N., Singh, R.P. (2016), ‘Stock Return Volatility Effect : Study of BRICS’ Transnational
Corporations Review, 6(4): 406-418
 Nelson, D.B., (1991), ‘Conditional Heteroskedasticity in Asset Returns : A New Approach’, Econometrica,
59(2): 347-370
 Poon, S.H., Granger, C.W.J. (2003) ‘Forecasting Volatility in Financial Markets : A Review’, Journal of
Economic Literature, 41(2): 478-539
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 Siddiqui, T.A., Khan, M. (2017) “ Volatility Estimation in Emerging Markets: A Study of India’s and
China’s Stock Market” Presented at the International Conference on Strategies in Volatile and Uncertain
Environment for Emerging Markets, July 14-15 2017, IIT-D
 Siddiqui, S., Siddiqui, T.A. (2015) ‘Forecasting Volatility in Commodity Market : Application of select
GARCH models’ Retrieved from http://www.ssrn.com id 2583573 (accessed on 27th August 2017)
 Theodore, S., Belijid, M., Adel, B., (2015), “Stock Market Volatility Spillovers and Portfolio Hedging” :
BRICS and the Financial Crisis”, International Review of Financial Analysis, 39:7-18
 Venkatesh, N., (2013), ‘ Rise of BRICS Economy and Its Impact on Global Stock Markets’, International
Journal of Commerce, Business and Management, 2(1),2319-2826
 Wilson, D., Kelston, A.l., Ahmed, S., (2010), ‘Is this the BRICs Decade’? , BRICs Monthly, 10/03
 Zhang, J., Zhang, D., Wang, J. ,Zhang, Y., (2013), ‘Volatility Spillovers between Equity and Bond Markets:
Evidence from G7 and BRICS’, Romanian Journal of Economic Forecasting, 16(4), 205-217
27
E-COMMERCE AND THE GROWTH OF GLOBAL RETAIL BUSINESS - A CASE STUDY OF

AMAZON.COM, INC
Karishma Arora
Research Scholar, School of Management Studies, Indira Gandhi National Open University, New Delhi
ABSTRACT
E-commerce is a buzzword in the Indian markets since the last decade. However, in context of developed world,
its existence can be witnessed since late 1970s when few multinational companies used it for electronic fund
transfers or electronic data interchange. E-commerce has changed ones perspective of doing business today.
Speaking of E-commerce industry, the first name that obviously emerges in mind is Amazon.com, Inc (Amazon)
which has earned its recognition as the oldest and biggest E-tailor in the industry, globally. Amazon could
reach where it stands today probably because of the razor-sharp entrepreneurship skills and foresightedness of
its founder and CEO, Jeff Bezos, who acknowledged the strength of Internet and used it in the most intelligent
and explicit way. In the fast growing consumer market, E-commerce boasts to offer wide range of benefits to
every participating country in economic and business terms by removing the geographical barriers. Owing to
its immense expediency, it has become the engine of international (retail) business in the contemporary world.
The purpose of this study is to recognize the role played by E-commerce in promoting and developing
international retail trade and analyse the design of E-commerce system with the help of a case study of
Amazon.com, Inc., the E-commerce giant. The study attempts to document how Amazon has revolutionized the
E-commerce industry at the international front and contributed towards the growth of retail business globally.
Keywords: Amazon, E-commerce, Global retail business
1. INTRODUCTION
How often do we feel the need to take a stroll through various markets and explore all of options of mobile
phones available? For obvious reasons, it is not possible physically, but the world of internet has given us
power to get access to anything and everything that we wish to buy, in just a click. Wide array of products
ranging from home appliances to books, consumer electronic goods to apparels, household related services like
cleaning to travelling packages etc are virtually available to any consumer who is having an electronic device in
hand with internet accessibility. It won’t be inappropriate to state that a consumer can carry ‘the globe’ in its
pocket. This is the sorcery of E-commerce.
1.1 What is E-commerce?
E-commerce is acronym for electronic commerce and it caters to exchange of goods and services through
internet and electronic devices such as computer networks, laptops, mobile phones etc. It uses technologies like
Information and communication technology(ICT) to create a virtual platform for consumers and business
organizations, where they can connect with one another, interact and give way to business transactions between
them.
Since its inception, it has come a long way. Electronic Data Interchange (EDI) is changing the face of e-
commerce lately. It has unleashed the scope of e-commerce. Today there is not a single arena where e-
commerce doesn’t have its footprints. It has revolutionized the way businesses or professional carry their daily
activities, while also easing the way for shoppers. E-commerce provides a safe and secure way to business-
business commerce, consumer and business commerce and consumer to consumer business as well. It has
considerably changed the face of commerce; specially the ways of managing market places and shopping. At
one hand, e-commerce has opened vast avenues for sellers to display their products on any websites across
globes or the other hand, virtual stores have scored points over brick and mortal shopping in aspects of
convenience, prices as well as variety.
Today roughly about 3.8 billion people are using internet facility across the globe, which signifies the
humungous opportunity for retail sectors to sell goods and services through electronic medium. It is setting up a
new industrial order for the retail sector. Vice President Albert Gore Ir. put it thus:
We are on the verge of a revolution that is just as profound as the change in the economy that came with the
industrial revolution. Soon electronic networks will allow people to transcend the barriers of time and distance
and take advantage ofglobal markets and business opportunities not even imaginable today, opening up a new
world of economic possibility and progress.
Talking about the retail sector and e-commerce together, we can’t afford to miss the innovation of Jeff Bezos,
the founder and CEO of Amazon. Amazon was the first online firm to execute secured online transactions. Jeff
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Bezos has embarked its name as the most farsighted entrepreneur. Tracing some steps back, few of the western
institutes started exchanging data electronically by the late 1970s. However, the shacklesin online trading of
goods were first broken by Jeff Bezos in the late 1990swith the introduction of his e-commerce website
Cadabra.com, now popularly known as Amazon.com.
The aim of this paper is to learn what e-commerce is; how it has stimulated the growth and development of
retail sector at international front with help of the case study of Amazon.com, Inc.
1.2 Amazon: The Breakthrough Beginner
Amazon was the first online store to execute secured online transactions. Started as an online bookstore, it soon
expanded to trading in a variety of products such as music, CDs/DVDs, electronics, MP3s, videogames,
apparels, furniture, food, toys, and jewelry. The company also produces consumer electronics—Kindle e-
readers, Fire tablets, Fire TV, and Echo—and is the world's largest cloud infrastructure services
(IaaS and PaaS) provider. It also sells certain low-end products like USB cables under its in-house brand
AmazonBasics. Running successfully, round-the-clock since 1994, astonishingly so, Amazon recorded its first
profit in the year 2003 only.
A lot of research has been done to describe the concept and scope of e-commerce which helped formulate the
base for this study. Extracts from few of the studies are as follows:-
Sheth and Sonal P (2015) aimed their study to describe how e-commerce is being conducted and managed, what
are its major opportunities, limitations, issues and its implications for India. They opined that E-commerce is
interdisciplinary, and, therefore, it should be of interest to managers and professional people in any functional
area of the business world.
ShahrzadShahriari et al. (2015) concluded that E-commerce can conduct any business online and via the
Internet. They listed out few advantages of e-commerce such as cost savings, increased efficiency, and
customization. They believe that in order to understand electronic commerce it is important to identify the
different terms that are used, and to assess their origin and usage. These include information overload,
reliability and security issues, and cost of access, social divisions and difficulties in policing the Internet.
Successful e-commerce involves understanding the limitations and minimizing the negative impact.”
D. K. Gangeshwer (2013) studied about future aspects of e-commerce in Indian context. The paper discussed
about the top motivating factors of shopping online.
Amit Saha (2015) highlighted the impact of the increasing trend of online shopping over the various fixed shop
retailers. He focused on the advent of e-stores with their attractive incentives and wide varieties. The study
looked into the various aspects about how retail businesses are being affected and also the various recovery
mechanisms they are coming up with to counter those e-stores in their race of survival. This paper also
unraveled the effect upon the profitability of the various concerns due to increasing trend for online shopping.”
3. OBJECTIVES OF THE STUDY
This research paper has following objectives: -
1. To examine the E-commerce revolution
2. To judge the impact of e-commerce in the growth of global retail sector through case study.
4. METHODOLOGY OF THE STUDY
Besides, literature review, case study method has been used to learn about the impact of E-commerce on global
markets, especially retail sector at international front.
5. CASE STUDY: - AMAZON.COM, INC.
Amazon.com strives to be the e-commerce destination where consumers can find and discover anything they
want to buy online.- Jeff Bezos
As the e-commerce has started to take over a good proportion of selling of goods there has been a constant
competition between the two concepts of doing business. While retailing has its existence since many centuries,
the concept of electronic mode of exchange of goods in only two decades old. While many businessmen saw
great potential in e-commerce as a way to expand their business, it became a threat to those who resented it. Re-
tailing and E-tailing are at a constant fight for consumers. However, one person who didn’t feel the worry and
took initiative to invest in an online book store about 20 years ago, was Jeff Bezos. Initially named as
Cadabra.com, a tiny setup operated through a second-hand computer selling books to becoming a global
29
company, Amazon has come a long way, in retailing sector. It is regarded as the world’s largest online retailer.
It made $107 billion in revenue in 2015. The speed at which their Founder, Jeff Bezos, grew his empire is
unparalleled.
Today, Amazon.com may account for around a third of all U.S. e-commerce sales and boast over 33,000
employees around the world.
5.1 Amazon's Journey from Small Bookstore to Global E-commerce Giant
In 1994, Jeff Bezos left his job on Wall Street to start an internet company. At the time, the internet was this
foreign thing which few people understood. He started off sellingbooks due to their high demand and low cost.
In just four months of operation, Amazon.com became a very popular site on the Web, making high marks on
several Internet rankings.
Just one year after founding Amazon, Jeff Bezos was able to get $8 million in funding. Impressively, this
investment was worth 55,000 times just 4 years later.
Amazon’s growth has been based on a willingness to reinvest profits and push the boundaries. Unlike some tech
companies, it was willing to test things out and push into new markets. For instance, the Amazon Fire Phone
was widely regarded as a failure; however, they were able to learn from it and feed it into developing the wildly
successful Kindle Fire Tablets.
He has an uncanny ability to spot companies which are likely to be successful. For instance, he holds
investments in Twitter, AirBnB and the Washington Post.
Bezos thinks of everything in a highly analytical fashion. While working on Wall Street, he took ballroom
classes in order to increase his “women flow”.
Moreover, Amazon places a lot of pressure on their employees. To call Jeff Bezos a perfectionist would be
putting it mildly. According to an investigative piece by the New York Times, it isn’t uncommon for employees
to be sacked for being ill. Moreover, their system of reward and punishment could be argued as reducing
employees to mere numbers. Jeff Bezos simply expects certain targets to be hit. This ruthless way of running a
company has meant that Amazon has been able to get back-to-back wins.
5.2 Few landmarks in epic Amazon’s journey
1994- a small online start-up selling books CDs and videos- called Cadabra.com
1995- name changed to Amazon.com, Inc.
1997- issued initial Public Offer on 15th, May,1997 at $18.00 per share
2000- new logotype featuring a curved smile with an arrow leading from A to Z, representing that the company
carries every product from A to Z.
2011-bought digital rights of DC comics such as Superman, Batman, Green Lantern etc. forcing bookstores like
Barnes & Noble to remove these titles from their shelves.
2013-announced a partnership with the United States Postal Service to begin delivering orders on Sundays.
2015-surpassed Walmart as most valuable retailer in the US by market capitalisation.
2016-Amazon announced plans to build convenience stores and develop curbside pickup locations for food.
Amazon.com announced a partnership with the U.K. Civil Aviation Authority to test some of the technologies
and may use delivery service via prime air drone in the future.
2017-Amazon announced that it would acquire Whole Foods, a high-end supermarket chain with over 400
stores, for $13.4 billion. Nike confirmed a partnership with Amazon, stating it to be in an initial phase where
they'll be selling goods on Amazon.
5.3 How Amazon achieved the pioneer level
Five years ago, amazon was at 15th position in the National Retails Foundation’s list of top 100 retailers with
$26 billion sales. Today, Amazon tops the list with $80 billion in online sales, leaving Walmart at second place
with $13 billion of sales. Amazon rose up with 16% growth. Amazon has established itself as the most relevant
brand to millions of customers across the world.
The relentless efforts manifested by its founder and CEO, Jeff Bezos is to be appreciated. His innovative ideas -
from the widely popular Amazon Prime subscription service and free two-day shipping to one-click purchases -
30
- has played a key role in winning the hearts and wallets of more than 300 million Amazon customers
worldwide.
He simply identified and studied the human behaviour. He developed a three dimension consumer-centred
strategy which is as follows:-
 easing the purchase process by prioritizing social proof
 shortening the amount of effort required for repeat purchases
 tightly connecting experiences across devices
He coined the above 3-way strategy through which online retailers can significantly boost sales and effectively
grow and retain their customer base at scale.
Some of his other propositions that helped him bag huge success are as follows:-
 Create a community of (data) givers
Bezos not just focused on gathering customer data but his genius lies inwhat his team does with it. They build
such aura around potential customers to activate interest and covert it into actual sales with ease. For example,
Amazon continuously finds unique ways to use members' saved credit card information to eliminate the need to
put in card details thus leading to a faster checkout process. American Express members can even easily click
on a button to pay for cart items with rewards points.
In addition, Amazon has played the ace card by giving utmost place to the customer reviews on its website.
activated their customer base to willingly provide data because it returns significant value. Most of the
customers buying decisions are influenced by online reviews. Amazon thus created a platform for its
community of customerswhere they willingly put product reviews which fuels up others customers’ mood for
buying a product. Customers also have freedom to put questions about a particular product which may
answered by any other customer or the seller. Such interactions remove buying dilemma of customers and they
complete the buying procedure with higher credence.
 Study behavioural patterns of customers to increase conversions
Customers many times keep products in their shopping cart and tend to forget them. While other times
customers keep switching from website to website in supposition to find better deals.
Amazon has come up with an innovative way of tracking customers behavioural patterns which helps them to
know which customer is exploring which products and buying them regularly. The"Subscribe&Save"option
given by amazon on their websitehelps to accelerate sales and retain loyal customers. For example, if data
shows that a consumer orders food items, toiletries or pet food every other month on a regular basis, why not
simplify the buyer's process via subscriptions? Online retailers that adopt this way of thinking where customers
can"set it and forget it" -- not only enhances convenience in shopping, but also automatically retains customers
without any additional expenditure on promotions and acquisition of customers.
 Strengthening customer connections and experiences online
Amazon believes in keeping its customers connected with themselves. It also recognizes how digitization and
automation is becoming a normal part of our daily lives where we love to use smart electronic devices. With
this approach Amazon has now launched Alexa voice which is a customer-centric technology where customers
can direct the device to perform a particular action such as putting a particular product to the cart or asking
about details of a product. Alexa is a smart home device which can be connected to various other apps such as
our mobile phones, music systems etc.
Amazon’s kindle is yet another great invention for avid readers on the go where online soft versions of their
favourite books, magazines, newspapers etc can be easily accessed at a touch.
 Efficient Delivery mechanism
Bezos identified what are customers’ fears while doing online shopping. One such hassle is late deliveries and
return procedures. Amazon has given top most priority by proving its customers options of one-day delivery
and two-day-delivery on a payment of a very nominal amount. In fact, return pick ups are also very smooth
without any annoyance.
Amazon Prime Air is a service that will deliver packages up to five pounds in 30 minutes or less using small
drones. Amazon is further working upon its idea of using drones for delivering the packing in the US.
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 Third-party sellers
As the logo of amazon promises to deliver products ranging from A to Z, it has connected with itself a vast
number of third-party sellers who sell products on Amazon (around 40% in 2008).Amazon has a tie up with
various other websites which place links to amazon n their websites and whenever a referral results in sales,
amazon pays commission to those associates.
Worldwide, Amazon has "over 900,000 members" in its affiliate programs. In the middle of 2014, the Amazon
Affiliate Program is used by 1.2% of all websites and it is the second most popular advertising network after
Google Ads.(Bezos, J. et all.(2014)) Amazon reported over 1.3 million sellers sold products through Amazon's
websites in 2007. Unlike eBay, Amazon sellers do not have to maintain separate payment accounts; all
payments are handled by Amazon.
 Multilevel sales strategy
Initially what started as B2C and B2B commerce, gradually moved to C2C commerce as well amazon today is
that common marketplace where anyone can sell nearly anything. Bezos took advantage of his supremacy in the
online retailing market, he allowed other e-commerce sellers to use Amazon as a platform to sell their goods.
The sales are processed through Amazon in return of some lease amount for the space they are using at
Amazon’s website. One would agree that not just customers, but Bezos knows how to allure his competitors in
his master plan.
Such innovations and steadfast commitments of Amazon have helped it gain the highest brand loyalty. Bezos
keeps exploring the potential of technology in all aspects which gains him the extra mile to maintain its position
as top online retailer since last five years consecutively.
5.4Amazon’s herculean 20-year run as a public company, explained in five charts
In May, 1997, a small online bookstore went public on the Nasdaq in an IPO with a valued of $438
million.Twenty years later, that little startup from Bezos’s garage — called Amazon.com — is worth nearly
$460 billion.
Amazon stock prices have increased 600 times than what it was on its IPO day
Source: https://www.recode.net/2017/5/15/15610786/
Fig-1
It took Amazon 18 years to come at par with Walmart in market cap, and further took only two years more to
double it.
Fig-2
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Revenue generation of a company is one of the most important aspect for investors to continue with their
investments. Amazon though, held a different approach towards its revenue and sales growth. Its focus was to
earn low but stable revenue, creating am image of money loser, while actually eating up all the market share
from its competitors.
Sales
Net Income
Fig-3
The impact of Bezos’s approach has been that he could manage to gain enough operating cash flow the
company needed to invest in everythingwas needed to keep itselfway ahead of its competitors, and shootup and
to the right.
Fig-4
5.5 Amazon vs. other e-commerce merchants growth in 2016
While in 2015, Amazon accounted for 40 percent growth share in e-commerce market, last year it acquired a
whooping 53 percent growth in US e-commerce market. It's also more than half of the 11.4 percent gain
reported by the Commerce Department over the 12 months ended Dec. 31. (The Commerce Department figures
apply to non-store sales, which also include catalogs and TV orders.)
33
Source- https://www.cnbc.com/2017/02/01/
Fig-5
Amazon’s presence worldwide
Amazon understands that people from different backgrounds and cultures may have difference in choices of
products. So, in purview of that Amazon has set up separate retail websites for each of the following countries-
the United States, the United Kingdom and Ireland, France, Canada, Germany, Italy, Spain, Netherlands,
Australia, Brazil, Japan, China, India, and Mexico. In 2016, Dutch, Polish, and Turkish language versions of the
German Amazon website were also launched. In order to meet the cross border demand of consumers, Amazon
now offers international shipping to certain other countries for some of its products.
6. E-COMMERCE IN INDIA
E-commerce in India is still at beginning stages. First few Indian e-commerce company being Indiamart,
flipkart, which followed similar footsteps of Amazon, i.e starting as a book store now is a big name in Indian E-
tailing sector.
By 2014, the Indian online retail pie was an estimated size of $ 2.3 billion, which was 0.4% of the total retailing
industry in the country. But the growth of online retail is impressive and the industry is expected to reach the
size of $32 billion by 2020 - a significant 3% of the total retail industry.(Srivastava, Pallavi(2014))
Amazon has identified good potential in India and has been on its heels to revolutionize the entire Indian e-
tailing space.
 Electronics is currently the largest segment in e-commerce in India with a share of 47 per cent and is
expected to grow at a CAGR of 43 per cent by 2020.
 The apparel segment has the second highest share of 31 per cent in the e-commerce retail industry.
 Currently, there are 1-1.2 million transactions per day in e-commerce retailing.
Source-KPMG report-E-commerce retaillogistics India

Fig-6
34
E-tailing in Rural India

 Vakrangee is a “technology driven company, focusing on creating India's largest network of last-mile retail
points-of-sale, to potentially enable every Indian to seamlessly benefit from financial inclusion, social
inclusion, Digital India, Skill Development, Employment, Government programmes and a wider access to
basic goods and services.”It has entered into a strategic tie-up with Amazon India to provide marketing,
promotional and other services through 'Vakrangee Kendras'. Vakrangee has been building an ecosystem of
small outlets to fill the last-mile gap for retail firms in rural areas. The company has over 35,000 business
correspondent bank branches through which it also offers insurance, e-commerce and e-governance services.
 Amazon initiated another scheme for the rural poor in India. More than online existence its focusing on
offline availability in rural ares as it acknowledged the fact that people in backwards ares are not versed with
technology at all. Project UDAAN was initiated in 2015. It aims at partnering with local sellers to enable
offline buyers to make purchases through the website. Amazon conducts training for those sellers who are
willing to be associated, and for every dale made through them, they are paid certain amount of commission.
As people are more comfortable with offline merchants their stores act as product delivery and pick-up
points. This makes is far easier to sell in rural areas.
Such extra efforts made by Amazon towards the rural and less-privileged people of the third world countries,
reveals how well it is managing to become global in true sense.
7. CONCLUSION
Internet commerce has enabled businesses with new technology andcapabilities. It has automatedthe operations
of business. It is creatinginter-dependencies between company’s value chain, in terms of its suppliers, logistic
chains, operating cycles, payment mechanisms etc.Any company incorporatinginternet technologies easily
scores a competitive advantage. E-commerce is easily bringing the world closer as the whole world becomes a
customer or a supplier to those having presence in the cloud. Amazon.com, Inc is the biggest name in the E-
tailing industry today. Bezos can be described as a serial entrepreneur. Amazon wasn’t the first online retailer
during 1990s; however, it was the first one to emphasize on customer needs and expectations. He emphasized
on studying the behavioural patterns of customers and give them what they want, and the way they want. His
innovative schemes such as multilevel sales strategy, creating discussion boards on the websites etc can become
learning module for other players in this sector. Amazon has turned the tables of e-commerce industry at the
global level. Its founder, Jeff Bezos truly recognized the zenith of internet power. Despite hardly having any
physical stores, it managed to grab and stay at top position for five consecutive years. Today e-commerce is
inviting every offline business to make its presence online as well because of the increased awareness of
customers. It is easier to reach customers without any geographical boundaries; all niche companies have their
presence online. E-commerce is also attracting FDI from around the world due to its wide range benefits, and
lastly all variety of products from pin to plane can be bought online hassle-free due to transparency of operation
models on e-commerce websites. If the power of internet is utilized in the correct direction, it has promising
prospective to further boost the international business. As e-commerce is also reaching underdeveloped and
third world countries, it is uniting the rural areas which is an important aspect for inclusive growth and
development of the world economy.
REFERENCES
 Bezos, J., CTO, W. V., Jassy, A., & Wilke, J. Amazon. com,Inc(July 9, 2010)."Amazon.co.uk Associates:
The web's most popular and successful Affiliate Program". Affiliate-program.amazon.co.uk.
 Bezos, J., CTO, W. V., Jassy, A., & Wilke, J. Amazon. com, Inc.Barr, A. (November 11, 2013). "Amazon
starts Sunday delivery with US Postal Service". USA Today.
 Bezos, J., CTO, W. V., Jassy, A., & Wilke, J. Amazon. com, Inc.(July 22, 2014)"Usage of advertising
networks for websites". Retrieved from http://www.W3Techs.com.
 Bezos, J., CTO, W. V., Jassy, A., & Wilke, J. Lardinois, Frederic.Amazon. com, Inc. (July 26,
2016)."Amazon partners with U.K. government to test its drones" .
 Bezos, J., CTO, W. V., Jassy, A., & Wilke, J. Amazon. com, Inc."Amazon to Build Convenience Stores,
Wall Street Journal Reports". (October 11, 2016).Retreived from Bloomberg.com.
 Campbell,D.(2017). “What Online Retailers Can Learn From Amazon ” Retrieved from
http://www.adageindia.in/digital/digitalnext/
 Gangeshwer, D. K. (2013). E-commerce or Internet Marketing: A business Review from Indian
35
context. International Journal of u-and e-Service, Science and Technology, 6(6), 187-94.
 Kamlesh , B., Debjani, N.(1999). E-Commerce - The Cutting Edge of Business, 2nd ed., Tata McGraw-
Hill Publishing Company Limited, 1999, p 12.
 Kantor J., Strietfeld David.(2015) "Inside Amazon: Wrestling Big Ideas in a Bruising Workplace". The
New York Times.
 Mendonca J. (2015) “Amazon India ties up with Vakrangee to sell in rural India”Retrieved from
https://economictimes.indiatimes.com/industry/services/retail/amazon-india-ties-up-with-vakrangee-to-
sell-in-rural-india/articleshow/48284509.cms
 Saha, A. (2015). The impact of online shopping upon retail trade business. In National Conference on
Advances in Engineering, Technology & Managemen, Assam (pp. 74-78).
 Streitfeld, David (2011). "Bookstores Drop Comics After Amazon Deal With DC". The New York Times.
 Shahriari, S., Shahriari, M., & Gheiji, S. (2015). “E-Commerce and It Impacts on Global Trend and
Market”, International Journal of Research–Granthaalayah, 3(4).
 Sheth, S. P. (2007). “E-commerce and its Implications for India with Special Reference to its Perceptions,
Applications, Usefulness and Future Potential”, Shodhganga, A reservoir of Indian theses @INFLIBNET.
 Srivastava, Pallavi(July, 2014). “How Amazon India is Changing the Rules of the E-tailing Game”
retrieved from https://www.businessinsider.in.
 Stanford University, School of Engineering (2008) “Amazon Enters The Cloud Computing Business”
Retrieved from https://web.stanford.edu/class/ee204/Publications/Amazon-EE353-2008-1.pdf
 Synergy Research Group, Reno, NV. "Microsoft Cloud Revenues Leap; Amazon is Still Way Out in Front
– Synergy Research Group". srgresearch.com.
 Timmers, P. (1999). Electronic Commerce- Strategies and Models for Business-to-Business Trading, John
Wiley & Sons, Ltd., p xiii.
 Turban, E., King, D., Lee, J., & Viehland, D. (2002),“Electronic Commerce: A Managerial Perspective”
, Prentice Hall: ISBN 013975285.
 Wattles, J. (June 29, 2017). "Nike confirms Amazon partnership". CNNMoney. Retrieved July 3, 2017.
 Westland, J. C., & Clark, T. H. (2001),“Global Electronic Commerce:Theory and Case Studies” , 2nd ed.,
MIT Press.
 Wingfield, N., & de la Merced, M. (2017). “Amazon to buy Whole Foods for 13.4 Billion Deal”. The New
York Times.
 http://www.internetworldstats.com/stats.htm
 https://www.recode.net/2017/5/15/15610786/amazon-jeff-bezos-public-company-profit-revenue-
explained-five-charts
 https://www.cnbc.com/2017/02/01/amazon-captured-more-than-half-of-all-online-sales-growth-last-
year.html.
 http://www.vakrangee.in/who-are-we.phps
36
EFFECTIVE DECISION MAKING USING ADVANCEMENTS IN BUSINESS ANALYTICS WITH

MACHINE LEARNING MODELS: IMPLICATION TO SPORTS ANALYTICS
K. Subhash1 and E. N. Vihari2

1
Student , Indian Institute of Management (IIM), Ranchi
Data Warehouse Developer2 , Capgemini, Financial District, Hyderabad
ABSTRACT
Business Analytics, since its inception had Sport Analytics as its major and most resourceful proliferation
inreal life scenario. Sporting industry had an analytical point of view ever since 1870’s yet usage of advanced
technological and analytical skills such as data mining and machine learning to obtain fine grained data and in
turn use it to obtain better predictions, possibilities and improvisations have started off much recently. This
paper elucidates how varied business insights and aspects along with the overview of the game have apparently
contributed in making decisions that builds a team as a potential game changer.
What would it be to predict a player’s defense? To optimize attack and scrutinize thedefense? What if there is
an analytic and predicative model to understand the pitch of a cricket field, different combinations of fielding
setup and their possible outcomes? All these are possible due to Sport Analytics with strengthened with
advanced machine learning. This research renders to explore the insights of how sports analytics can fetch the
audience an inquisitiveness,a businessperson to have a better chance of gaining more money on the game he
sponsored and the player to have a better chance of giving his team a cutting edge over an un-analytical
approach towards the game.
This paper also ponders over how machine learning in sports analytics can actually change the phase of game
play analysis and provide an insightfulness into the game. This research tries to figure out the possible scope
for advancement in the machine learning algorithms, which can provide limitless advantages and extremely
efficient possibilities in turn changing the game play and plan for a player, manager, coach and even audience
who have the major stake of investment into the game.
Keywords: Analytics, Data,Decision, Prediction, Sports.
1. INTRODUCTION
Data Analytics and Data science words have been quite a buzz for the past couple of years. It is not something
exaggerating as data is the future and without the right data and right structuring of this data, one could terribly
fall behind in this fast-paced business world. Hence, collecting the data and analyzing the data to obtain
meaningful insight is the key to success in any field these days.
To geta basic idea about Data Analytics,one requires knowing what Analytics is in the first place. It can be
delineated as‘manipulation and filtering data to obtain the essence of any raw informational data’. According to
Robert Woz, “Analytics is the discovery and communication of meaningful patterns in data”[Data Analytics for
Beginners: A Beginner's Guide to Learn and Master Data Analytics, 2017].
Analytics can be seen as a process rather than an individual entity. It is a continuous flow of information to
filter and bring the necessary output. It is interdisciplinary process, which brings together mathematics,
predictive methods, Artificial Intelligence and data visualization. What would it be to imagine your
players’defense? To optimize your attack and scrutinizeyour defense What if there is an analysis and
predicative model to show the different combinations of fielding setup and their possible outcomes. All these
are today possible due to Sport Analytics with machine learning field. This can fetch the audience an
inquisitiveness,a businessperson to have a better chance of gaining more money on the game he sponsored and
the player to have a better chance of giving his team a cutting edge over a normal un-analytical approach
towards the game.
Many recent modifications have come up in this Sport Analytics field such as Ghosting and deep learning
through which making simulations of the predictive game models are also possible today.
Over the past few years, world has experienced an explosion in the field of sports and is still trying to update
and add new methods and algorithms to the library to make things more and more accurate and effective. Sports
Analytics field has been busy quite lately in predicting the future of the games, sports and analyzing the current
states of sports which has been a great help to the field.
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Defining Sports Analytics is quite complex however it can defined as‘The Management of Structured Historical
Data and the application of predictive analysis and its models to utilize the data and use of information systems
to Inform decision makers and enable the organizations to gain a competitive advantage over others in the
industry without this’ [Sport Analytics: A data-driven approach to sport business and management, 2016]
In simple language, it is processing of Sports-Related data to find meaningful patterns. It can used to find
hidden trends and player statistics. This analytics is also used to communicate those patterns and help make
decisions.
We know that this field is still naive and is mostly unstructured. Interest and insight into this field has been
booming in recent years. Therefore, it is a good idea, good business to get into this field way before the
competition gets much larger, and before it gets much bulkier with more ambiguities. Data Analytics and its
innovative technological advancements are soon going to change the way a game is reviewed and change the
way it is being perceived by those who own and make money from it.
Even before we go there, we need to understand couple of terms and key operations in sports analytics to
understand this field better.
Data management is the process of acquiring, storing, processing and verifying the data. It is mostly about
extracting the data’s key points and modelling it using present algorithms. There are numerous models out there
in the market. Few models are extensively used and few are based on their accuracy and the skill to use such
tools. There are high gradient tools present however, the knowledge to use them or skill to use them is lacking
and there is a huge gap in the market and industry. The use of analytical models and tools to forecast a game’s
result, a players performance is mostly the purpose, of course by no means a necessity. It can be taken as
describing the data present in a presentable way to make an understanding out of it.
Information systems unlike the above two attributes, is slightly abstract and vague. These are prominently used
to effectively extract the model results of any project.
Decision-making is the final part of any analytics process. This can be seen as at the end goal of the whole
process. This is where he extracted analytical information starts to make sense. The decision makers in modern
sports are mostly coaching staff or management.
It is not bad if players themselves use this data to understand the whole game and make informed and well
thought of decisions.
In terms of data, we can say that this is the most interesting type of data any data scientist can get in this field. It
is data rich and there can be no better than analysis hundreds of games of players playing a game. Yes, due to
millions of possibilities of permutations and combinations of player placing and strategies, this has high, vast
and rigorous amounts of unstructured data. Yet, again, what better use can be done of a data analyst than
refining, filtering and brining in the right data to the right requirement.
Previously, we know that players used to watch hundreds of hours of game play films to understand opponent’s
movements and their strategies. With the help of Sport Analytics, one can actually get maximum efficiency
with minimum effort. Machine learning in Sport analytics can actually change the phase of game play analysis
and provide an insightfulness into the game. Over giga bytes of data from hundreds of games, a well-developed
machine-learning algorithm can provide limitless advantages and extremely efficient possibilities in turn
changing the game play and plan in day-to-day life of a player, manager, coach and even audience who have the
major stake of investment into the game.
3. EVOLUTION AND INITIAL PHASES OF SPORTS ANALYTICS
A very recently born field is what most people think of this, however studies applying mathematical and
statistical models to professional sports data can be referred back to as far as more than 50 years. It is very
crucial to remember what the world looked like in the 2000’s when people we just starting to use the data to
understand the data rather than make analysis out of it. At that time, in the west, where statistics was taking off
and there itself the industry was pretty much just using this study in 2 or 3 NBA teams.
Pretty much later, in the recent 21st century near to 2010 -2012 when people thought motion capture technology
is far myth and that we are far from discovering and making it work in the industry. Just five to six years later,
more than 60% of the teams in NBA are using these tools to increase the team side operations and management
side operations as well.
The general ideation is that the sports analytics began sometime in the 19th century with baseball. The data was
collected with good old pencil and paper. This was them used to create scouting reports which a coach or
38
manager would use to make decisions about their team. Ben Alamar, a European Authorproposes this
technique in his book‘Sports Analytics – A Guide for Coaches, Managers, and Other Decision Makers’and
gave a logical flow toward the decision maker.
4. SPORTS ANALYTICS IN BUSINESS: CONTEMPORARY CONTEXT
Data inside a sports organization used to consist of individual box scores and player, team statistics summary.
Text based scouting reports were drawn and raw game films were used. The last 15 years has drastically
changed the world of sports with the introduction of analytics into it.The first and most important part of the
game is always the audience.
Fans are the reason for a game to keep running for years. Fan engagement off the field to enhanced on-field
experiences driven by VR & AR, Oakland team ushered in the era of big data in sports.
Leading to its rise in academic research as well with hosting an annual sports conference MIT Sports Analytics
Conference brings top minds from the sporting world such as team leads, coaches, players and journalists to
discuss cutting-edge analytics solutions for sports landscape.
International cricketing bodies are also quick to embrace technology. Case in point, Australian Cricket teamed
up Microsoft that has launched Fair Play Athlete Management System, which will unlock insights from vast
amounts of player data. The platform powered by powered by Microsoft’s Cloud and Cortana(The Artificial
intelligence end of Microsoft ) Analytics Suite uses machine learning, predictive analytics and visualizations to
help data scientists better manage the huge volume of performance data tracking.
There is Bengaluru based startup in India for Analytics powering ESPN cricket points. It delights fans with
visual appealing data and statistically enthusiastic videos. The videos give information about strike rates, poor
team performance and best bowlers etc. For example, It can say how Sachin Tendulkar has batted against home
spinners versus how he reacted to overseas spinners and what are his weak pitch points and balls. A well-
developed model can easily predict the number of runs that are likely to be scored in a particular match.
The ICC and Intel partnership is also a step in that direction. Statistical predictors are in no way a sure shot way
to success, but they help in eliminating doubt.
There is a Chennai-based company, which is one of the Indian pioneers in sports analytics space with being
Indian team’s first sports analyst company. They are the first ones to introduce video analysis to Indian cricket;
the company is also the performance analyst of Indian team since 2003 and helped achieve the World Cup title
in 2003. The Company transitioned cricket analysis from predictive to descriptive. With such use of Analysis in
India sports, we can see India in the next top most countries using Analytics to redefine sports. The company
also lent its expertise in helping Kolkata Knight Riders form a team with auction insights. The company offers
data analysis to sports like hockey and badminton and opponent critical understanding analysis to badminton
player too. The company’s real-time decision-making system that analysts enable a coach to survey all the
possible options that are feasible during a game.
Not just limited to professional sports, analytics has made inroads into training academies, helping root out bias
and uncertainty. Over the coming years, sports analytics will for sure continue to evolve with greater adoption
and integration.
Adaption of Analytics into cricket mainly into Indian sports has been a new thing. The work of Analytics has
been three dimensional like data, analysis and advanced metric related data. Past couple of years, there is ball-
by-ball data being collected of all the International Cricket matches that have been played in the last fifteen
years. There is also data collected for T20 matches, which are very popular.
There is an exhaustive database for both T20 and Indian premier leagues. There is Ball to ball data being
collected against for each match for fielding placement and its output. These techniques are something beyond
the traditional way of determining the success of a match and this is the future.
5. MACHINE LEARNING – EFFECTS ON ANALYTICS
Before Big Data analytics for Sports, there was the system of coaches watching over the tapes again and again
to find the weak spot of an opponent and then guide the player to win-win situation which of course was
completely based on the coach’s intuition and instinct. Now, there are hundreds of models, which determine the
result of a match with historical data, giga bytes of data surmounting to huge traction and efficiency. Hence
there are companies coming up and even the leagues are looking out for such machine supported suggestions
and advices instead of raw and un-supported assumptions.
39
Using Machine learning, the data is accurate and is based on facts and figures instead of vague ideologies and
thoughts.The future is in the Data visualizations. This will totally change the way we see a game. This gives
real time accusations, which are high in quality and efficiency instead of risk taking assumptions.
In Basketball,different players have different shooting ability. Analytics with right amount of data can find the
right shooter for the right corner. Analytics can also sometimes find the hidden or secretly good player based on
the shots he covered from the distance and the corner he was standing. Data is just magic when in the right tool.
All it takes is analysis to pop out once the data is given and that’s the end of discussion as there would be N-
number of permutations and combinations given out by the predictive models. This totally re-defines the
statistics. It gives all the information based on experiences and shots taken by the player against different
defenders and with particular styles of dribbling.
6. CONCLUSION AND AVENUES FOR FURTHER RESEARCH
The future of Machine Learning is to predict the game with the mental status and body language of the player,
which will play a pivotal role in the team selection and informed decisions about the game. This can happen
probably in the coming decade or two.
Deep Learning is a part of Machine Learning, which allows the architect of the data to obtain it with higher
accuracy and clarity. Imagine being able to model the opponents defense with just 3-D mapping. Imagine to
optimize your attack or to determine the placement of players for rebounds and catches in basketball and
cricket. All this is possible with the help of Deep Learning. Lately Ghosting was invented that can accurately
learn and predict how an actual professional player can play and learn from thousands of raw data and matches.
The visual nature of this ghosting protocol system could provide direct and indirect benefits to teams that invest
in it.A paradigm shift is about to happen in the field of sports analytics, and many companies hope to be at the
center of it. Recent advances in deep learning and machine learning are giving coaches and professional athletes
insights that previously required watching hundreds of hours of game film. With ghosting systems, teams can
show players how to position themselves to maximize the potential for a positive outcome.
REFERENCES
 Benjamin C. Alamar (2013). Sports Analytics – A Guide for Coaches, Managers, and Other Decision
Makers. Columbia University Press. Print.
 Gil Fried, Ceyda Mumcu (2016). Sport Analytics: A data-driven approach to sport business and
management. Web.
 Robert J. Woz (2017). Data Analytics for Beginners: A Beginner's Guide to Learn and Master Data
Analytic. Web
 Benjamin Alamar and Vijay Mehrotra (2011). Beyond ‘Moneyball’: Rapidly evolving world of sports
analytics, Part I. Analytics Magazine.http://analytics-magazine.org/beyond-moneyball-the-rapidly-evolving-
world-of-sports-analytics-part-i/
 Peter Dizikes (2015). Six keys to sports analytics. MIT News Office. http://news.mit.edu/2015/mit-sloan-
sports-analytics-conference-0302
 Richa Bhatia (2017). Scoring with analytics: Top sports analytics companies in India. Analytics India
Magazine. https://analyticsindiamag.com/scoring-analytics-top-sports-analytics-companies-india/
40
FACTORS AFFECTING FEMALE EXPATRIATES: A REVIEW OF LITERATURE
Dr. Sunayana Kumar1 and Nadia Ashraf Khan2

Assistant Professor and, Research Scholar2, Centre for Management Studies, Jamia Millia Islamia
1
ABSTRACT
Women today have successfully marked their places in the world with firm steps in all areas and sectors despite
the odds. From setting foot on the moon to shattering the glass ceiling to climb corporate ladders to achieve
their organizational career goals, women have been making their mark continuously. Female success stories
continue to flood in from all parts of the world today and nowhere do they lag behind in bringing profits to the
organizations, heading teams and achieving targets and goals.
Despite showing success and performance that are at par with their male colleagues, why are the women not
able to break through the ‘glass borders’? Do women not want international careers or a place in the top
management positions? Can they, with all the required skills and experiences, not succeed internationally?
When even on international assignments, women have shown as much job commitment and bagged the same
supervisor ratings as male expatriates, why do glass borders still prevent them from moving globally? The
purpose of this study is to review and list the factors affecting female expatriates.
Keywords: Female expatriates, factors affecting female expatriates, gender bias, culture
INTRODUCTION
Expatriates play a very crucial role in the performance of an organisation in the arena of international business
(Tung, 1981). The increase in globalisation is causing more and more employees to be sent on long-term
international assignments than ever before, which clearly indicates how the use of expatriates, male as well as
female will continue to grow in the 21st century (Dolins, 1999). Research has seen how initially only male
employees were entrusted with international assignments as against the female counterparts in the organizations
(Vance et al, 2006; Taylor et al 2002). Although in the recent decades the percentage of female expatriates
being sent on international assignments has considerably increased from 3% in 1990 to 20% in 2009
(Brookfield Global Relocation Services, 2009), the females in the area of international business still stand
under-represented. In spite of a considerable increase in the female expatriation, women are still found to be
one-fifth of the total expats being sent on international assignments (Brookfield, 2012). Research puts forth
what we know as ‘gender structures’ in the labour market, suggesting the lower the percentage of women in a
profession, the lower will be the chances of their reaching the top (Blackburn and Jarman, 2005; Jarman and
Blackburn, 1995).
However, there is somewhat a change in the scenario of female expatriates in the global front in light of the
recent happenings that have caused organisations to expand their pool of international managers and has
resulted in the inclusion of females in the pool as well. The post 9/11 concern for security (Cox et al, 2007;
Suder, 2004), relocation of families, trailing partners, education and development of children and dual career
families (Harvey et al, 1999 and Permits Foundation, 2009) have caused a decrease in the number of managers
willing to take up international assignments and hence, female expats have become an important source of
talent in the arena of international business (Nina Cole and Yvonne McNulty, 2011). Yet, in the light of all
these research findings it remains very challenging for women to find place among and equal to their male
counterparts in the organization in the arena of international business. They face an array of social, cultural and
gender based challenges on their way to paving a global career for themselves.
FACTORS AFFECTING FEMALE EXPATRIATES
Female expatiates have been found to be as successful at international assignments as their male counter parts
(Caliguiri and Tung, 1999; Napier and Taylor, 2002; Sinangil and Ones, 2003). Altman and Shortland, 2008,
carried out a review of research only to find out how women are able to adjust and adapt better than men in
cross-cultural assignments. Female expatriates, despite being exposed to not only work related but also non-
work challenges, like working with host country nationals (who due to the cultural and social differences, find it
difficult to accept the deployment of female managers on cross border assignments) are successful ( Janssens et
al. 2006; Paik and Vance, 2002; Westwood and Leung, 1994). This success despite hardships can be owed to
the suitable characteristics like building and maintaining cross-cultural relationships (Gordon and Teagarden,
1992). Also, their skills with languages, clarity of job roles (Taylor and Napier, 1996) and their way with words
lead to a better work as well as interaction adjustment (Selmer and Leung, 2003b).
41
In 2007, Desvaux et al presented a research suggesting that gender diversity could be a driver for corporate
performance. There are empirical evidences to show that females exhibit personality traits and characteristics
that are better associated with expat success (Guthrie et al, 2003). The ability of females to show a greater spirit
and performance for co-operating, arriving at a consensus and exceptional capabilities at multi-tasking,
emotional sensitivity as well as emotional intelligence and a great way with words grants them an edge or what
Helgeson (1990) termed as ‘female advantage’ in managing assignments (Adler, 1979; Fisher, 1999).
Despite the success of female expatiates, there is a paucity in the number of women being sent on global
assignments. This paper is an attempt to list the factors affecting female expatriation at the different stages of
the expatriation process.
GENDER BIAS AFFECTING FEMALE EXPATRIATION
Gender bias harms the entire process of female expatriation right from selection of females for international
assignments, to the outcomes those assignments also taking their cross-cultural adjustment in the host-county
by the stride. There is witnessed stereotyping and gender bias against females in organizations which is known
to limit their careers and result in an unequal treatment (Auster, 1993). Women’s career growth and
development is put to halt by what is long known to us as the ‘glass ceiling’- an invisible but impermeable
barrier that limits the career advancement of women (Berke and Vinnicombe, 2005, p165). Likewise, in case of
international career growth, females face what is termed as ‘glass border’ preventing mobility across borders
(Linehan and Walsh, 1999a). The ‘glass border’ strengthens the ‘glass ceiling’ and vice versa (Haines and Saba,
1999), putting impediments in their career growth.
Westwood and Leung point out the two ways organizations have while going for filling expat positions; one by
advertising all the vacancies and testing the candidates formally, and another by informal targeting. However
organizations do not mostly go for open and announced open expatriate positions but rather an informal
targeting of candidates takes place (Westwood and Leung, 1992). There are closed circles from which referrals
come and the candidate pool is formed from which women are excluded, whether directly or indirectly, mostly
on the misconceived assumption about their unwillingness to take up international assignments because of their
working husbands and children (Chan and Smith, 2000). Also, women are not a part of these networks; they
cannot assess these networks well and are ignorant of such opportunities, which causes their exclusion from
being considered to be sent on expatriate assignments (Westwood and Leung, 1994). Women not only lag
behind in assessing networks within the organizations but also in finding mentors that could help them devise
growth plans for their international career (Linehan and Walsh, 1999b). Remaining professionally isolated, they
fail to fetch international career opportunities (Shortland, 2011). One important finding here is that women need
more mentors to enhance their self confidence, their assessment of professional networks, identifying
promotional prospects and career advancements (Linehan and Walsh, 1999c).
Four factors are very important and uniquely associated in the case of female expatriation and subsequently
their adjustment, namely, creating career options for their male trailing spouse; difficulty in striking a balance
between their career and personal relationships; child-care and raising and lastly explicit and implicit biases
associated with international assignments and women and hence the negative impact of gender bias on the
international career of female managers. There is seen a clear bias against selecting female managers for
international assignments (Insch et al, 2008; Verma et al., 2006; Kollinger, 2005). Researchers have identified
gender stereotyping as the most emphatic theoretical explanation for the under-represented involvement of
females in international assignments (Shortland, 2009). Female expatriates are seen holding lower positions
than their male counterparts despite serving the same tenure in the organisation and similar and equal
experience in international assignments (Selmer and Leung, 2003b). Also, while in the case of male managers,
international assignments create a fast track career growth plan; in case of female managers any such fast track
growth is not found to occur. This causes the females expats to see expatriation assignments as lesser successful
career paths since they are not at all or lesser often able to meet their career goals in comparison to their male
counterparts (Selmer and Leung, 2002). Men tend to hold top positions in organizations and maintain a much
closed network and a circle of individuals to be trusted with international assignments (Schein, 1973). Women
are deprived of such opportunities that require them to move laterally across borders into international divisions
(Thal and Cateora, 1979). Since its very important to have some level of international experience to be
promoted to strategic levels in an organization, women’s chances get limited as far as opportunities to reach the
top levels in management are concerned (Edstrom and Galbraith, 1977).
Nancy J. Adler provides one explanation to the paucity of female expatriates based on the principle of supply
and demand of female labour. Women were assumed to restrict themselves from taking up or coming forward
to apply for international assignments. The females that do volunteer for such opportunities are termed
42
unsuitable or turned down by employers or rejected by host country officials on account of negative perceptions
regarding deployment of female expatiates (J. Adler, 1979). We see a consistency in the factors limiting women
from taking up international assignments over the decades, the main being, the choices made by women, their
familial concerns, their perception and a lack of respect and confidence shown by the host country and
employers. This prejudice of foreigners against female expats, the loneliness to be dealt with, difficulties to be
faced and most importantly their trailing male spouses in case of married women and children’s education in
case of women with children hinder their international mobility (Izraeli et al, 1980). In dual career families it is
even more difficult to make such decisions (Luthans, Chew and Li, 2006). Getting the male spouse to trail
behind a female expat to look for a career there in the host country puts restrictions on the female concerned
(Hardill and Donald, 1998). Married women, especially those with children find great difficulties showing
international mobility (Linehan, 2000). Therefore, they take up fewer such assignments than those who are
unmarried or have non-working partners (Stroh et al, 2000a, 2000b) while, on the contrary, refusal of relocation
by a male manager due to an impact on the female spouse’s career is seen as ‘career suicide’ (Linehan and
Scullion, 2001a).
Women do want expatriate careers but it doesn’t always translate into reality since it comes second to family
responsibility (Akim, 2000; Shortland, 2011). The intention of male partner here plays a very important role in
deciding if the female will take up the international opportunity or not (Makela, Kansala and Suutari, 2001;
Haines and Saba, 2008, Brett and Stroh, 1995). Acceptance as well as success of such assignments depends
largely on spousal support and happiness and their willingness to adjust in the host-country (Tung, 1982).
Marriage is seen as one reason that increases the risk of failure for such assignments for female expats
(Shortland, 2011). Its right to say that unmarried women exhibit greater mobility with regards to international
assignments as for married women prioritising their marriage and familial responsibilities comes first. Care of
elders and education of children plays a significant impediment hindering a successful international career
(Tzeng, 2006; Zheo et al., 2006, Tharenou, 2003).
SOCIAL INTERACTION AND CULTURE AFFECTING FEMALE EXPATRIATION
Social support and interaction create a sense of belongingness and connection; develop feelings of security and
self-esteem hence enhancing self-confidence of female expatriates. Organizations need to encourage such
opportunities for them to prevent negative feelings like loneliness and isolation from creeping up, thereby,
shooting up chances of success of female expat assignments (Caliguiri and Lazarova, 2002). Women are found
to be less adjusted cross-culturally than men in nations where there is a lesser participation from female
workforce and lesser number of women managers (Caliguiri and Tung, 1999).
Female expats undergo a constant pressure to build relationships to reduce social isolation especially in
countries and cultures where women are not found in higher ranks in the hierarchies (Taylor and Napier, 2001).
They find difficulties gelling in the expatriate networks as they are mostly male dominated (Lineham and
Walsh, 2000b). A research conducted on the experiences of American women sent to Turkey revealed the
difficulties faced on this front; the discomfort felt by juniors in interacting and socializing with higher rank
officials while local married women viewed them as a threat because of their ‘foreigner and single’ status
(Taylor and Napier, 2001; Napier and Taylor, 2002). Social support, social interaction and building a
relationship is very crucial for cross cultural expatriate adjustment (Adelman, 1988; Aycan, 1997a, 1997b;
Black, 1990; Black et al. 1991; Briody and Chrisman, 1991; Church, 1982; Feldman and Bolino, 1999; Ward
and Chang, 1997). In case of females it is even more so. Females lacking family support (Caliguiri et al., 1999)
and not very interactive socially and those who find it difficult to make friends adjust lesser and slower on
international assignments (Westwood and Leung, 1994).
Caliguiri and Lazarova, 2002, proposed a model to explain how female expatriates develop relationships and as
a result adjust cross-culturally. This model threw Social interaction and social support is very important in
cross-cultural adjustment, both in terms of work adjustment as well as interaction adjustment (Caliguiri and
Lazarova, 2002). Social support and interaction helps to co-ordinate feelings and psychological processes and
renders a stable state of mind to develop recognition and connection in the host country (Fontaine 1986; Rook,
1984) which helps in expatriates’ adjustment and reduces stress and uncertainty during the assignment (Aycan
1997a, 1997b; Black et al. 1990).
There are sometimes societal and cultural norms that limit the chances of female expatriates and opportunities
of social interaction (Westwood and Leung, 1994). For example in case of social interaction of single expatriate
women, which might carry a negative connotation in certain countries (Caliguiri et al., 1999). This leaves
female expats in a fixed state and feelings of isolation and loneliness are reported hence affecting the outcomes
43
of their assignments (Napier and Taylor, 1995). On occasions female expats are known to have bought dogs for
companionship (Caliguiri et al., 1999).
The challenges are not for single women alone. Caliguiri and Lazarova suggest that culturally, even married
women face many challenges like the social stigma associated with having cross-gender relationships. There are
problems due to hierarchical set up in organizational relations e.g. befriending a senior manager irrespective of
gender has a discomfort associated with it. Also there prevails a negative ‘foreigner’ status among the host
country nationals towards the expatriates leaving them socially challenged (Caliguiri and Lazarova, 2002).
Fig: Social interaction and social support as antecedents to female expatriates' cross-cultural adjustment as
given by Caliguiri and Lazarova(2002)
Organizations should create and encourage opportunities for such social interactions. For example, now that we
know how important contact of expatriates with host-national colleagues is, organizations should train the host-
country nationals to positively influence their perceptions of the female expatriate. This training may enhance
the cultural awareness among host-country nationals and confront their biases and stereotypes (Aycan, 1997a;
Florkowski and Fogel, 1999; Vance and Paik, 1995). Such training will also facilitate the interaction and
socialization between host nationals and female expatriates and increase the social support for them. It is
particularly important in case of nations where strong biases against women workforce (Aycan, 1997a, 1997b;
Caligiuri and Cascio, 1998).
INSTITUTIONAL EFFECTS ON FEMALE EXPATRIATION
Employees discriminate between male and female employees when it comes to choosing the right candidates
for global assignments. This is because it is seen as an established fact that sending male members of an
organization on international assignments involves lower costs as compared to expatriating their female
counterparts and to establish women as more suitable for the same purpose will involve incurring higher costs
(Becker, 2001). So organizations have chosen to live on with the on-going bias. However, there are employers
that have well in time let go off the bias and have been able to reduce costs and increase returns on international
assignments (Anker, 2001).
Labour markets see a segregation of jobs on the basis of gender structures (Blackburn and Jarman, 2005a;
Siltanen, Jarman and Blackburn, 1995). In case of expatriates, horizontal
gender segregation is found which means smaller the percentage of women in a profession, smaller will be the
number of females reaching the top positions in the hierarchy (Blackburn and Jarman, 2005b; Wirth, 2001).
This is the reason why the chances of women holding top positions in management in male dominated sectors is
minuscule for example women’s presence as heads of multinationals (Klenke, 1999).
DISCUSSION
The above study reveals how female expatriation needs a lot of attention in all the stages right from selection of
candidates to their relocation in the host-country and further to repatriation if any meaningful change is to be
44
brought about and to increase gender diversity in expatriation (Susan Shortland, 2011). The most important
factor affecting female expatriation and resulting in the paucity of females on global assignments is the gender
bias and stereotyping starting right from the home-country to the host country. This is the first and foremost
issue that needs to be addressed in order to be able to send the right candidates on the bases of merit and not
network based targeting. Organizations need to declare openly the vacancies and carry out formal tests to
choose from the unbiased candidate pool. In the hot-country, there has to be encouraged an open and more
flexible attitude of respect and acceptance for women expats being deployed. This has to be the starting point if
some meaningful change is needed to be brought about. Having the requisite international experience will grant
the women in organizations the required qualification for top management level positions hence breaking the
glass-border and glass-ceiling.
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47
FINANCIAL INCLUSION THROUGH BUSINESS CORRESPONDENT MODEL-OPPORTUNITIES

AND OPERATIONAL ISSUES OF CUSTOMER SERVICE PROVIDERS
Dr. Amal Kumar Agarwala1 and Lonibha Deka2

Associate Professor1, Department Of Statistics, Arya Vidyapeeth College Guwahati
Research Scholar2, Department of Commerce, Gauhati University, Guwahati
ABSTRACT
Pace of global development has made achieving advancement of every section of the society imperative. While
doing so the focus now has shifted to the rural segment which remains excluded from the formal source of
financial service. India, where a majority part resides in rural areas is still not aware of financial services
provided and including these segments within the ambit of financial services is known as financial inclusion.
The Reserve Bank permitted banks to utilize the services of intermediaries in providing banking services
through the use of Business Correspondents (BC), also known as branchless banking. The service providers or
the Bank Mitra operating at the Customer Service Point (CSP) acts as the pillar of the Business Correspondent
model. The service providers are the one which act as the link between the bank and the customers, since it is
physically not viable to set a bank branch in every area. Inspite of the importance of CSP, there are some
operational issues which act as hurdle in the success of the BC Model. This paper has focused on the
operational issues faced by the service providers and conducted a study in the Kamrup district of Assam.
Keywords: Financial Services, Financial Inclusion, Business Correspondent, Branchless banking, Customer
Service Point.
1. INTRODUCTION
With the increasing pace of global development it has become imperative to achieve advancement of every
section of the society. While doing so the focus now has shifted to that section of society which remains
excluded from the formal source of financial service i.e. the rural segment. Lack of access to financial services
in developing countries for a section of the society is considered as a serious threat to the overall progress of the
economy. If we look into the figures of households availing banking service as per the Census 2011, 58.69%
households in India and 45.36% in Kamrup district have availed banking services, which shows the need to
amplify the reach of banking services.
The process of including these segments within the ambit of financial services is known as financial inclusion.
Towards broader financial inclusion the access to a transaction account is a vital step since it allows people to
store money, send and receive payments. The focus of the World Bank Group’s Universal Financial Access
2020 initiative is to ensure that people worldwide can have access to a transaction account since it can be
considered as a gateway to other financial services15.
Reserve Bank of India (RBI) defines financial inclusion as “a process of ensuring access to appropriate financial
products and services needed by all sections of the society in general and vulnerable groups such as weaker
sections and low income groups in particular, at an affordable cost in a fair and transparent manner by regulated
mainstream institutional players”.
Banks play a vital role in the process of financial inclusion. Banks ensured achievement of financial inclusion
through various services such as opening of no-frills accounts, relaxation on know-your-customer norms,
opening of branches in unbanked rural centers, GCC and KCC, engaging business correspondents. In 2004
Khan Commission was set up by the RBI in order to look into financial inclusion and accordingly as per the
recommendations in January 2006, the Reserve Bank permitted banks to utilize the services of intermediaries in
providing banking services.
2. THE BUSINESS CORRESPONDENT MODEL
With the view to promote financial inclusion amongst the unbanked, a set of guidelines were developed by the
RBI to formalize branchless banking and extending financial services specially in geographically detached
areas, which they called the Business Correspondent (BC) model, introduced in January 2006. The Reserve
Bank permitted commercial banks to make use of the services of NGOs, SHGs, Micro-finance Institutions,
Societies registered under Mutually Aided Cooperative Societies Acts or the Cooperative Societies Acts of
States, Post Offices, Retired bank employees, ex-servicemen and retired government employees as
intermediaries to act as Business Correspondent for providing financial and banking services.
15
https://www.worldbank.org/en/topic/financialinclusion/overview
48
Business Correspondents (BC) are the retail agents engaged by banks for providing banking services at
locations other than a bank branch/ATM. The BC arrangement essentially means enrolling customers and
enabling the transactions of the customers at the Customer Service Points (CSPs) on their behalf commonly
known as branchless banking. BC enable a bank to expand its outreach and offer limited range of banking
services at low cost, as setting up a branch may not be viable in all cases. Without an inclusive financial system,
poor individuals and small enterprises have to rely on their own limited savings and earnings to invest in their
education and entrepreneurship, to take advantage of growth opportunities 16. Certain segments of the population
have to resort to high cost informal sources such as moneylenders since they experience difficulties in obtaining
appropriate access to financial services. The BC model has been considered as the most important initiative of
the Reserve Bank.
State bank of India has been a front runner in introducing BC model in Assam. With 90.62% of rural population
(as per 2011 census) in Kamrup district it is the prime necessity to link this section to the main stream banking
services.
3. CUSTOMER SERVICE POINT
Customer Service Point (CSP) acts as the pillar of the Business Correspondent model. The service providers are
the one which act as the link between the bank and the customers. The services provided through CSP includes
opening of saving a/c, deposit, withdrawal, availing schemes of government (including the Pradhan Mantri Jan
Dhan Yojna, Pradhan Mantri Suraksha Bima Yojna, Pradhan Mantri Jeevan Jyoti Bima Yojna, Atal Pension
Yojna). CSPs are entrusted with a unique CSP code by the head office which marks their identity and are linked
with the bank branch on behalf of which banking activities will be provided. The CSP server used for
functioning is connected to the core banking server of the bank. The CSP outlet undertakes banking activity
through any one of the various technologies adopted by the bank such as Kiosk Banking, Mobile Rural Banking
solution, Card based technology, Cell phone messaging technology. Out of the mentioned technologies the most
widely used technique at present is Kiosk banking. In Kiosk banking, the CSP can enroll customers and open
accounts using a Finger Print capturing device supplied by the Bank and using the internet connectivity.
The various role to be performed by the CSP’s are:
 Verification of applicants details and identification of customer
 Forwarding of completed account opening forms with KYC documents to Link Branch.
 Provide permitted banking services
 Maintain records and registers
 Ensure uniform branding of outlets
 Contact customers to fund their Zero balance accounts
 Issue system generated receipts
The contribution of the BC model can be understood by the amount of accounts operating under the model.
Table 1.1 shows the total number of Basic Saving Bank Deposit Account through branch and the BC model.
Table 1.1: Total number of BSBDA (in millions)
Particulars 2010 2011 2012 2013 2014 2015 2016
BSBDA through branches (No. in million) 60 73 81 101 126 210.3 238
BSBDA through BCs (No. in million) 13 32 57 81 116.9 187.8 231
BSBDA Total (in million) 73 105 139 182 243 398.1 469
(Source: Statistical table relating to banks in India, RBI)
From the table it is observed that the number of accounts under the BC model has made a significant increase
from 13 million in 2010 to 231 million in 2016. A major increase is noticed in the year 2014, bringing the
number of accounts from 81 million in 2013 to 116.9 million in 2014. If we have a look in the year 2016, we
can observe almost equal contribution of branch and BC model in the total number of accounts. We can
rightfully assume that the BC model has the scope of further achievement.
16
RBI Publications, Financial Inclusion, Sep 04, 2008
49
Consequences of financial exclusion can be complicated day-to-day cash flow management and limits the
option for providing people in the unorganized sector security in their old age (Rakesh Mohan, 2006).
Broadening the availability of financial services to the financially excluded population of the country is the
purpose of financial inclusion in order to open its development prospective and striving towards inclusive
growth of nation by making financing available to the poor and needful (Pradnya.P.Meshram, Prajakta
Yawalkar,2016). The enhancement of economic opportunities through banking inclusion has an indirect effect
upon the attainment of education and health opportunities and this in turn induces the level of human
development (Dr. Rajeshwari M. Shettar, 2016). Financial inclusion broadens the resource base of the financial
system by developing a culture of savings among large segment of rural population and plays its own role in the
process of economic development (Dr. Sudhinder Singh Chowhan, Dr. J.C. Pande, 2014). Dr. Raghuram Rajan,
Ex-Governor, Reserve Bank of India mentioned information, incentives and transaction costs as hindrance in
the way of inclusion of rural people. People in rural areas mostly resort to informal economic activity due to
which they sometimes lack documentation which stands as an information barrier in offering financial products
by the banker. The uncertainty in the mind of lender with regard to repayment of loan from the borrower makes
the lender not to offer any loan which falls as hindrance under incentive. Lastly the transactions by poor section
usually are small in size which makes the fixed cost relatively high. So it can be assumed that any banker would
focus on large size transaction instead of small (Dr. Rajan, 2016)
5. OBJECTIVE OF THE RESEARCH
 To give an overview of the Business Correspondent model.
 To study the operational issues faced by the Service Providers.
This paper is mainly descriptive in nature. Boko development block and Chaygaon development block of
Kamrup district of Assam has been selected for the purpose of this study. Primary data has been collected
through schedule from 30 randomly selected CSPs operating under the Business Correspondent Company
appointed by State Bank of India. Secondary data has also been collected from bank website, E-Journals,
reports and published journals. The selected CSP of SBI in Kamrup district operates under the following BC
Company i.e. Drishtee, Zero Mass Foundation, NICT Technologies Pvt Ltd, Arth-Rural Connect Services Pvt
Ltd.
7. ANALYSIS OF THE DATA
An analysis of the data collected through primary study is presented below.
7.1 Table 1.2 displays some of the aspects of operation of CSPs under the BC Model.
Table-1.2: Aspects of CSP operation
Parameters Yes % No %
i. Engagement in other service 22 73 08 27
ii. Training provided 27 90 03 10
iii. Satisfaction with commission pattern 02 7 28 93
iv. Benefit from grant of loan through CSP 30 100 0 0
(Source: field survey)
The following interpretations can be made from the table
a) 73% of CSP is engaged in other occupation apart from serving at CSP. Within this segment, some of the
CSP’s have undertaken this service as a side business in their existing shop/store whereas a majority of them
have ventured in other services. 27% are solely active as CSP.
b) Training of the CSP is essential to operate the BC business efficiently. The above table illustrate that 90% of
the respondent CSP were provided training whereas 10% of them did not go through any such training.
Further enquiry showed that majority of the respondents felt the requirement for further training particularly
in computer operation.
c) 93% of the CSP are not satisfied with the commission and consider that the commission structure is not
adequately designed to serve the purpose of their work. They stated that the amount of commission paid is
low and the segregation of commission received is not presented clearly.
50
d) Since the grant of loan is still not available through the CSP, the sanction of same would prove beneficial for
the customers, as agreed by all the respondents since customers would be able to avail the services of micro
credit from the CSP instead of resorting to other sources.
7.2 Table 1.3 displays the various services provided by the CSP in the study area.
Table-1.3: Services provided
Services Respondents %
Deposits 30 100
Withdrawal 30 100
Micro Credit Nil Nil
Insurance 27 90
Others 15 50
Table 1.3 shows that service commonly provided by all the CSP’s is deposits and withdrawal of money.
Insurance service is gaining momentum with Mantri Suraksha Bima Yojana. Other services provided are SBI
account opening (through Pradhan Mantri Jan Dhan Yojana), pension (through Atal Pension Yojana), recurring
deposit and transfer of money. Bank is yet to approve the grant of micro credit through CSP, therefore such
service is not offered through the model.
7.3 Table 1.4 shows various factors which stand as obstacle towards better performance of CSP.
Table-1.4: Problem faced by CSP
Factors Respondents %
Lack of coordination with branches 19 63
Lack of coordination with BC 25 83
Staff shortage at the CSP 07 23
Lack of training 12 40
Lack of customers knowledge 08 27
Technical problem with device 26 87
Following are the interpretations derived from table 1.4:
a) It is evident from the above table that 87% of the CSP faced the problem of network breakdown due to
which they were unable to process customer’s requirements within reasonable duration resulting to loss in
business.
b) Lack of coordination with BC as well as the link branches acts as obstacle in the service of CSP. The service
provider urged that the members from the BC Company should make frequent visits at the service points in
order to have a better understanding of the problems faced by the CSP’s. The time taken by the link branch
for processing the work of CSP is sometimes more due to which the customers have to face inconvenience.
In some of the centre the rush of customers are more to be handled by one service provider, due to which
they had to seek help from other people. 40% CSP considered lack of training as an obstacle since they had
difficulty in operating computers.
c) Service providers informed that for some of the customers the motive behind having an account is to
withdraw the subsidy or benefits credited to their account. There are instances where the customer
withdraws the entire amount making their balance nil. One of the reasons behind accounts remaining
inoperative may be the fact that customers are still unaware of the benefits of having a bank account.
8. SUMMARY OF FINDINGS
93% of CSP informed that the amount of commission received is not viable due to which some of the service
provider had to resort to other service. Since the services provided through CSP is for the low income group the
service provider is unable to consider the service as profit making. The grant of micro credit through the CSP
would prove beneficial for the rural people as opinioned by 100% CSP. Other operational issues faced by the
CSP are lack of better coordination between the BC Company and the link branch. Technical trouble with
server remains an obstacle towards firm operation as per 87% of the CSP. The lack of customer’s knowledge
can be overcome through more workshops and providing a better insight into the financial services so that the
customers are well aware of the benefits of operating an account and they can demand for better products. The
51
CSP’s in the study area are keen towards providing better quality service and considered the service as
opportunity in uplifting the weaker section of the society and providing a channelized way of financial service.
9. CONCLUSION
The BC model can be viewed as a source of employment since 52,340 service outlets has been set up under SBI
till 31.3.2017 as per the Sustainability Report 2016-2017, SBI. The communication of BC Company, link
branch and CSP should be improved so that better plans can be made for a greater reach of the BC Model. The
BC model has been a boon for the financial inclusion drive but there are instance where people are still not
aware of the model. The bank and BC Company should make reasonable effort towards promoting this model
in the utmost rural areas in order to cover a huge customer base. One of the important concerns of the rural
people is availing credit. Banks can make improvements in the model by allowing the CSPs to grant loan within
a specific limit which can be kept under the scrutiny of the link branch. Since the number of CSPs enrolled in
the BC Model is on rise, it can be interpreted that this structure of branchless banking has ample scope in
achieving new heights in financial inclusion through the operation of the Customer Service Providers.
REFERENCE
 http://www.censusindia.gov.in
 https://www.worldbank.org/en/topic/financialinclusion/overview
 RBI Publications, Financial Inclusion, Sep 04, 2008
 Sharma, Dr. Anupama. and Kukreja, Ms. Sumita. (2013) An Analytical Study: Relevance of Financial
Inclusion For Developing Nations, Research Inventy: International Journal Of Engineering And Science,
Vol.2, Issue 6, March.
 Chakrabarti, Dr. Manas, The Role Of Regional Rural Banks (Rrbs) In Financial Inclusion: An Empirical
Study On West Bengal State In India, Abhinav, National Monthly Refereed Journal Of Research In
Commerce & Management, Vol 2, Issue 8.
 Rath Binit, Ramji Minakshi and Kobishyn Alexandra (2009), Business Correspondent Model: A
Preliminary Exploration Report, Microfinance India Summit, October.
 Raman Atul, (2012) Financial Inclusion and Growth of Indian Banking System, IOSR Journal of Business
and Management, Volume 1, Issue 3, May-June.
 Mohan, Dr. Rakesh (2006), Economic growth, financial deepening and financial inclusion, Annual
Bankers' Conference, Hyderabad, 3 November.
 Rakshitha, S. (2015). Role of Banks in achieving Financial Inclusion. Micro Finance and Inclusive
Growth, p. 96.
 Meshram, Pradnya.P. and Yawalkar, Prajakta (2016), A Study on Financial Inclusion Initiation by State Bank of
India, SS International Journal Of Multidisciplinary Research, , Volume 2 Issue 1 2016, E-ISSN: 2395-
7964.
 Shettar Dr. Rajeshwari M. (2016), Pradhan Mantri Jan Dhan Yojana: Issues and Challenges, IOSR
Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X, p-ISSN: 2319-7668, Volume 18,
Issue 2 .Ver. IV, PP 17-24 Feb.
 Chowhan Dr. Sudhinder Singh, Pande Dr. J.C.( 2014), Pradhan Mantri Jan Dhan Yojana: A Giant Leap
Towards Financial Inclusion, Vol. 1 Issue 4, International Journal of Research in Management & Business
Studies, Oct – Dec.
 Rajan, Dr. Raghuram (2016), National Seminar on Equity, Access, and Inclusion - Transforming Rural
India through Financial Inclusion, National Institute of Rural Development and Panchayat Raj,
Hyderabad, July 18.
 Duvvuri Subbarao (2009), Financial inclusion – challenges and opportunities, Governor of the Reserve
Bank of India, at the Bankers’ Club, Kolkata, 9 December.
 http://www.sbi.co.in
 https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=2718&Mode=0
52
IMPACT OF CAPITAL STRUCTURE ON PROFITABILITY AND MARKET VALUE: STUDY OF

BSE S&P 100 LISTED FIRMS
Dr. Priti Sharma

Assistant Professor, Department of Commerce, Maharshi Dayanand University, Rohtak
ABSTRACT
Profitability is matter of great concern for all the stakeholders in the firm and theory reveals that it is the
leverage decision that has significant impact on profitability as well market value of a firm. Therefore, the
purpose of this study is to assess the relationship between capital structure and profitability and market value
of BSE S&P 100 listed firms capital and also to investigate the extent of impact of capital structure on the
profitability and market value.
In this analytical study data for the period of seven years (from 2011 to 2017) has been collected from CMIE
PROWESS database and the same has been using descriptive statistics, Pearson correlation and multiple
regression analyses. Findings of the present study show that leverage has positive significant upon return on
assets and leverage has no any significant impact on market value. The findings of the present study will
definitely contribute the existing literature as well provide a sound base for decision making to the firms under
study concomitant to capital structure decisions.
Keywords: BSE 100, Financial Leverage, Market value, ROA.
1. INTRODUCTION
Firm performance is always a matter of concern for every business concern, and there are so many variables
(qualitative as well quantitative both) which have direct and indirect effect on the performance of the business
firm e.g. cost of capital, capital structure, size of the firm, business risk etc. And it is the capital structure
decisions which contribute in firm performance. Initially, Modigiani and Miller (1958) there is no significant
relation between CS and firm performance but later in the year 1963 explained that value of the firm increases
with the higher debt ratio.
Literature too, up to some extent depicts that capital structure decisions do impact significantly the firm value.
Therefore, in the present study, author investigated empirically the impact of capital structure on firm
performance pertaining Bombay Stock Exchange listed 100 firms (from 2011 to 2017). This paper has three
sections, first section is about the literature review pertaining to the relationship between CS and firm
performance, third section is about objectives and methodology, in fourth section, analysis, results and
discussion of results and lastly the conclusions and future research.
In the year 2004, Baur in his study pertaining to Czech Republic found that debt to equity ratio is negatively
correlated with profitability and tangibility but positively correlated size of the firm. Further, in a study, Chen
and Strange (2005) conducted study Chinese listed companies and found that profitability is negatively
correlated with debt ratio while size of firm, risk and age are positively correlated with debt ratio. Huang and
Song (2006) found no negative correlations between leverage and the performance of the Chinese firms. Zeitun
and Tian (2007), investigated the impact of capital structure on financial performance of companies from
Jordan. And in their study, they concluded that CS has negative contribution in the financial performance of
firms.
Onaolapo and Kajola (2010) also checked the relationship between CS and financial performance pertaining to
30 non –financial Nigerian firms and result of OLS regression shows that CS is negatively related to financial
performance. In another study of Ong and Teh (2011), they explored the relationship between capital structure
and corporate performance of Malaysian firms and findings shows that there is significant relationship between
capital structure and corporate performance.
Saeedi and Mahmoodi (2011) checked the relation between CS and financial performance of Iranian companies
and found that ROA has negative significant relationship with capital structure. Salim and Yadav (2012) in their
study pertaining to Malaysian listed firms found that short term debt, long term debt and total debt are negative
correlated with return on assets, return on equity and earnings per share. But they found positive relationship
between market value and short term debt and long term debt. Muhammad, et. al. (2014), too found significant
negative correlation among CS and firm performance of cement companies listed on Karachi Stock Exchange.
Akeem, et. al. (2014) conducted a study manufacturing companies of Nigeria in order to ascertain the effects of
capital structure on firm’s performance and findings of their study shows that total debt and debt to equity ratio
53
have negative significant relationship with firm performance. And they concluded that firm should use more of
equity component and less of debt component in their CS in order to enhance the firm performance.
In another study, Banerjee and De (2015) investigated the impact of CS on financial performance of BSE 500
firms in which return on assets as dependent and business risk, size, sales, growth rate, leverage, interest
coverage ratio, tangibility and non-debt tax shield as independent variables. Findings of the study shows that in
pre-recession period sales (log of sales) and interest coverage ratio has positive significant relationship with
profitability and leverage and size has negative impact. In post recession period, only log of sales has posive
impact and size, leverage and interest coverage ratio has significant negative impact upon profitability. Findings
shows that rest of the independent variables have no significant relationship with profitability. IsolaWakeel and
AkanniLateef (2015) in their study found significant effect of capital structure on firm performance. Further, in
a study by Vatavu, (2015) found that it is the shareholder’s equity that is having positive impact on the
performance indicators of the Romanian firms and “total debt” and “short-term debt” is having negative relation
with “return on assets” and “return on equity”. In the year 2016, Nassar also investigated the impact of CS on
financial performance of 136 industrial companies listed on Istanbul Stock Exchange, findings of his study
shows that capital structure and firm performance have negative significant relationship.
2.1 Research Gap and Theoretical framework
Review of literature has provided mixed of opinion pertaining to the relation between “CS” and “firm
performance”. Some studies are showing significant positive relation between the CS but some studies are
showing no significant positive relation between capital structure and firm performance. In result, we cannot
derive any inferences from the literature available. Hence, researcher has made an attempt to empirically
investigate the relationship between the capital structure and firm performance of BSE 100 firms.
About BSE 100: This broad based index was launched in the year 1989 and uses 1983-84 as the base year. This
index is having 100 scrips.
3. METHODOLOGY
In this analytical research pertaining to capital structure and firm value BSE S&P 100 firms, data has been
collected form “Centre for Monitoring Indian Economy PROWESS” database for a period of 7 years from 2011
to 2017. A total of 98 firms were studied using descriptive statistics, Pearson correlation and multiple regression
analysis. In order to check the problem of multicollinearity among independent and control variables,
Variance Inflation Factor (VIF) has been used by the researcher.
Variables used in the study:
Dependent Variable: 1. Return on Assets
2. M/B ratio
Independent Variables: 1. Leverage (Debt to Equity Ratio)
Control Variables: 1. Tangibility (Net fixed assets/Total assets)
2. Size of the firm_1 (log of Total sales)
3. Size of the firm_2 (log of Total assets)
Regression Model used:
1. ROA= α + β1 (leverage) + β2 (Tangibility) + β3(Size of the firm 1) + β4 (size of the firm_2) + €
2. M/B ratio= α + β1 (leverage) + β2 (Tangibility) + β3(Size of the firm 1) + β4 (size of the firm_2) + €
3. RESULT AND ANALYSIS
Analysis of the present study starts with checking the multi-collinearity problem among the independent
variables namely: leverage, Tangibility, Size of the firm_1 (log of total sales) and Size of the firm_2 (log of
total assets). Multi-collinearity problem means correlation between various independent variables used in the
study. In table no. 1, all the values of VIF are smaller than the 5 which infers that problem of multi-collinearity
is not there among independent variables.
54
Table-1: Collinearity Diagnostic (through VIF)

Coefficientsa
Model Collinearity Statistics
Tolerance VIF
Leverage .321 3.117
Tangibility .776 1.288
size_1 .390 2.567
sales_1 .256 3.902
a. Dependent Variable: ROA
Descriptive Analysis: In Table 2 the descriptive statistics pertaining to the variables under the present study e.g.
ROA, leverage, Tangibility, Size of the firm_1 (log of total sales) and Size of the firm_2 (log of total assets).
Mean and standard deviation have been included to show the descriptive statistics.
Table No. 2 Descriptive Statistics
Mean Std. Deviation N
ROA 9.2373 9.11752 686
Leverage .9721 1.79758 686
Tangibility .2027 .16751 686
size_1 5.2886 .62353 686
sales_1 4.9426 .89906 581
Correlation Analysis:The below table No. 3 shows that result of Pearson correlation among the “dependent
variables” (Return on assets and M/B ratio) and “Independent variables” (leverage) and control variables
namely, {(Tangibility, Size of the firm_1 (log of total sales) and Size of the firm_2 (log of total assets)}.
Table No-3: Correlations
ROA MV_BV Leverage Tangibility size_1 sales_1
ROA Pearson 1
Correlation
MV_BV Pearson -.079 1
Correlation
Leverage Pearson -.352** -.025 1
Correlation
Tangibility Pearson .055 -.027 -.315** 1
Correlation
size_1 Pearson -.368** .043 .268** -.121** 1
Correlation
sales_1 Pearson .014 .018 -.551** .406** .415** 1
Correlation
**. Correlation is significant at the 0.01 level (2-tailed).
There is significant positive correlation between ROA and leverage, and Size of the firm_2 (log of total assets)
at 0.01 level of significance which means all the independent variables are contributes positively in the financial
performance. And M/B ratio has no significant relationship with any of the independent variables.
Multiple Regression Analysis
Table No-4: Regression Analysis pertaining Profitability
Model-1: ROA= α + β1 (leverage) + β2 (Tangibility) + β3(Size of the firm 1) + β4 (size of the firm_2) + €
Independent Variable Coefficient t-statistic
Intercept 8.028*
Leverage -.295 -4.357*
Tangibility -.155 -3.554*
Size_1 -.145 -2.361*
Size_2 -.024 -.322
Notes: *Shows α= 0.05 level is significant, Adjusted R2 = .121 (changed Adj. R2= .147), F-Value = 25.9, p-
value = <0.0001
55
Table No-5: Regression Analysis pertaining M/B ratio

Model-2: ROA= α + β1 (leverage) + β2 (Tangibility) + β3(Size of the firm 1) + β4 (size of the
firm_2) + €
IDV Coefficient t-statistic
Intercept -.612
Leverage -.015 -.165
Tangibility -.068 -1.326
Size_1 .060 .748
Size_2 .013 .133
2 2
Notes: * Shows α= 0.05 level is significant, Adjusted R = .121 (changed Adj. R = .147), F-Value =
.766, p-value = <0.0001
In the above table No. 4 and 5, results pertaining to the regression analysis have been presented, In the table no.
4, results are significant as Adjusted R2 = .121.in the first model (pertaining to control variable) and changed
statistics of Adjusted R2 =. 147 (pertaining to leverage) are showing significant P-Values. This infers that,
leverage does have some impact upon financial performance (return on assets) of the firms under the study and
14.7% of the variations in the ROA is because of leverage. But results of second model are not showing any
significant impact. All beta coefficients are showing no significant coefficient value which infers that leverage
has no impact upon MV of the firms..
5. DISCUSSION
In the present study, relationship between capital structure (leverage) and firm performance have been
investigated using BSE 100 firms. Correlations analysis findings depicts that all the leverage has positive
significant relationship with financial performance and in case of market to book value, there is no such any
relationship exists between MB ratio and leverage.
Findings of the regression analysis show that 14.7 percent of variations in the return on assets are because of
leverage and which is significant but results are quite contradictory in model 2.
The major findings of this study are quite similar with the previous researches in which there exists a positive
relation between CS and financial performance like in the study of Baur (2004), Ong and Teh (2011), Salim and
Yadav (2012), Banerjee and De (2015), IsolaWakeel and AkanniLateef (2015), and Vatavu, (2015).
No doubt, majority of studies {Modigiani and Miller (1958), Chen and Strange (2005), Huang and Song (2006),
Zeitun and Tian (2007), Onaolapo and Kajola (2010), Saeedi and Mahmoodi (2011) Salim and Yadav (2012),
Muhammad, et. al. (2014), Akeem, et. al. (2014) and Nassar (2016)} in the literature are showing negative
relationship between capital structure and financial performance.
In context of market value and capital structure, findings of the present of the study showing no significant
relationship as well impact of CS on MV but, in literature a study by Salim and Yadav (2012) shows positive
relation between market value and STD and LTD.
And in the model 1, the beta coefficient value of leverage, tangibility and Size of the firm_1 (log of total sales)
is quite good except size of the firm_2 (log of total assets). But in model 2, beta coefficient is showing very bad
result in context of all independent variables. Findings of this study clearly confirm that decisions pertaining CS
do have on impact financial performance which infers that increasing proportion of leverage will increase
financial performance but results are contradictory in context of market value and capital structure.
6. CONCLUSIONS
In the present study pertaining to ascertaining the impact of capital structure on financial performance and
market value of BSE 100 firms. Findings clearly concludes that as the proportion of leverage increases, the
financial performance excels and scenario is quite opposite in context of market value and capital structure.
LIMITATIONS AND FUTURE DIRECTIONS
In the present study, only three control variables are taken by the researcher because of the problem of multi-
collinearity but there are certain other variables which directly or indirectly impact the firm value. So further
research can be performed using those variables e.g. business risk, interest coverage ratio,etc. And in this
present study macro level work has been done by the researcher by taking whole BSE 100 index, further study
can be done at micro level by selecting few firms.
56
REFERENCES
1. Akeem, L. B., Terer K., E., Kiyanjui, M. W., and Kayode, A. M. (2014), “Effects of capital structure on
firm’s performance: Empirical study of Manufactuing Companies in Nigeria”, Journal of Finance and
Investment Analysis, Vol. 3, No. 4, pp. 39-57.
2. Banerjee, A. and De, A. (2015), “Impact of Capital Structure Decisions on Financial Performance during
Pre- and Post-recession Period”, Management and Labour Studies, Vol. 40, No. 1 and 2, pp. 176-193.
3. Baur, P. (2004), “Determinants of capital structure: Empirical evidence of Czech Republic”, Czech Journal
of Economics and Finance, Vol. 54, pp. 2-21.
4. Chen, J., and Strange, R. (2005), “The determinants of capital structure: Evidence form Chinese listed
companies”, Economic Change and Restructuring, Vol 38, No. 1, pp. 11-35.
5. Huang, S. and Song, F. (2006), “The determinants of capital structure: evidence from China”, China
Economic Review, Vol. 17, No. 1, pp. 14-36.
6. IsolaWakeel, A. and AkanniLateef, O. (2015), “Capital structure, Competition and Firm performance:
Evidence from Nonfinancial Companies in Nigeria”, Journal of Contemporary Issues and Thought, Vol. 5,
pp. 137-154.
7. Modigiliani, F. and Miller, M. (1958), “The cost of capital, corporate finance and the theory of
investment”, The American Economic review, Vol. 48, No. 3, pp. 261-297.
8. Modigiliani, F. and Miller, M. (1963), “Coporate income taxes and cost of capital: a correction”, American
Economic Review, Vol. 53, pp. 443-453.
9. Muhammad, H., Shah, B., and Islam, Z. (2014), “The impact of Capital Structure on Firm Performance:
Evidence from Pakistan”, Journal of Industrial Distribution and Business, Vol. 5, No. 2, pp. 13-20.
10. Nassar, S. (2016), “The impact of capital structure on financial performance of the firms: Evidence from
Borsa Istanbul”, Journal of Business and Financial Affairs, Vol. 5, No. 2.
11. Onaolapo, A. A. and Kajola, S. O. (2010), “Capital structure and firm performance: Evidence from
Nigeria”, European Journal of Economics, Finance and Administrative Sciences, Vol. 25, pp. 70-81.
12. Ong, T. S. and Teh, B. H. (2011), “Capital structure and corporate performance of Malaysian construction
sector”, International Research Journal of Finance and Economics, Vol. 70, pp. 20-29.
13. Salim, M. and Yadav, R. (2012), “Capital structure and firm performance: Evidence from Malaysian Listed
Compnaies”, Procedia- Social and Behavioral Sciences, Vol. 65, pp. 156-166.
14. Vatavu, S. (2015), “The impact of capital structure on financial performance in Romanian listed
companies”, Procedia Economics and Finance, Vol. 32, pp. 1314-1322.
15. Zeitun, R. and Tian, G. G. (2007), “Capital structure and corporate performance: Evidence from Jordan”,
Australian Accounting Business and Finance Journal, Vol. 1, No. 4, pp. 40-53.
57
TRENDS AND PATTERNS OF INDIAN OUTWARD FOREIGN DIRECT INVESTMENT
Dr. Veeramani1, Mariam Jamaleh2 and Sonakshi Singh3

1
M.Phil Scholar3, Department of Rural Management, Babasaheb Bhimrao Ambedkar University (Central
ABSTRACT
During late 90’s the Indian Government adopted the open market strategy, in the course of which Indian
multinationals were encouraged to invest abroad in a global quest for dominance. Multinationals rising from
the emerging countries is cutting a larger share of the world market each passing day and Indian
multinationals are an integral part of this rising global champions group. The importance of these investments
is to substantiate India’s economic growth and enforce the country’s strategic goals; thissuggests the
significance of studying their recent trends and patterns.
Building on a firm-level monthly dataon overseas investments of Indian entities,collected from RBI over a
period of ten years, we handpicked a top ten list of India’s largest investors. We would explore their choices of
mode of entry, financingchannels and destinations.The finalresults should give us a good glimpse of Indian
OFDI characteristics on a micro-level.
Keywords: Outward FDI, Indian multinationals, entry modes, financing channels, destination
INTRODUCTION
From Birla Group setting up a textile mill in Ethiopia in 1959 to Bharti Airtel acquiring Zain Africa, the Indian
multinationals have come a long way. Recently, a group of multinationals; incorporated during the import
distribution era or well before during the colonial era, and others which were born after the year 1991under a
new liberalization scheme, which has put India on the list of the top 20 nations in terms of the size of its
outward FDI (UNCTAD, 2011).
In 2014, MNEs from developing Asia became the world’s largest investing group for the first time, accounting
for almost one third of the total 432 billion $. In South Asia, FDI outflows from India reversed the slide of
2013, increasing fivefold to $10 billion in 2014, as large Indian MNEs resumed their international expansion.
(UNCTAD, 2015).These shifts in the landscape of global economy toward Asiahave urged similar shifts in
focus of international business literature. For a long time the literature has been heavily centred on western
multinationals, theories were built by identifying their characteristics, patterns of their overseas investments and
destinations. As another type of multinationals has emerged during the 1990’s, these multinationals are different
from their counterparts in developed economies. They have different investment patterns, trends and different
destinations. This necessitated more attention to be directed to study this phenomenon.India provides a
proper field to study the outward FDI from developing countries. Indian multinationals have been expanding
abroad increasingly along with the gradual relaxation of controls on capital outflows. Outward FDI has grown
from $ 12842 million in 2006 to $ 25547 million in 2016. This outward FDI was directed to different countries
using various financing channels and entry modes.
The structure of paper is as follows: the next section introduces us the research design and data. Section 3
presents general trends and patterns in Indian outward FDI. The subsequent section illustrates the modes of
entry and financing channels used by Indian multinationals. Sections 5 discuss the immediate destinations of
outward FDI from India. Finally, the conclusion.
RESEARCH DESIGN AND DATA
This paper is an attempt to capture the idiosyncratic features of Indian outward FDI by analyzing the
internationalization aspects of the top 10 Indian outward investors. Adopting the inductive approach, we depend
on observations to find patterns and explanations to those patterns. Our chosen method can be called as
Narrative description with elements of comparison.
Data: Since July 2011, RBI has made available a monthly firm-level data of outward direct investment along
with accessibility to archives dating back to July 2007.
The data provide us with the names of the Indian Parties that made the transactions, the names of the foreign
affiliate to which the flows were directed, the type of entry mode whether it is through a Wholly Owned
Subsidiary (WOS) or a Joint Venture (JV), the immediate destination of the flows were where the affiliate was
58
situated, the size of the transactions arein million $ in the form of equity, debt, and/or guarantee Issued. This
data is made available as it is reported by the designated authorised dealers17 to RBI.
We aggregated the data annually from July 2007 till the end of June 2017 covering a 10 year period. We select
our sample as the top 10 list of Indian multinationals which have invested the most during our study period.
These multinationals are responsible for almost 32% of total outward FDI. They are a diverse group of firms in
term of size,age and ownership. Table 1 shows the total amounts of outward FDI conducted byeach
multinational, their market capitalization as a proxy for size and the year of incorporation.
Table-1: Top 10 outward investors from July 2007 till July 2017
OFDI ($ Market Capitalization on Jun Year of
Name of Indian MNC
million) 2017 (Rscrore) Incorporation
Bharti Airtel 32297.42 151561,42 1995
Reliance Industries 12491.68 448797,36 1966
ONGC 9915.50 201866,79 1956
Tata Motors 5034.09 124877,82 1945
Suzlon Energy 4987.11 9735,16 1995
Tata Steel 4896.55 33149,44 1907
JSW Steel 3941.60 49130,01 1982
Piramal Enterprises 3827.22 48299,55 1988
Lupin 3583.90 46997,36 1972
Reliance Communication 3579.91 5351,31 2002
General trends
Table-2: Annual size outward FDI transaction
2008 2009 2010 2011 2012 2013 2014 2015 2016
Bharti Airtel 35.82 39.35 11110.19 1393.92 3992.96 4488.46 9905.35 0.19 0
Reliance Industries 473.23 388.57 7378.34 809.6 2205.07 165.07 301.35 277.05 477.4
ONGC 1034.38 2538.88 381.571 116.39 15 888.72 4151.54 0.25 116.7
Tata Motors 1451.3 3136.81 9.0075 267.69 46.28 27.88 35.62 10.28 40.55
Suzlon Energy 1076.34 314.78 777.8616 389.54 707.51 784.52 0 0 9.5
Tata Steel 0 65.29 1192.58 1308.20 352.63 1.71 1906.54 3.42 50
JSW Steel 147.13 91.81 466.192 350.32 479.18 695.63 441.02 249.49 265.81
Piramal Enterprises 14.1 155.85 88.3896 111.65 1817.97 432.55 181.85 226.33 223.33
Lupin 49.78 59.22 4.957 7.5 52.68 57.99 114.89 1058.7 2103.05
Reliance Communication 4 160.02 2310.00 0 0 549.81 0 21 0
OFDI flows increased steadily from 2007, it spiked in 2010 mainly supported by a more than $ 10 billion
acquisition of Zain’s Africa by Bharti Airtel. The flows dropped sharply in 2011, they increased a little in 2012
to drop again in 2013. The flows reached another high in 2014 then plummeted to a record low in 2015. They
has started to rise in 2016, and continued to till the end of June 2017.
Figure-1: Annual outward FDI trends
17
An Indian party is required to route all transactions in respect of a particular overseas JV/WOS only through one branch
of an Authorized Dealer. This branch would be called the ‘Designated Authorized Dealer’ in respect of that JV/WOS and
all transactions and communications relating to the investment in that particular JV/WOS are to be reported only through
this ‘ designated branch’ of an Authorized Dealer.
59
The fact that the ups and downs in OFDI flows for these ten multinationals are in tandem to a large extent
points out that it might be related to macroeconomic factors in their home country, India or the global
economy.
No doubts that OFDI flows has been increasing gradually along with the increase in liberalization in foreign
exchange rules. In September 2007, 100% limit of net worth was liberalized further to 300% and to 400% of the
Indian party net worth in 2008.
During the second half of 2013, the Indian rupee plunged to a record low versus the dollar slumping to a 68.85
value on August 28, 2015. RBI responded in the same month tightening the control over the movements of
OFDI flows. Circular no. 23, August 2014 reduced the OFDI limit back to 100% of the net worth under the
automatic route.The depreciation in rupee and the setback in the liberalization route might have negatively
affected the OFDI flows during 2013. Once the rupee showed signs of recovery and stabilized around 60 Rs. for
USD, RBI restore the old rules and the limit is back to 400% of the net worth as long as the whole financial
commitment isn’t more than USD 1 billion, in July 2014. The flows reallypicked up during 2014.What might
cause the huge decrease in 2015?The devaluation of the YUAN caused stock markets all over the world to go
into downward spiral, this panic may have find its way to the direct investment flows too.
MODES OF ENTRY AND FINANCING CHANNELS
According to RBI guidelines “Joint Venture (JV)’’ means a foreign entity formed, registered or incorporated in
accordance with the laws and regulations of the host country in which the Indian party makes a direct
investment.” And “Wholly Owned Subsidiary (WOS)’’ means a foreign entity formed, registered or
incorporated in accordance with the laws and regulations of the host country, whose entire capital is held by the
Indian party.
JV WOS
Bharti Airtel 27917 2986
Reliance Industries 0 12491
ONGC 5639 3868
Tata Motors 315 4759
Suzlon Energy 22 4966
Tata Steel 120 4777
JSW Steel 3151 791
Piramal Enterprises 731 3091
Lupin 105 3481
Reliance Communication 0 3580
Looking at Table 3, it’s obvious that Indian multinationals prefer WOSs to JV s as an entry mode. The fact that
they have equally invested comparable amounts in WOSs and JVs( $ 44790 million in WOSs and $ 38000
million in JVs) is distorted by Bharti Airtel huge investments through its joint ventures in Netherlands and
Singapore. This doesn’t apply to the rest of MNCs in our sample or in the whole populations.
How are these MNCs funding their WOSs or JVs? They are investing more equity in their WOSs than they are
investing in their JVs. The equity invested in JVs is equal to 30% of that invested in WOSs. The opposite is
right for debt; JVs are more funded by debt than WOSs. The big difference is in issuing guarantees. Parent
Indian companies, except for the case of Bharti Airtel don’t seem willing to issue guarantees on behalf of their
joint ventures.
The financing of the internationalization of MNCs is done through different channels namely equity, debt and
reinvested retained earnings. These channels reflect the internal capital market transactions between an MNC
and its foreign affiliates (JVs and WOSs).
Table-3: Financing channels of Indian OFDI
Equity Debt GI
Bharti Airtel 2223 2428 26254
Reliance Industries 2261 416 9815
ONGC 9085 239 185
Tata Motors 3375 450 1250
Suzlon Energy 1432 485 3070
Tata Steel 1199 1792 1906
JSW Steel 263 2156 1522
60
Piramal Enterprises 274 1242 2306

Lupin 786 13 2787
Reliance Communication 564 571 2445
Host countries
The disadvantage of data on overseas investments available from RBI is that countries mentioned under the
label of host countries are the immediate destination of the OFDI flows and most probably not the final one.
This creates a problem in recognizing the real host countries considering that more than 60% of these flow
where directed toward Offshore Financial Centres (OFCs).
Table-4: Entry Modes and Host Countries
IVORY
RUSSIA AZERBIJAN MOZAMBIQUE SWEDEN COLOMBIA
COST
JV MYANMAR SUDAN VIETNAM EGYPT LYBIA SYRIA
ONGC SRI LANKA KAZAKHSTAN COOMBIA
CAYMAN
WOS IRAN SWITZERLAND BVI MAURITIUS SINGAPORE
ISLAN
JV NETHERLANDS SINGAPORE UK UAE
Bharti Airtel
WOS MAURITIUS USA UK HONGKONG SINGAPORE SRI LANKA
Reliance JV USA
Industries WOS NETHERLANDS UAE AUSTRALIA MAURITIUS UK SINGAPORE
JV SOUTH AFRICA SINGAPORE
Tata Steel
WOS SINGAPORE
JV THAILAND SPAIN SOUTH AFRICA ITALY INDONESIA NIGERIA
Tata Motor
WOS SINGAPORE UK SPAIN MORROCO
JV CHILE USA SINGAPORE
JSW Steel
WOS MAURITIUS NETHERLANDS UK
JV NETHERLANDS
Suzlon Energy
WOS DENMARK USA GERMANY CHINA MAURITIUS NETHERLANDS
JV USA
Lupin
WOS NETHERLANDS SWITZERLAND UAE UK AUSTRALIA
Piramal JV USA
Enterprises WOS SWITZRELAND NETHERLANDS
Reliance JV
Communications WOS MALDIVES SINGAPORE NETHERLANDS
OFCs as defined by International Monetary Fund (IMF) are jurisdictions where most of the financial activity
that is taking place is linking overseas lenders with overseas borrowers. A less positive definition was
introduced by OECD which considers an OFC as a tax haven which is based on the existence of preferential tax
regimes for financial services and limited disclosure of tax information.
Which one of these two perspectives applied more to Indian OFDI flows to OFCs? As part of the liberalization
movement the Indian firms were allowed to create special purpose vehicle whether in the form of a subsidiary
or a joint venture to raise foreign capital to finance their foreign investments mainly acquisitions. In 2010,
Bharti Airtel acquired Zain Africa for $ 10.7 billion; the company announced that it has raised the amount as a
debt form a consortium of foreign banks along with the state bank of India. The monthly data available from
RBI shows that Airtel issued guarantees to its joint venture in Netherlands with the amount of $ 5462.5 million
and guarantees of the exact amount on behalf of its joint venture in Singapore. Meaning that Airtel is using
these joint ventures which have been set up in OFCs like Singapore and the Netherlands to raise fund. Except in
few cases most of the WOSs were set up in countries knows as OFCs. We can notice possible final destinations
more in the case of joint ventures. Table 6shows the share of host countries which are not classified as OFCs
out ofthe total overseas investments made by multinationals in our sample. It is alarming that on average only
16% out of total outward FDI was directed to non-OFCs destinations.
Table-5: Indian OFDI in Non-OFCs destinations
Total OFDI OFDI directed to a Non OFC %
ONGC 9915.5 6047.061 61%
Bharti Airtel 32297.42 134.9 0%
Tata Motors 5034.088 413.764 8%
Reliance Industries 12491.68 328.6986 3%
61
JSW Steel 7111.859 3170.254 45%

Tata Steel 4896.553 81.4704 2%
Suzlon Energy 4987.109 1107.511 22%
Lupin 3583 231 6.5%
Piramal enterprises 3821 2448 65%
Reliance Communication 3579 0 0%
Total 87717.2 13962.65 16%
CONCLUSION
Considering that the 10 Indian multinationals in our sample have carried out almost 32% of total outward FDI
over a decade. Generally speaking, we can say that Indian outward FDI has grown since 2007 but volatility was
a feature of these flows over the years. Indian multinationals have a striking preference for WOSs as an entry
mode; they have also been financing more and more of their outward FDI using Guarantees which are issued by
these multinationals to their affiliate to enable them to raise money from international capital markets. Finally,
the large amounts of outward FDI directed to OFCs raises concerns over tax evasion practices and require
further exploration.
REFERENCES
 UNCTAD. (2011). World Investment Report. New York & Geneva: United Nations.
 UNCTAD. (2015). World Investment Report . New York & Geneva : United Nations.
62
NEXUS BETWEEN FINANCIAL INCLUSION AND TELECOMMUNICATION: A STRUCTURAL

EQUATION MODELLING ANALYSIS WITH SPECIAL REFERENCE TO JAMMU& KASHMIR
Dr. Taufeeque Ahmad Siddiqui1 and Kashif Iqbal Siddiqui2

1
ABSTRACT
Financial Inclusion matters because finanancial development is a key driver for economic development. Since
2005, the Reserve Bank of India (RBI) has introduced several measures to boost the financial inclusion in India
through several schemes like relaxed KYC norms, no-frills’ accounts, General Credit Cards, Business
Correspondent Model. Still more than 19% of the population are unbanked or financially excluded due to weak
infrastructure of financial system of India. The telecom sector can act as bridge between financial institution
and unbanked population to overcome the infrastructure related issues. Primary data for the study has been
collected from 200 residents of Jammu and Kashmir through a schedule for conducting empirical research. The
study shows a significant and positive effects of Ability of using mobile phone as well as Awareness about
telecom services on Ability of using banking services and Awareness about banking services. Hence, telecom
sector along with financial sector can make a joint effort through appropriately designed product.
Keywords: Financial Inclusion, Rural, Structural Equation Modelling, Telecommunication, Unbanked
INTRODUCTION
Rangarajan's committee on financial inclusion defines it as "Financial inclusion may be defined as the process
of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such
as weaker sections and low income groups at an affordable cost”. Financial services include insurance, loans,
credit, saving etc. The main motive behind financial inclusion is to improve the livelihood of low income and
underprivileged. Financial Inclusion matters because finanancial development is a key driver for economic
development. Since 2005, the Reserve Bank of India (RBI) has introduced several measures to boost the
financial inclusion in India through several schemes like relaxed KYC norms, no-frills’ accounts, General
Credit Cards, Business Correspondent Model. The Government of India has also taken various steps towards
financial inclusion such as Pradhan Mantri Jan Dhan Yojna, Pradhan Mantri Fasal Beema Yojna, Pradhan
Mantri Jeevan Jyoti Yojna, Pradhan Mantri Mudra Yojna etc.
Still more than 19% of the population are unbanked or financially excluded due to weak infrastructure of
financial system of India. Like financial sector, telecommunication is also emerging as backbone for Indian
economy. India is the second largest telecommunication market and third highest number of internet users in
the world. Telecom technology is changing our lives. Telecom sector is witnessing substantial growth every
year. As on 31st Oct 2017, the number of telecom subcribers is 504.19 million. Telecom sector with such a large
rural customer base can be an efficient channel to teach the unbanked population. The telecom sector can act as
bridge between financial institution and unbanked population to overcome the infrastructure related issues.
LITERATURE REVIEW
Jin&Hundal (2007) in their paper tried to identify the factors influencing mobile service adoption in rural India.
The primary data were collected from 1357 respondents who have adopted mobile phones in the rural region of
the Punjab and analyzed using Principal Component Analysis. The education level of respondents below metric
might be the reason that the rural respondents were not much influenced by media/advertising. The study
concludes that rural people extremely desire the facilities and knowledge along with latest technology to make
choice about mobile sets and service provider.
Paramasivan&Ganeshkumar (2013) in their paper scrutinized the status of financial inclusion in India. The
secondary data from report of World Bank, financial access survey (2010, 2012) were used for study. They
have recommended strengthening of MFI, BC or BF. They have also suggested Indian post office as a channel
to provide banking services in rural India. The joint efforts of technology provider and banking channel are
required to reach the unbanked. They have concluded that financial literacy is important along with the proper
investment opportunities.
Mago and Chitokwindo (2014) in their article examined the impact of mobile banking on financial inclusion in
Zimbabwe. The results reveals that the low income people are willing to adopt mobile bonking due to security
convenience, cheap, easy to use and accessible. They recommended that the low income people of remote area
can use financial services through mobile banking. Mobile banking has increased the financial activities in rural
areas and boosting the economic growth.
63
Singh et. al (2014) in their paper focuses on the use of existing means such as mobile phones, India post office,
banking technologies, fair price shops and business correspondents (BCs) for financial inclusion in India. They
have collected data from field research and consultation with the members of RBI. They have analyzed the
three dimension of financial inclusion i.e. branch penetration, credit penetration and deposit. Credit penetration
is the major problems among all. They have concluded that lack of awareness and financial literacy among rural
population are responsible for low penetration of financial services. Incentives to the BCs, use of existing
network, awareness about banking technology and mobile phone will create a difference in achieving financial
inclusion.
Garani&ghosh (2015) in their paper discussed the key components of financial inclusion and the related
developed ICT which assists the financial inclusion as an easy apparatus. They have collected primary data
from the southern part of the Assam with the sample size of 50 people. It was observed that 100% of the
beneficiaries in the study were using the ATM services and 60% were using SMS alert (Mobile). The
relationship between the banks ICT service and the customers’ satisfactions was studied. It is clear from
findings that the activity by the banks for financial inclusion is increasing considering the penetration of internet
with the motto of Digital India.
Behl& Pal (2016) in their paper developed a relationship between perception of users and degree of usage of
mobile banking. They have identified the barriers associated with usage of mobile banking in rural India. The
primary data were collected through the structured questionnaire. They have used structured equation modeling
(SEM) for analyzing the data and confirmatory factor analysis (CFA) to check the fitness of measurement
model. The results reveal that usage of the mobile banking technology is largely driven by perception of users
and potential users. Perception plays an important role towards degree of diffusion of mobile banking in rural
area.
Ouma et al. (2017) in their study examined in selected countries in sub Saharan Africa, whether the persistent
use of mobile phone to provide financial services is a boon for savings mobilization.The results show that the
likelihood of saving at the household level increases with the availability and usage of mobile phones to provide
financial services. Thus, Mobile phone financial services is an opportunity for promoting savings mobilization,
especially among the poor and low income groups where access to formal financial services is limited.
Siddiqui & Siddiqui (2017) in their paper analyzed the impact of telecom on financial inclusion using structural
equation modelling based software Smart PLS. They have collected 200 samples each from Gujarat and West
Bengal. Awareness, Usability and ability of using services is the dimensions for each constructs. The results
reveals that there is clear evidence of positive impact of telecom on financial inclusion in both the states
irrespective of the level of growth.
Siddiqui & Siddiqui (2017) in their paper analyzed the impact of telecom on financial inclusion by moderating
the effect of education. A sample of 200 were collected from Palwal district of Haryana. They have used
SmartPLS to show the modelling relationship between the constructs. The results disclose that the education
plays an important role in defining the relationship between telecom and financial inclusion. They have
recommended that the Financial institution and telecom companies should collaborate through innovative
techniques to reach the unbanked.
1. To study the impact of Ability of using mobile phone on Ability of using banking services
2. To study the impact of Ability of using mobile phone on Awareness about banking services
3. To study the impact of Awareness about mobile services on Ability of using banking services
4. To study the impact of Awareness about mobile services on Awareness about banking services
HYPOTHESIS
H01: There is no significant impact of Ability of using mobile phone on Ability of using banking services
H02: There is no significant impact of Ability of using mobile phone on Awareness about banking services
H03: There is no significant impact of Awareness about mobile services on Ability of using banking services
H04: There is no significant impact of Awareness about mobile services on Awareness about banking services
Primary data for the study has been collected from 200 residents of Jammu and Kashmir through a schedule for
conducting empirical research. As the study is based on rural population, the Thahpoo and Nowgam villages
have been selected from Anantnag district of Jammu and Kashmir.
64
Ability of using banking services and Awareness about banking services are the two dimensions representing
dependent constructs named as Financial Inclusion. Similarly, Ability of using mobile phones and Awareness
about mobile services are the two dimensions representing independent constructs named as Telecom.
Structural Equation Modelling (SEM) has been used for analyzing the model and testing the hypothesis.
Structural Equation Modelling using AMOS 21.0 was executed to observe the effect of telecom on dependent
variable financial inclusion. AMOS is a covariance based Structural Equation Modelling
Analysis
Out of 23 indicators, only 12 indicators were retained in the final model. In order to fit the model, we have
dropped 11 indicators based on their low outer loadings. List of all indicators are in appendix. The structural
model is acceptable based on the following model fit parameters:
Absolute fit indices
It determines how well the proposed theory fits the data. Chi-Squared Test, RMSEA, GFI, AGFI, RMR and
SRMR are included in this category.
Chi Squared Test:
It assesses the magnitude of discrepancy between the sample and fitted covariance matrices. (Hu and Bentler,
1999). Model fitness is examined by the value of relative chi-square (CMIN / DF) and the recommended range
is between 2 to 5 (Wheaton et al, 1977). The CMIN/DF value for the current model is 3.887which indicates
good model fit.
Root Mean Square Error of Approximation (RMSEA):
The RMSEA tells us how well the model, with unknown but optimally chosen parameter estimate would fit the
populations covariance Matrix (Byrne, 1998). As per MacCallum et al (1996), the recommended value which
shows a good fit is below 0.08. The RMSEA value for this model is 0.07.
Goodness of fit (GFI)
The cutoff value of 0.90 recommended by Bentler and Bonett (1980). GFI value for current model is 0.935
which represents a good model fit.
RMR (Root Mean Square Residual)
RMR value for the current model is 0.04 which is within recommended limit. RMR value should be less than
0.05.
Path Analysis
The relationship between different paths are estimated through Structural Equation Modelling. Table 1
represents the regression weight. All the paths are significant in the model with p value less than 0.05 and
critical ratio is greater than 1.96. Hence, all the research hypothesis is supported. Ability of Using Mobile
Phone (AUMP) has highest impact on ability of using banking services(AUBS) followed by Awareness about
banking services (AWBS). Similarly, awareness about telecom services(AWTS) positively impact ability of
using banking services(AUBS) as well as awareness about banking services (AWBS).
Table-1: Regression Weight
Estimate S.E. C.R. P Label
AUBS <--- AUMP 0.424 0.051 8.314 *** par_5
AWBS <--- AUMP 0.254 0.069 3.681 *** par_6
AUBS <--- AWTS 0.358 0.063 5.683 *** par_7
AWBS <--- AWTS 0.364 0.071 5.127 *** par_8
Figure-1: exhibits the Structural Equation Modelling (SEM) showing the impact of telecom on financial inclusion.
Figure-1: Path diagram

65
CONCLUSION& IMPLICATIONS
This research is proposed to analyze the effect of telecom on financial inclusion. The study shows a significant
and positive effects of Ability of using mobile phone (AUMP) as well as Awareness about telecom
services(AWTS) on Ability of using banking services(AUBS) and Awareness about banking services(AWBS).
It can be concluded from the results that the people who are able to use mobile phone services and aware about
telecom services are also able to use banking services and aware about the services provided by financial
institution. Hence, telecom sector along with financial sector can make a joint effort to increase their customer
base through appropriately designed product. Telecom company can be effective and efficient channel to reach
the unbanked population at an affordable cost.
REFERENCES
 Behl, A., & Pal, A. (2016). Analysing the barriers towards sustainable financial inclusion using mobile
banking in rural India. Indian Journal of Science and Technology, 9(15).
 Bentler, P. M., &Bonett, D. G. (1980). Significance tests and goodness of fit in the analysis of covariance
structures. Psychological bulletin, 88(3), 588.
 Byrne, B. M. (1998). Structural equation modeling with LISREL, PRELIS, and SIMPLIS: Basic concepts,
applications, and programming. Mahwah, NJ: Lawrence Erlbaum Associates.
 Garani, P. & Ghosh, D. (2015). Information and Communication Technology (ICT) an easy apparatus for
financial inclusion. International Journal of Scientific Research, 4(11), 453-457.
 Hu, L. T., &Bentler, P. M. (1999). Cutoff criteria for fit indexes in covariance structure analysis:
Conventional criteria versus new alternatives. Structural equation modeling: a multidisciplinary
journal, 6(1), 1-55.
 Jain, A., &Hundal, B. S. (2007). Factors influencing mobile services adoption in rural India. Asia-Pacific
Journal of Rural Development, 17(1).
 MacCallum, R. C., Browne, M. W., & Sugawara, H. M. (1996). Power analysis and determination of sample
size for covariance structure modeling. Psychological methods, 1(2), 130.
 Mago, S., &Chitokwindo, S. (2014). The Impact of Mobile Banking on Financial Inclusion In Zimbabwe: A
Case for Masvingo Province. Mediterranean Journal of Social Sciences, 5(9), 221.
 Ouma, S. A., Odongo, T. M., & Were, M. (2017). Mobile financial services and financial inclusion: Is it a
boon for savings mobilization?. Review of Development Finance, 7(1), 29-35.
 Paramasivan, C., &Ganeshkumar, V. (2013). Overview of financial inclusion in India. International Journal
of Management and development studies, 2(3), 45-49.
 Siddiqui. T. A. & Siddiqui. K. I. (2017). “Determining Effect of Telecom Services on Financial Inclusion in
Haryana using SEM”. Proceedings of International Conference on Research and Business Sustainability,
IIT-Roorkee.436-441. ISBN 978-1-5090-6470-0
 Siddiqui. T. A. & Siddiqui. K. I. (2017). “Exploring linkages between Telecom and Financial Inclusion: An
Innovative Strategy for Success”.Proceedings of International Conference on Strategies in Volatile and
Uncertain Environment for Emerging Markets, Indian Institute of Technology Delhi. 830-837. ISBN 978-
93-83893-05-8.
 Singh, C., Mittal, A., Garg, R., Goenka, A., Goud, R. P., Ram, K., ... & Kumar, U. (2014). Financial
inclusion in India: Select issues.
 Wheaton, B., Muthen, B., Alwin, D. F., & Summers, G. F. (1977). Assessing reliability and stability in panel
models. Sociological methodology, 8, 84-136.
APPENDIX
List of Indicators
Ability of using banking services(AUBS) Ability of using Mobile Phone(AUBS)
FAC Family member able to use ATM card FAMC Family member able to make call
FCC Family member able to use credit card FARC Family member able to receive call
FC Family member able to use cheque FASM Family member able to send SMS
FDM Family member able to deposit money FARS Family member able to receive SMS
66
FWC Family member able to withdraw cash FAUI Family member able to use internet
Awareness about telecom services(AWTS) Awareness about telecom services(AWTS)
KAC Knowledge about ATM card K2G Knowledge of 2G
KCC Knowledge about credit card KMMS Knowledge of MMS
KSA Knowledge about saving account KSMS Knowledge of SMS
KAS Knowledge about ATM services KAR Knowledge about roaming
KRD Knowledge about Deposit KSTD knowledge about STD
KC Knowledge about cheque KMNP knowledge about mobile portability
KOTP knowledge about OTP
67
DETERMINANTS OF BANK PROFITABILITY: AN EMPIRICAL STUDY FROM INDIA
Kanika Dhingra
Research Scholar, IIFT, Delhi
ABSTRACT
Banks now-a-days stand-in as significant players in the monetary system of a developing country like India.
Indian banks have done well during the recent global crisis, as is apparent from the yearly credit growth,
profitability and trends in Non - performing assets of banks. Financial performance of a bank shows the strong
point and weak points of the bank by satisfactorily creating a association among the items of a balance sheet
and profit and loss account.
The banking sector of India has arose as distinct of the robust drivers of India’s economic growth. Banking
industry of India has finished owing progress in past few years, even through the eras when the financial
meltdown was hampering whole world.Thus, the profitability position of banks acts as an vital measure to know
the position of bank in the banking sector. Analysis of financial performance is a function of multiple factors
such as capital adequacy, assets value, efficiency of management, liquidity and profitability position. The study
was analytical in nature and was drawn on basis of secondary data only. The data was collected from reserve
bank India publications and annual reports, financial reports of respective banks and various websites like
World Bank, Punjab national bank and Axis Bank.
The study deals with various variables; one is the dependent named Return on asset which is a proxy measure
to banks profitability and six independent variables named liquidity, cost, risk, GDP, inflation rate and interest
rate, out of which the former are bank definite factors and latter are macroeconomic factors. Further for the
analysis of these variables; Multivariate linear regression and correlation techniques were used. The study
reflected a significant impact of all the six factors on return on asset stating the fact that the banks profitability
is affected by all the six determinants and the correlation is also significant.
Keywords: Macroeconomic, Profitability, Bank-Definite, Interest Rate, Return on Assets, Non-Performing
Assets.
INTRODUCTION
The empirical studies have found a strong relationship among economic growth and fiscal development.
Finance plays a significant role in the economic growth. The charts illustrate the functioning of Banks in last 10
year and Relative functioning of BSE Banks& BSE Sensex in 2010-11. The performance of Banks hastened
through the period March 2002 to March 2008. The performance of banks slowed through March 2008 – March
2009 but afterwards it has shown rising inclination till March 2011.The four-month phase (November 2010-
February 2011) was clear by a constant waning in all the indices triggered by a number of universal and
domestic progresses. The Sensex deteriorated by 12.4%, while the Bankex Index declined by18.3%.Some of the
worldwide factors, such as increase in crude oil rates and high commodity prices contributed to inflation in
thedomestic economy. High inflation together with low growth rate in the Index of Industrial Production (IIP)
and tightening interest rates has caused some concerns over the short-term economic growth, hitting the stocks
in each the sectors, particularly those in the fiscal services sector.
Figure No-1.4: Performance of Indian Banking Industry Source:rbi.org.in

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LITERATURE REVIEW
The review of literature is to give a theoretical foundation for the research and help regulate the nature of the
research. Athanasoglou (2005) examined the significance of bank-specific macroeconomic determinants on
bank profitability for the phase 1985 to 2001 and stated that both external and domestic factors moved its
structure and functioning. A vitaloutcome of this study is that the trade cycle considerably affects bank profits,
even after adjusting for the influence of other determinants, which have a robust correlation with the
cycle.Sufian and Habibullah (2009) studied the factors of the profitability of the Chinese banking sector
throughout the post-reform period of 2000–2005.Findings of the study suggested that all the factors have
statistically substantial impact on China banks profitability. Flamini, Mcdonald and Schumacher
(2009)analysed that credit risk, greater returns on assets are linked with big bank size, activity diversification
and private ownership. They stated that bank returns are disturbed by macroeconomic variables, promoting
stumpy inflation and steady output growth. The study upkeeps the policy of striking higher capital desires to
strengthen financial stability.Wasiuzzaman and Tarmizi (2010) studied the influence of bank feature as well as
macroeconomic factors on the profitability of Islamic banks. Dr. Gupta and Dr. Sikarwar (2014) stated the
comparative analysis of growth rate analysis of two banks and to compare them in aspects of private sector
bank and public sector bank. Nahang and Araghi (2015) stated the study for identification of the functioning of
banks in the enactment of each of the function. The study also analysed the internal variablesmarking the
profitability of city banks including deposit amount the recompense facilities, credit management, cost
management and liquidity. The researcher used correlation method and regression method for the analysis. All
the above stated papers related to bank explicit and macroeconomic factors stated the influence on profitability.
1. To study the influence of bank definite determinants on profitability of selected public and private banks.
2. To study the influence of macroeconomic variables on profitability of selected public and private sector
banks.
SCOPE OF THE STUDY
The present analysis will be undertaken “to examine the influence of bank definite and macroeconomics
variables on viability (profitability) of Punjab National Bank (Public sector bank) and Axis Bank (Private sector
bank)for a phase of years ranging from (2004 to 2016)”. The research study will be supported out in India.The
functional area of the analysis is Finance.The macroeconomic determinants to be considered for the analysis are
such as GDP rate, inflation rate, whereas the bank definite variables would be liquidity, Cost, capital adequacy.
The effectiveness of the banks will be mirrored in the form of Return on Assets (ROA).
METHODOLOGY USED FOR DATA COLLECTION
The learning is diagnostic in nature and is grounded on secondary data. The main sources for the data collected
are Reserve Bank of India publications, RBI annual reports and database. Other sourcesfor the data assembly
are articles, related research papers, business journals, magazines, newspaper and periodicals. The financial
reports as other source in case of the banks are also studied. The sample of the analysis comprised of two banks,
one public sector bank and other one is private sector bank for a period ranging from 2004 to 2016 years.
METHODOLOGY USED FOR DATA ANALYSIS
Methods used under the study are Correlation Analysis and Multivariatelinear Regression Analysis technique
and tools for the dataanalysis are SPSS. The analysis is divided in two parts, Public sector banks and Private
sector banks. The study considered the following variables GDP (x1), Interest Rates (x2), Inflation (x3),
Liquidity (x4), Risk (x5) and Cost (x6). The influence of these variables is reflected on (ROA) return on assets
(y). ROA is taken as a proxy for assessing the bank’s profitability. To fulfill the stated objectives, linear
production function of the resulting form was formed:
Y = a + b1x1 + b2x2 + b3x3 + b4x4 + b5x5 + b6x6
Y = Return on Assets (ROA)
X1= Gross Domestic Product (GDP)
X2= Interest Rates
X3= Inflation
X4= Risk
X5= Liquidity
69
X6= Cost
There are some factors which are always considered as constants. In the study with the help of regression and
correlation the impact of each x variables on y is studied by the researcher.
HYPOTHESIS
Hypothesis 1
H0: There is no substantialeffect of Macroeconomic elements on profitability of Punjab National Bank.
H1: There is substantialeffect of Macroeconomic variables on profitability of Punjab National Bank.
Hypothesis 2
H0: There is no substantialeffect of Bank specific variables on profitability of Punjab National Bank.
H1: There is substantialeffect of Bank specific variables on profitability of Punjab National Bank.
Hypothesis 3
H0: There is no substantial effect of Macroeconomic variables on profitability of Axis Bank.
H1: There is substantialeffect of Macroeconomic variables on profitability of Axis Bank.
Hypothesis 4
H0: There is no substantialeffect of Bank explicit variables on profitability Axis Bank.
H1: There is substantialeffect of Bank explicit variables on profitability Axis Bank.
DATA ANALYSIS AND INTERPRETATION
DATA PRESENTATION
The analysis studies the effect of macroeconomic and bank explicit determinants on the profitability of banks.
The total of six factors is analyzed amongst which three are macroeconomic factors and the residual three are
bank explicit determinants. Two banks are considered one is a public sector banks (Punjab national bank) and
another is a private sector bank (Axis Bank).
Gross Domestic Product
Gross domestic product (GDP) is the market value of all formallyaccepted final goods and services
manufactured within a state in a year, or other certainphase of time. GDP can be resolute in three ways; they are
the production (or output) approach, the income method, or the expenditure method. The Gross Domestic
Product is calculated by the given formula:
GDP = Rent + Interests + Profits + Statistical Adjustments + Wages
Years Gross Domestic Product
2004 3.8
2005 4.8
2006 3.8
2007 7.9
2008 7.9
2009 9.3
2010 9.3
2011 9.8
2012 3.9
2013 8.5
2014 10.5
2015 6.3
2016 3.2
Mean 6.84
Table No-4.1: Percentage Growth of GDP (2004-2016)
Source: World Bank.org
The above given table displays the Gross Domestic Product (GDP) of India over a period of thirteen years. The
mean value of GDP is 6.84. The lowermost value of gross domestic product
70
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Figure No-4.1: Percentage Growth of GDP (2004-2016)
over this phase of thirteen years is 3.2 in the year 2016 whereas the maximum value of GDP is 10.5 in the year
2014.The above graph displays the movement of gross domestic product of the nation during a period of
thirteen years ranging from 2004 to 2016. GDP of India presented a high digit of highs and lows in the above-
mentioneddefinite period of time. GDP was maximum in the year 2014 and lowermost in the year 2016
showing a downfall.
Inflation rate
Inflation is a constantrise in the general price level of goods and services in an economy during a phase of time.
When the general price level upsurges, each unit of money buys littler goods and services. There are several
effects of Inflation on a country’s economy and can be concurrently positive and negative. Negative effects of
inflation compriseof an expansion in the opportunity cost of holding currency, ambiguity over prospected
inflation which may dampen investment and savings. Positive effects include certifying that central banks can
regulate real interest rates (to lessen recessions), and heartening investment in non-monetary capital projects.
Years Inflation rate
2004 4
2005 3.7
2006 4.4
2007 3.8
2008 3.8
2009 4.2
2010 6.1
2011 6.4
2012 8.4
2013 10.9
2014 12
2015 5.9
2016 4.9
Mean 6.60
Table No-4.2: Percentage Inflation Rates (2004-2016)
The above given table shows the Inflation Rates of India during a period of thirteen years. The mean value for
the Inflation Rates is 6.60. The lowermost value of Inflation Rates is 3.7 in the year 2005 whereas uppermost
value during this period of thirteen years is 10.9 in 2013.
71
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Figure No-4.2: Percentage Inflation Rates (2004-2016)
The above graph exhibits the figures of Inflation rate of the nation during a period of thirteen years stretching
from 2004 to 2016. Inflation Rate of India displayed an upward drive till the year 2014 and a declining stage
after 2014. Inflation Rate was uppermost in the year 2010 and lowermost in the year 2015 presenting a downfall
in 2016 also.
Interest rate
An interest rate is the rate at which interest is paid by a pledger (debtor) for the use of currency that they borrow
from a mortgagee (creditor). Interest-rate goals are a vibrantinstrument of monetary policy and are taken into
account when dispensing with factors like investment, inflation, and unemployment.
Years Interest rate
2004 8.3
2005 8.6
2006 7.9
2007 7.3
2008 4.9
2009 6.2
2010 4.5
2011 6.9
2012 4.3
2013 5.8
2014 -0.5
2015 1.7
2016 2.3
Mean 5.24
Table No-4.3: Percentage Interest Rates (2004-2016)
The above table displays the Interest Rates of India during a period of thirteen years. The average value for the
Interest Rates is 5.24. The lowermost value of Interest Rates during this period of thirteen years is -0.5 in the
year 2014 whereas on the other hand the uppermost value of Interest Rates during this period of thirteen years is
7.9 in the year 2006.
72
Figure No. 4.3: Percentage Interest Rates (2004-2016)
The above given graph shows the figures of Interest Rates of the country during a period of thirteen years
extending from 2004 to 2016. Interest Rates of India presented downward, upward, again downward measure in
the above statedexplicit period of time. Rate of Interest were steady and then decrease in 2004, after that it
presented a slightgrowth till and then a constant lows or steadysituations were witnessed. The uppermost value
was in the year 2006 whereas the lowermost was in the year 2014.
Credit to deposit Ratio
The CDR is nothing but the significant flow of progresses to the deposits organized by banks in terms of
percentage. The credit / deposit ratio (CD ratio) is used to observe the liquidity of a bank. Larger the Credit to
Deposit ratio, farther the efficiency of the bank to exploit the fund it gathered. The Credit to Deposit ratio is
derived by the following formula:
Credit to Deposit = Total Credit/Total deposit collected×100
Years Punjab National Bank Axis Bank
2004 25.18 64.79
2005 27 50.22
2006 22.48 47.59
2007 32.48 42.84
2008 35.44 43.63
2009 30.19 47.4
2010 31.00 52.79
2011 30.30 59.85
2012 23.10 68.89
2013 21.53 64.89
2014 22.19 71.87
2015 19.95 31.57
2016 16.52 10.01
Mean 25.95 50.48
Table No-4.4: Percentage of Credit to Deposit Ratio (2004-2016)
The above table illustrates, the credit to ratio of Axis Bank and Punjab national bank for a period of thirteen
years. The ratio replicates the liquidity position of banks over the period of time. The ratio of Axis Bank is
superiorthan Punjab national bank. The ratio of Axis Bank is 50.48 whereas that of Punjab National Bank is
25.95 which state a better situation for Axis Bank in terms of improveduse of funds and liquidity in contrast to
Punjab National Bank.
73
Figure No-4.4: Percentage Liquidity of Banks (2004-2016)

The above given graph exhibits the liquidity position of both mentioned banks. The liquidity is stated in terms
of credit to deposit ratio. The movement of Punjab National Bank is more steady as matched to that of Axis
Bank. The graph of Axis Bank after 2014 presented a breakdown in the ratio and was outpacing in the previous
years. The uppermost value of Axis bank was replicated in the year 2014 and of Punjab National Bank was in
the year 2008, which is much lesser than Axis Bank. The lowermost value of the credit to deposit ratio for both
the banks was in the year 2016.
Capital Adequacy Ratio
It is expressed as a percentage of a bank's risk weighted credit exposures. This proportion is used to guard
depositors and encourage the steadiness and effectiveness of financial systems around the world. Two kinds of
capital are restrained: tier one capital, which can fascinate losses without a bank being essential to cease
interchange, and tier two capital, which can engross losses in the occurrence of a winding-up and so offers a
reducedmark of protection to investors. The Capital Adequacy Ratio is derived by the following formula:
Capital Adequacy Ratio = Total Capital/Risk Weighted Assets×100.
2004 10.31 11.37
2005 10.24 9
2006 10.70 10.05
2007 12.02 10.9
2008 13.10 11.21
2009 14.78 12.66
2010 11.95 11.08
2011 12.29 12
2012 13.45 13.73
2013 14.03 13.69
2014 14.16 15.8
2015 14.42 12.65
2016 12.03 14
Mean 12.58 12.16
Table No-4.5: Percentage of Capital Adequacy Ratios (2004-2016)
The above given table displays the Capital Adequacy Ratio of Axis Bank and Punjab National Bank during a
period of thirteen years. The ratio reveals the level of Risk of banks during the period of time. The ratio of
Punjab National Bank is higher than Axis Bank. The ratio of Axis Bank is 12.16 while that of Punjab National
Bank is 12.58 which state a better position for Axis Bank in terms of diverse risk connectedelementsmarking
the cost of firms in contrast to Punjab National Bank.
74
Figure No-4.5: Percentage Risk of Banks (2004-2016)

The above given graph displays the risk element of both the banks. The Risk is expressed in terms of Capital
Adequacy Ratio. The movement of both the banks is steady during the period of thirteen years. The graph of
Axis Bank reached the uppermost point in the year 2014 and Punjab National Bank presented the uppermost in
year 2015. The inferior values of both the banks were indicated in the initial years of the data gathered.
Operating Expenses to Income Ratio: Operating expenses contains those expenses which are vital for the
operation of the business. The major constitutents of operating expenses are like Payment to and provisions for
employee, Rent, taxes and lighting, Printing and stationery, Advertisement and publicity, Law charges etc. The
income in the ratio is the total Income containing interest incomes also. The Operating to income ratio is
resulting by the following formula: Operating Expense to Income Ratio = Total Operating expenses/Total
Income×100
2004 47.15 9.39
2005 48.84 10.17
2006 51.89 10.58
2007 53.31 19.45
2008 53.41 28.38
2009 50.33 21.02
2010 60.00 23.13
2011 65.97 23.00
2012 70.55 26.20
2013 72.88 24.95
2014 74.34 30.96
2015 33.19 25.69
2016 33.10 21.95
Mean 54.99 21.14
Table No-4.6: Percentage of Operation Expense to Income Ratio of banks (2004-2016)
The above table presents the Operation Expense to Income Ratio of Axis Bank and Punjab National Bank
during a period of thirteen years. The ratio suggests the level of operating expenses sustained by the banks
during the period of time. The ratio of Punjab national bank is superiorthan Axis Bank. The ratio of Axis Bank
is 21.14 whereas that of Punjab National Bank is 54.99 which state a better position for Axis Bank in terms of
lesser operating expenses and greater total income in comparison to Punjab National Bank.
75
Figure No-4.6: Percentage Cost of banks (2004-2016)

The above given graph displays the Cost factor of both the banks. The Cost is stated in terms of Operating
Expenses to Income Ratio. The movement of Axis Bank is more steady as matched to Punjab National Bank
over the period of thirteen years. The graph of Axis Bank reached the maximum point in the year 2014 and
Punjab National Bank presented the maximum in the same year 2014 only. The lesser values of both the banks
were revealed in the initial years of the data gathered but Axis Bank mirrored a low in some upcoming years
also and when matched with Punjab National Bank the values are much lesser during the period of time.
Return on Asset
Return on Assets is acquired as a proxy of profitability. It is engaged as the exogenous variable or the
dependent variable. It is anmarker of how profitable an organisation is relation to its total assets. ROA gives an
indication as to how competent management is at using its assets to generate earnings. Computed by dividing a
business's annual earnings by its total assets, ROA is presented as a percentage. Sometimes this is referred to as
"return on investment". Some investors add interest expense back into net income when doing this calculation
because they'd like to use operating returns before cost of borrowing. The formula for return on assets:
Return on Assets = Net Incomes/Total Assets
2004 27.51 18.16
2005 27.51 22.85
2006 151.53 32.05
2007 152.01 39.89
2008 188.91 49.07
2009 258.84 87.96
2010 297.38 103.06
2011 330.97 120.80
2012 390.68 245.13
2013 464.75 284.50
2014 562.09 395.99
2015 678.91 462.77
2016 820.13 551.99
Mean 334.70 185.70
Table No-4.7: Percentage of Return on Assets of banks (2004-2016)
76
The abovegiven table shows the Return on assets of Axis Bank and Punjab national bank during a period of
thirteen years. ROA replicates the level of returns that the banks are receiving on the assets over the time. The
value of Return on Assets of Punjab national Bank was much greater as compared to Axis Bank for all the
thirteen years. The average Return on Assets of Axis Bank is 185.70 whereas that of Punjab National Bank is
334.70 which state enhanced financial position of PNB in contrast to Axis Bank.
Figure No-4.7: Percentage ROA of banks (2004-2016)

The above given graph shows the Return on asset of both the banks. The Return on Assets of Axis Bank is low
as matched to Punjab National Bank during the period of thirteen years ranging from 2004 to 2016.
DATA ANALYSIS: Multivariate Regression Analysis
It is a statistical procedure for assessing the relationships amongst variables and emphases on the
associationamid a dependent element and one or more independent elements. It helps to appreciate the
modification in the value of the dependent element when any one of the independent elements is varied. The
regression equation is written as Y = a + bX +e
‘Y’ is the value of the Dependent Variable (Y), what is being predicted or explained.
‘a’ or Alpha, a constant; equals the value of Y when the value of X=0
‘b’ or Beta, the coefficient of X; the slope of the regression line; how much Y changes for each one-unit change
in X.
‘X’ is the value of the Independent variable (X), what is forecasting or describing the value of Y. ‘e’ is the error
term; the error in forecasting the value of Y, given the value of X (it is not displayed in most regression
equations).
The research studies the variation in value of return on assets when the macroeconomic and bank explicit
variables are varied.
Testing of Hypothesis
HYPOTHESIS 1
H0: There is no substantialinfluence of Macroeconomic elements on profitability of Punjab National Bank.
H1: There is substantialinfluence of Macroeconomic elements on profitability of Punjab National Bank.
Empirical Results
Model R R Adjusted Std. Error of Change Statistics
Square R Square the Estimate R Square F df1 df2 Sig.F
Change Change Change
1 .899a .808 .744 123.02197 .808 12.637 3 9 .001
77
Table No. 4.8: Model Summary of Hypothesis 1

ROA GDP Inflation Interest
Pearson Correlation 1 .053 .834** -.839**
ROA Sig. (2-tailed) .863 .000 .000
N 13 13 13 13
Pearson Correlation .053 1 .185 -.247
GDP Sig. (2-tailed) .863 .545 .416
N 13 13 13 13
**
Pearson Correlation .834 .185 1 -.784**
Inflation Sig. (2-tailed) .000 .545 .002
N 13 13 13 13
Pearson Correlation -.839** -.247 -.784** 1
Interest Sig. (2-tailed) .000 .416 .002
N 13 13 13 13
Table No. 4.9: Correlation Table of Hypothesis 1
Model Unstandardized Coefficients Standardized Coefficients t Sig.
B Std. Error Beta
(Constant) 284.795 150.334 1.894 .091
GDP -19.463 8.210 -.280 -2.371 .042
INFLATION 31.946 11.462 .514 2.787 .021
1
INTEREST -33.725 12.455 -.506 -2.708 .024
Table No-4.10: Regression table of Hypothesis 1

ANALYSIS AND INTERPRETATION
The value of correlation among the two elements Return on Assets and Macroeconomic factors named GDP,
Inflation Rate and Interest Rate are 0.53, 0.834 and -0.839 respectively which is positive in trendfor GDP and
inflation rate but negative for interest rate. The value of R2 is .808 which means that all the three elements have
80.8% influence on ROA and they effect the profitability of the bank.
Regression equation among the two elements can be established as follows:
Y = 284.795 – 19.463X1 + 31.946X2 – 33.725X3.
As the p value (=0.001) gained from regression table is less than the value of alpha 0.05, so the null hypothesis
is rejected and the alternate hypothesis is accepted. It conditions that GDP, Inflation Rate and Interest Rate
jointly have significant impact on Return on Assets of the Punjab National bank. Thus, it is confirmed that
macroeconomic elements have substantialinfluence on profitability of Punjab National Bank.Out of three
macroeconomics elements the effect of interest rate and inflation was larger as can be seen through their
correspondingsubstantial values. The influence of GDP on ROA is negligible, as neither its correlation value
nor its regression coefficient is important.
HYPOTHESIS 2
H0: There is no substantialinfluence of Bank explicitelements on profitability Punjab National Bank.
H1: There is substantialinfluence of Bank explicitelements on profitability Punjab National Bank.
Empirical Results
Model R R Adjusted R Std. Error Change Statistics
Square Square of the R Square F df1 df2 Sig. F Change
Estimate Change Change
1 .853a .728 .638 146.39692 .728 8.042 3 9 .006
ROA Liquidity Risk Cost
* *
Pearson Correlation 1 -.661 .574 -.127
ROA Sig. (2-tailed) .014 .040 .678
N 13 13 13 13
Liquidity Pearson Correlation -.661* 1 -.083 .198
78
Sig. (2-tailed) .014 .787 .517

N 13 13 13 13
Pearson Correlation .574* -.083 1 .253
Risk Sig. (2-tailed) .040 .787 .405
N 13 13 13 13
Pearson Correlation -.127 .198 .253 1
Cost Sig. (2-tailed) .678 .517 .405
N 13 13 13 13
Table No. 4.12: Correlation Table of Hypothesis 2
Model Unstandardized Standardized T Sig.

Coefficients Coefficients
B Std. Error Beta
(Constant) 38.366 412.733 .093 .928
-
LIQUIDITY -25.347 7.784 -.583 .010
3.256
RISK 88.089 28.323 .564 3.110 .013
COST -2.794 3.333 -.155 -.838 .424
Table No. 4.13: Regression Table of Hypothesis 2
The value of correlation among the two variables- Return on Assets and Bank Explicitelements named
Liquidity, Risk and Cost is -0.661, 0.574 and -0.127 respectively which is positive in trend for risk but negative
in case of liquidity and cost. The value of R2 is .728 which means that all the three elements have 72.8%
influence on ROA and they mark the profitability of the bank.
Regression equation between the two variables can be recognized as follows:
Y = 38.366 – 25.347X1 + 88.089X2 – 2.794X3.
As the p value (=0.006) attained from regression table is less than the value of alpha 0.05, so the null hypothesis
is rejected and the alternate hypothesis is accepted. It states that Liquidity, Risk and Cost jointly have
substantialinfluence on Return on Assets of the Punjab National bank. Thus, it is confirmed that Bank
Explicitfactors have substantialinfluence on profitability of Punjab National Bank.
The bank explicitelements namely Liquidity, Risk and Cost together have substantialinfluence on profitability
of PNB. Out of three Bank explicitelement, the influence of liquidity and risk was more as can be seen through
their respective important values. The influence of cost on ROA is negligible, as neither its correlation value nor
its regression coefficient is important.
HYPOTHESIS 3
H0: There is no substantialinfluence of Macroeconomic elements on profitability of Axis Bank.
H1: There is substantialinfluence of Macroeconomic elements on profitability of Axis Bank.
Empirical Results
Square Square of the R Square F df1 df2 Sig. F
Estimate Change Change Change
1 .939a .882 .843 72.94734 .882 22.506 3 9 .000
ROA GDP Inflation Interest
Pearson Correlation 1 -.060 .859** -.840**
ROA Sig. (2-tailed) .846 .000 .000
N 13 13 13 13
Pearson Correlation -.060 1 .185 -.247
GDP Sig. (2-tailed) .846 .545 .416
N 13 13 13 13
Inflation Pearson Correlation .859** .185 1 -.784**
79
Sig. (2-tailed) .000 .545 .002

N 13 13 13 13
Pearson Correlation -.840** -.247 -.784** 1
Interest Sig. (2-tailed) .000 .416 .002
N 13 13 13 13
Table No. 4.15: Correlation table of Hypothesis
Model Unstandardized Coefficients Standardized Coefficients T Sig.
B Std. Error Beta
(Constant) 284.795 150.334 1.894 .091
GDP -19.463 8.210 -.280 -2.371 .042
INFLATION 31.946 11.462 .514 2.787 .021
INTEREST -33.725 12.455 -.506 -2.708 .024
Table No. 4.16: Regression Table of hypothesis 3
The value of correlation among the two elements Return on Assets and Macroeconomic factors named GDP,
Inflation Rate and Interest Rate is -.060, 0.859 and -0.840 respectively which is positive in trend for risk and
negative in instance of liquidity and cost. The value of R2 is .882 which means that all the three elements have
88.2% influence on ROA and they effect the profitability of the bank. Regression equation among the two
variables can be established as follows
Y = 284.795 – 19.463X1 +31.946X2 – 33.725X3.
As the p value (=0.000) attained from regression table is lower than the value of alpha 0.05, so the null
hypothesis is rejected and the alternate hypothesis is accepted. It states that GDP, Inflation Rate and Interest
Rate together have significant impact on Return on Assets of the Axis bank. Thus it is verified that
macroeconomic determinants have significant impact on profitability of Axis Bank.
The macroeconomic factors namely GDP, Inflation and Interest rates jointly have substantialinfluence on
profitability of Axis Bank. Out of three macroeconomics elements the influence of interest rate and inflation
was more as can be seen over their respective important values. The influence of GDP on ROA is insignificant,
as neither its correlation value nor its regression coefficient is important.
HYPOTHESIS 4
H0: There is no substantialinfluence of Bank explicitelements on profitability of Axis Bank.
H1: There is substantialinfluence of Bank explicitelements on profitability of Axis Bank.
Empirical Results
Square Square of the R Square F df1 df2 Sig. F
Estimate Change Change Change
1 .907a .823 .764 89.46051 .823 13.959 3 9 .001
ROA Liquidity Risk Cost
Pearson Correlation 1 -.359 .775** .559*
ROA Sig. (2-tailed) .228 .002 .047
N 13 13 13 13
Pearson Correlation -.359 1 .138 .063
Liquidity Sig. (2-tailed) .228 .654 .837
N 13 13 13 13
Pearson Correlation .775** .138 1 .724**
Risk Sig. (2-tailed) .002 .654 .005
N 13 13 13 13
Pearson Correlation .559* .063 .724** 1
Cost Sig. (2-tailed) .047 .837 .005
N 13 13 13 13
80
Table No. 4.18: Correlation table of Hypothesis 4

Model Unstandardized Coefficients Standardized Coefficients t Sig.
B Std. Error Beta
(Constant) -588.911 191.593 -3.074 .013
LIQUIDITY -5.197 1.546 -.476 -3.361 .008
RISK 87.165 20.518 .871 4.248 .002
COST -1.103 5.345 -.042 -.206 .841
Table No. 4.19: Regression table of hypothesis 4
The value of correlation among the two elements Return on Assets and Bank Specific factors named Liquidity,
Risk and Cost is -0.359, 0.775 and 0.559 respectively which is positive in trend for risk and cost but negative
for liquidity and return on assets. The value of R2 is .823 which means that all the three elements have 82.3%
influence on ROA and they mark the profitability of the bank.
Regression equation among the two elements can be established as follows:
Y = -588.911 – 5.197X1 + 87.165X2 – 1.103X3.
As the p value (=0.001) acquired from regression table is lower than the value of alpha 0.05, so the null
hypothesis is rejected and the alternate hypothesis is accepted. It indicates that Liquidity, Risk and Cost together
have importantinfluence on Return on Assets of the Axis bank. Thus it is proved that Bank Specific elements
have substantialinfluence on profitability of Axis Bank.
Out of three Bank explicitelement the influence of liquidity and risk was more as can be seen through
theircorrespondingsubstantial values. The influence of cost on ROA is insignificant, as neither its correlation
value nor its regression coefficient is important.
CONCLUSION
The macroeconomic elements namely Gross Domestic Product, Inflation and Interest rates collectively have
importantinfluence on profitability of Punjab National Bank and Axis Bank. Out of three macroeconomics
elements for Punjab National Bank and Axis Bank, the influence of interest rate and inflation was more and the
influence of GDP on ROA is negligible.The bank explicitelements namely Liquidity, Risk and Operating Cost
together have importantimpression on profitability of Punjab National Bank and Axis Bank. Out of three Bank
definite factor for Punjab National Bank and Axis Bank, theinfluence of liquidity and risk was more but the
effect of cost on ROA is insignificant.
BIBLIOGRAPHY
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Indicators of Profitability - Empirical Evidence from the Commercial Banks of Pakistan,” International
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between Saudi Arabia and Jordan,” Journal of Applied Finance & Banking, vol. 4, Issue no. 1, pp.125-140.
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bank profitability,” Economic Research Department, Bank of Greece, Vol. 25, Issue 2, pp. 5-37.
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productivity, vol. 32, pp. 329-336.
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The Indian journal of commerce, Vol. 63, Issue no. 3, pp. 13-21.
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System Stability Department Reserve Bank of Australia, Vol No. 5, Issue No. 1 pp.1-37.
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listed commercial banks in Pakistan,”European Journal of Business and Social Sciences, Vol. 2, Issue No.9,
pp. 186-201.
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Comparative study,” Indian journal of finance, Vol No. 2, Issue No. 7 pp. 41-48.
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sector banks,” International Journal of Transformations in Business Management, Vol. No. 1, Issue No. 5,
pp. 2231-6868.
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Indian journal of finance, Vol No. 3, Issue No. 3 pp. 47-54.
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of selected banks,” International Journal of Research in Finance & Marketing, Vol. 3, Issue No.2, pp. 20-
29.
82
MODELLING VOLATILITY OF SELECT TELECOM COMPANIES OF CNX 500
Dr. Taufeeque Ahmad Siddiqui1 and Zahoor Ahmad Mir2

1
ABSTRACT
Telecomm sector is an important component of any economy and it acts as an infrastructure for other sectors of
economy, so it plays a pivotal role in the functioning of other sectors of economy. This study investigates the
stock market performance of select telecommunication companies in CNX 500. First stock return performance
through descriptive statistics has been assessed. Volatility of stock returns have been studied using GARCH
model. The investigation has been made for a period from 2008 to 2014. The study reports an evidence of time
varying volatility which exhibits clustering, high persistence and predictability. It is inferred from the results
that volatility is impacted more by lagged values and also reactive to recent innovations.
Keywords; Economy, CNX 500, Volatility, Innovations
INTRODUCTION
Volatility in the equity market has become a matter of everybody’s concern in recent years, namely investors,
regulators, and brokers. Firstly when asset prices fluctuate sharply over time periods as short as few minutes to
a long span, the investors may find it difficult to accept that the explanation for the change lies in information
about fundamental economic factors, hence they may consequently associate speculation and irrationality with
the market. Arguably this can lead to general erosion of investors‟ confidence and diversion of the flow of
capital from equity markets. Secondly, an increase in volatility will tend to increase the risk faced by market
makers, leading them to charge more for the liquidity they provide. Thirdly, with volatility increasing steadily
over a long period, regulatory agencies and providers of capital might require different security firms to allocate
a large percentage of available capital to cash-equivalent investments, to the potential determinant of allocation
efficiently. Lastly volatility is perceived as an indicator of market inadequacy and a potential threat to the very
integrity of market mechanism. The wide spread concern in the market place has underlined the importance of
being able to measure and predict stock market volatility to the benefit of market participants.
In a seminal article, Engle (1982) proposes to model time-varying conditional variance with the Auto
Regressive Conditional Heteroscedasticity (ARCH) process that uses past disturbances to model the variance of
the series. Early empirical evidences show that high ARCH order has to be selected in order to catch the
dynamic of the conditional variance. The Generalized ARCH (GARCH) model of Bollerslev (1986) is an
answer to this issue. In most of the cases the ARCH and GARCH models are apparently successful in
estimating and forecasting of volatility of financial time series data. Stock return volatility hinders economic
performance through consumer spending, for example, immediately after persistent drop in stock prices,
economic forecasters generally predict sharp weaker economic growth. They believe that the fall in the stock
prices is expected to directly lower consumer spending. In addition, a weakening in consumer confidence could
contribute to further reduction in consumer spending.
This study is conducted to analyse the stock market performance of select telecom companies through
descriptive statistics and modelling volatility of these companies. This will help investors and other stake
holders to gain insights into the stock market performance of these companies and they will be able to make
better decisions regarding the sector and individual companies of the sector.
The vision of the telecom policy 2012 is “To provide secure, reliable, affordable and high quality converged
telecommunication services anytime, anywhere for an accelerated inclusive socio-economic development.
(National telecom policy 2012). So telecom companies have an important role in economy not only as a back
bone of information and communication services but also from the point of view of its support it other
industries. it acts as infrastructural network and offers lots of opportunities for growth and investment. So
telecom sector is a very attractive investment avenue for investors which have ample potential for returns. So it
becomes imperative to analyse the various aspects and performance of telecom companies in India.
REVIEW OF LITERATURE
Chan K.K and G.S.Ksrolyi (1991) conducted a study which covered both S&P 500 and Major Market Index
(MMI) futures. Bivariate GARCH Models were used to estimate volatility. Their results indicated a strong
inter-market dependence in volatility of spot and futures returns.
Goyal (1995) used conditional volatility model to study the nature of stock return volatility in India. He also
documented the impact of carry forward system on the level of volatility.
83
Antonio and Holmes (1995) in their study examine the relationship between information and volatility in FTSE
100 index in the UK using GARCH technique. They found that introduction of FTSE 100 index Futures had
changed volatility in the spot market and attributed this to better and faster dissemination of information flow
due to trading in stock index futures.
Gregory and Michall (1996) in their study examine that how volatility of S & P 500 index futures affected the S
& P 500 index volatility. Their study also examined the effect of good and bad news on the spot market
volatility. Volatility was estimated using EGARCH model. They found that bad news increased volatility more
than good news and the degree of asymmetry was higher for futures market.
Varma (1999) showed, using daily data from 1990-1998 of an Indian stock index (Nifty), that GARCH (1, 1)
with generalized error distribution performs better than the EWMA model of volatility.
Pandey.I.M and Chee.H.K (2002) used yearly panel data of Malasian companies from 1993 to 2000 and
concluded that beta E/P ratio, dividend yield and book to market ratio played a significant role in predicting the
expected stock returns in Malaysia.
Chowhan and Shukla (2003) studied BSE Sensex and a set of representative stock to find the changes in their
volatility during two years 1998 – 99 and 1999-2000 when rolling settlement and dematerialization of stocks as
a measure of reducing volatility was put to test. They found that the market regulations were not very effective
in curbing the volatility in the markets.
Harvinder Kaur (2004) made an attempt to study the extent and pattern of stock returns volatility of the Indian
stock market during 1999-2000. The two most prominent spot price indices namely, BSE Senses and S&P CNX
Nifty were covered in this study. It was found that the stock market volatility was the highest during 1992 and
2000.
Partha Aparation pal (2005) analyzed the impact of FII on the movement of sensex in his study. The study
pointed out that during the months, April to June 2004, the period after the general elections the stock market
index declined by about 17 per cent.
Banerjee and Sarkar (2006) studied the volatility in the index returns of the NSE, using high frequency intra-
day data covering a period from June 2000 to January 2004. (At five minute intervals). This paper shows that
Indian stock market experiences volatility clustering and hence GARCH type models predict the market
volatility better than simple volatility models like historical average, moving average etc. It is also observed that
the asymmetric GARCH models provide better fit than the symmetric GARCH model, confirming the presence
of leverage effect. Finally the results show that the change in volume of trade in the market directly affects the
volatility of asset returns. Further the presence of FII in the Indian stock market does not appear to increase the
market volatility.
Niladri Das & JK Pattanayak (2007) in their article considered the fundamental factors which have a significant
bearing on the movement of stock prices in the Indian capital market. The study has identified twelve different
explanatory variables, namely EPS, ROCE, RONW, PE ratio, debt-equity ratio, P/B ratio, beta dividend yield,
average return, CEPS, book value per share and market capitalization which have considerable influence on the
stock price movement in the Indian stock market.
Kumar and Singh (2008) conducted an empirical study of volatility , risk premium and seasonality in risk –
return relation of the Indian stock and commodity markets, using the general autoregressive conditional
heteroscedasticity in the mean model (GARCH -In -Mean) introduced by eagle et al (1987). The return showed
persistence in the volatility, clustering and asymmetric properties. Gold shows significant positive risk-return
relationship, whereas Nifty and Soybean had positive but not significant relationship. This finding is consistent
with most asset pricing models which postulate a positive relationship between a stock portfolios expected
returns and volatility. Soybean does not show seasonality in return, whereas seasonality is found in Nifty
returns. Volatility shows seasonal effect in all the cases.
Rohini Singh (2009) conducted a study on “Company Attributes and stock returns in India. A panel Data
Analysis” and analyzed that stock returns to the underlying behaviour of beta and five company attributes i.e.
size earning yield, cash earning yield, dividend yield and book to market ratio. Beta was not found to be
statistically significant. Size and book –to-market ratio were found to be significant in the individual regressions
and only size was significant in the multivariate analysis.
Kuper (2012) tries to understand the nature of dependence of conditional variance on past volatility in oil
prices, as a measure of uncertainty. Time varying conditional variance are estimated using univariate (G)
ARCH models, for monthly time series for the period January 1970 to April 2002.
84
RESEARCH PROBLEM
The Indian stock market has pivotal role to play in the growth and development of economy.
Telecommunication has to keep pace with the advancements in other sectors of country’s economy for proper
and systematic growth. The telecom sector is one of the most important sector and acts as infrastructure for the
other sectors, so it has very important place in economy. Due to its significance and potential opportunities for
growth, a lot of investment is required in the sector and investors are very eager to make investment in the
telecom companies. So the present study has been conducted to analyse the performance of select telecom
companies through descriptive statistics and modelling their volatility. This will give investors the risk
perception of these companies and act as a guide to investors.
OBJECTIVES
 To model the volatility of select telecom companies of CNX 500.
 To analyse stock market performance of the selected telecom companies through descriptive statistics.
HYPOTHESIS
Ho: There is no volatility clustering in select telecom companies of cnx 500 index.
H1; There is volatility clustering in select telecom companies of cnx 500 index
METHODOLOGY
The telecom companies included in CNX 500 have been selected for the purpose of the current study.
PERIOD OF STUDY
The study period spans from January 2008 to December 2014, besides being the most recent period, a lot of
changes have happened in Indian stock market particularly due to financial crisis. It is, therefore, important to
study the nature of stock market volatility during these years.
THE SAMPLE
The stock market indices are representative of the various industry sectors and trading activity which revolves
around the stocks comprising the indices. CNX 500 is a broad index in Indian capital market and from these
500 companies, 4 telecom service providers namely Bharti Airtel, Idea Cellular, Reliance Communications,
Tata Communications have been selected among the total of seven companies,
DATA BASE
The daily stock price data of these selected companies have been taken from prowess, the online data base
maintained by the centre for monitoring of Indian economy (cmie) and official website of NSE.
Daily stock prices have been converted to daily returns. The present study uses the logarithmic difference of
prices of two successive periods for the calculation of rate of return. The logarithmic difference is symmetric
between up and down movements and is expressed in percentage terms for ease of comparability with the
straightforward idea of a percentage change. If It be the closing price of stock on date t and It-1 be the same for
its previous business day, i.e., omitting intervening weekend or stock exchange holidays, then the one day
return on the market portfolio is calculated as:
rt = ln (It/ It-1)*100
Where, ln (z) is the natural logarithm of ‘z’
Tools Used for Analysis The tools used for analysing the stock market performance include mean, standard
deviation, skewness and kurtosis and the volatility of selected companies is modelled through GARCH (1, 1)
model.
the study. The forecast by these conditional volatility models are based on the parameters of the model itself as
well as they are on the return characteristics during the relevant period.
EMPIRICAL ANALYSIS
Performance analysis of the telecom companies through descriptive measures.
Figure one shows the plot of the return series generated from the daily closing prices of selected companies
over the entire study period, while the descriptive statistics of selected companies is shown in table 1
85
30
20
10
-10
-20
-30
250 500 750 1000 1250 1500 1750
AIRTEL IDEA
RCOM TATACOM
Airtel- Bharti Airtel, Idea- Idea Cellular; Rcom- Reliance Communications, Tatacom-Tata Communications
Visual inspection of the plot shows that there is volatility clustering of the return series of the selected
companies during the study period. Among the selected return series, the idea cellular is having a positive
means indicating that price series has increased over a period of time. The return series of rcom has highest
standard deviation of 3.48 indicating maximum dispersion in the return series and Airtel is having lowest
standard deviation of 2.31 indicating comparatively lower dispersion than other series.
Table-1
Descriptive analysis of AIRTEL, RCOM, IDEA CELLULAR and TATACOM
N Mean Std. Deviation Variance Skewness Kurtosis
Statisti Std. Std.
Statistic c Statistic Statistic Statistic Error Statistic Error
Airtel 1777 -0.015 2.310 5.337 -.050 .058 2.680 .116
Idea 1777 0.004 2.676 7.159 .125 .058 4.237 .116
Rcom 1777 -0.120 3.483 12.135 -.033 .058 4.871 .116
Tatacom 1777 -0.002 2.561 6.559 .580 .058 6.053 .116
Airtel- Bharti Airtel, Idea- Idea Cellular, Rcom- Reliance Communications, Tatacom-Tata Communications
The return series of Airtel and Rcom is negatively skewed indicating the return series is spread more on the
lower side of the mean and for idea cellular and Tatacom, it is positively skewed, it implies the existence of
relatively larger number of extreme positive values. The kurtosis statistic is above 3 in case of idea, Rcom and
Tatacom which connotes that series are leptokurtic which means they have heavier tail than standard normal
distribution, while it less than 3 in case of Airtel i.e. Plytokurtic.
Volatility modelling of selected telecom companies in CNX 500 index
The modelling of volatility is done through Garch model. The precondition for the application of an
econometric model is the stationarity of data series. This test is conducted with the help of Augmented Dickey
Fuller (ADF) test. The results generated from the unit root test of selected telecom companies are given in table
2.
Table-2
STATIONARY TEST OF TELECOM COMPANIES
Null Hypothesis: AIRTEL , Idea, Rcom, and Tatacom has a unit root
Augmented Dickey-Fuller test statistic t-Statistic Prob.*
Airtel -32.32593 0.0000
IDEA -40.55123 0.0000
RCOM -43.25422 0.0000
TATACO -40.81561 0.0000
Test critical values: 1% level -3.433832
86
5% level -2.862965
10% level -2.567575
*MacKinnon (1996) one-sided p-values.
Airtel- Bharti Airtel, Idea- Idea Cellular, Rcom- Reliance Communications, Tatacom-Tata Communications
It is observed from the table 2 that the computed ADF test statistic is smaller than critical values i.e. -3.433832,
-2.862965 and -2.567575 at 1 percent, 5 percent and 10 percent level of significance respectively; therefore the
null hypothesis is rejected. It indicates that return series of selected companies do not have a unit root problem
and is stationary at 1 percent, 5 percent and 10 percent level of significance.
In order to identify volatility clustering in data of airtel, GARCH model has been applied and results are
presented in table 3.
Table-3
Garch analysis of airtel
Dependent Variable: AIRTEL
GARCH = C(3) + C(4)*RESID(-1)^2 + C(5)*GARCH(-1)
Variable Coefficient Std. Error z-Statistic Prob.
Variance Equation
C 4.22E-32 7.48E-33 5.638951 0.0000
RESID(-1)^2 0.150000 0.027812 5.393356 0.0000
GARCH(-1) 0.600000 0.060917 9.849534 0.0000
Table 5.2 presents parameter estimates of GARCH (1, 1) for the returns of Airtel Company. Since σt2 is the one-
period ahead forecast variance based on past information, it is called the conditional variance. The above
specified conditional variance equation is a function of three terms viz. a constant term (C), news about
volatility from the previous period, measured as the lag of the squared residual from the mean equation (ε2t-1) ,
and the last period’s forecast variance (σ2t-1 ). It is observed from the table that all the GARCH parameters are
statistically significant. The estimated GARCH coefficients in the conditional variance equation are
considerably larger than ARCH coefficient. The implication is that the market has a memory of longer than one
period and that volatility is more sensitive to its lagged values than it is to new surprises’ in the market place.
So the bulk of information for the current volatility comes from previous days forecast. Finally the sum of arch
and Garch term is less than one implying that a shock at time t will persist but it will keep on declining.
Next is the analysis of idea cellular and Garch results are given below in table 4.
Table 4
Garch analysis of idea cellular
C 1.98E-32 5.34E-33 3.702413 0.0002
RESID(-1)^2 0.150000 0.025342 5.919139 0.0000
GARCH(-1) 0.600000 0.084104 7.134029 0.0000
It is observed from table four that all the Garch parameters are statistically significant in the variance equation.
The value of Garch coefficient is larger than arch coefficient and it connotes that past volatility has higher
impact on the conditional variance than recent news measured as the square of yesterdays return. The total
value of arch and Garch term is less than one means that shocks at time t will persist.
Next is the Garch analysis of RCOM and the results are presented in table 5 below
Table-5
Garch analysis of rcom
Variance Equation
C 1.52E-31 1.84E-32 8.262545 0.0000
RESID(-1)^2 0.150000 0.019166 7.826555 0.0000
GARCH(-1) 0.600000 0.034981 17.15199 0.0000
87
It is observed from the above table that all the parameters’ in the variance equation are statistically significant.
The Garch coefficient is larger than arch coefficient and it connotes that the bulk of information about the
conditional variance is given by previous volatility and recent news means arch coefficient explains only 15
percent of conditional variance. The sum of arch and Garch is less than one and it connotes that shocks at time t
will be persistent.
Next and last is the application of GARCH model to tatacom and results of analysis is presented in table 6
below.
Table-6
Garch analysis of tatacom
Dependent Variable: TATACOM
C 2.14E-32 4.45E-33 4.804164 0.0000
RESID(-1)^2 0.150000 0.031907 4.701195 0.0000
GARCH(-1) 0.600000 0.070727 8.483331 0.0000
It is observed from the table no 6 that all the parameters of the variance equation are statistically significant.
The Garch coefficient in case of tatacom is also larger than arch coefficient , implying that new shock will have
implication on the price for a larger period. The market will take some time to digest the information fully into
the price. Smaller arch coefficient means that tatacom reacts less to market movements. sum of arch and Garch
is less than one means shocks will be persistent.
CONCLUSION
In this paper stock market performance of four telecom companies have been assessed through descriptive
statistics. The study has also modelled their volatility through Garch model. It is found from the descriptive
statistics that only idea cellular is having positive mean implying that the price series has increased over time
and other three companies namely airtel , rcom and tata com are having negative average return. The return of
rcom is having the highest spread while airtel returns are comparatively least spread. The returns of airel and
rcom are negatively skewed and the returns of idea and tata com are positively skewed implying the existence
of relatively larger number of extreme values. Kurtosis statistic of only airtel is less than 3 while the other three
companies are more than three i.e. they have fatter tail than normal distribution.
Volatility of the select companies is measured over a period from January 2008 to December 2014. using Garch
model. While studying the daily logarithmic return series, we observed that the market is tranquil and volatile,
volatile and tranquil. The conduct of stationary test confirmed that the return series of the four companies are
stationary and then we applied the Garch (1,1)model. This is the effect that is known as volatility clustering. It
indicates about the predictability of volatility. The GARCH (1, 1) model is estimated to see whether volatility is
predictable. The study finds strong evidence of time varying volatility. It is also found that periods of high and
low volatility tend to cluster. Also, volatility shows high persistence and is predictable. The Garch (1, 1) model
is fitted for all the companies. It was found that in all the four telecom companies conditional volatility is more
explained by its recent lags than that of recent innovations. Garch coefficient is found higher than arch
coefficient in all companies implying that previous trend will have implication on the price for a larger period.
Smaller arch coefficient for selected companies means they reacts less tonew informations.sum of arch and
Garch is less than one means shocks will be persistent but in long period it is of decaying nature.
REFERENCES
 Antonion.A and Holmes.P (1995). “Futures Trading Information and Spot Price Volatility: Evidence for the
FTSE 100 Stock India using GARCH” Journal of Banking and Finance, Vol-19, PP.117-129.
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Intra-Day Data” Working Paper Series, WPS No 588, Indian Institute of Management, Calcutta.
 Bollerslev, T. 1986. Generalized Autoregressive conditional heteroscedasticity. Journal of Econometrics
31:307-327.
 Brajesh Kumar and Priyanka Singh (2008). “Volatility Modelling , Seasonality and Risk Return
Relationship in GARCH- in –Mean Framework, the Case of Indian Stock and Commodity Market”, Social
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 Chan.K.K.C Chan and G.A. Ksrolyi (1991). “The Intraday Relationship between Returns and Returns
Volatility in the Stock Index and Index Futures”, Review of Financial Studies, 4, 657-683.
 Engle, R.F. 1982. Autoregressive conditional heteroscedasticity with estimates of the variance of United
Kingdom ination. Econometrica 50:987-1007.
 Goyal, R., 1995, ‘Volatility in Stock Market Returns’, Reserve Bank of India Occasional Papers,16(3), 175-
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 Gregory K and T.Michall (1996). “Temporal Relationships and Dynamic Interactions Between Spot and
Future Markets”, The Journal of Future Markets, l.16(1), 55-69.
 Harvinder Kaur (2004). “Stock Market Volatility in India”, The Indian Journal of Commerce, 57(4), 55.
 Kuper (2012), measuring oil price volatility,2002
 (http://som.eldoc.ub.rug.nl/FILES/reports/themeC/2002/02C43/02C43.pdf )
 National Telecom Policy.
 (2012) (http://www.trai.gov.in/WriteReadData/userfiles/file/NTP%202012.pdf )
 Niladri Das & JK Pattanayak (2007). “Factors Affecting Market Price of Sense Shares”, The ICRAI Journal
of Applied Finance,13(8),33-46.
 Panday.I.M Chee H K (2002). “Predictors of Variation in Stock Returns: Evidence from Malaysian
Company Panel Data”, Global Business and Financial Review, 7(1),61-62
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 Piyush Kumar Chowhan and Vasant Shukla (2003). “A Study of Volatility in Indian Stock Markets to
Understand the Reasons for Turblence in the Last Two Years”, Social Science Research Network (SSRN),
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Journal of Applied Finance, February, 2009.
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 Varma, J.R., 1999, ‘Value at risk models in the Indian stock market’, Vikalpa, Indian Institute of
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89
RELATIONSHIP BETWEEN COMMODITIES & STOCK MARKETS IN INDIA – AN EMPIRICAL

TESTING
Rajesh R1 and Dr. A. Satya Nandini2

1
Assistant Professor , Department of Management Studies, Christ (Deemed to be University), Bangalore
Professor2, Department of Management Studies & Research Centre, BMS College of Engineering, Bangalore
ABSTRACT
India has six national and sixteen regional commodity exchanges which is growing at appreciable levels. There
is a difference in opinion about correlation between stocks and commodity markets among countries. This has
created a curiosity to find the correlation between these markets in India.
This paper attempts to test if there is any correlation between the stock and commodity markets. It focuses on
examining the performance of these markets. The impact and influence between these markets was analysed.
Data was collected through reliable secondary sources and analysis was done with the use of statistical tools.
Correlation is checked using the indicators of both market and the testing revealed that iCOMDEX Crude Oil
showed a high degree of negative correlation between Nifty & Sensex however iCOMDEX Gold showed a high
degree of positive correlation with Nifty & Sensex. This shows that Nifty and Sensex is highly correlated to
Gold than Crude oil.
Keywords: stock market, commodity market, correlation, performance analysis, econometric test.
1. INTRODUCTION
According to Swamy Vigneswara & S Sreejesh, Indian commodity and stock markets witnessed volatile
conditions very often. The impact of one market on another, the level of its effect and co-movements between
the markets in the current situation need to be tested. Analysing the dependencies between commodity and
stock markets is important mainly for two reasons. Firstly to accept that investment strategies are sensitive to
the correlation structure of Commodity and Stock markets. Secondly it is helpful for policy makers to analyse
the effect of their decision, whether the information spills over asset classes, financial and economic decisions
will have cross-market influences.
This paper attempts to analyse the relationship between commodity and stock market.
(Ingalhalli, G., & Reddy, 2016)used granger causality test and revealed that there is a granger cause between
Oil process and Sensex. Further authors argued there is a unidirectional relationship between gold and stock
market.
(Aftab, Kabir, Bashar, & Masih, 2015)authors used GARCH methodology to find the relationship between
commodity and Islamic stock market. The result shows that there was a high correlation between commodity
and Islamic stock markets during financial crisis 2007-08.
(Ghorbel, Abbes Boujelbene, & Boujelbene, 2014)found that there is strong bidirectional volatility between
oil and stock markets of oil importing countries using ARCH and GARCH effect. Further they used Kalman
filter which showed high correlation between oil and stock market returns.
(Urooj Aijaz, 2013)used multi linear regression test and found that there is a positive and significant
correlation between gold and crude oil prices and it has positive impact on KSE 100 index.
(DeLegge, 2013)states that commodity markets were highly neglected in the attraction of stock and bonds due
to reasons like difficulty and expensive mode of investment. There exists a perfect correlation between
commodity ETF and commodities. There is a high potential for commodity markets.
(Nandini, 2012)studiesthe correlation relationship between global and Indian stock market considering BSE
and found that BSE Sensex showed high positive correlation NASDAQ, S&P 100, FTSE 100 and HANG
SENG, whereas the degree of correlation with NIKKEI was moderate. This correlation was further proved with
significant T test. Author concluded that Indian Capital market is highly dependent on global capital markets.
(Rossi, 2012)states that global commodity prices indices have high positive correlation with equity markets.
Also found that both commodity and stock markets has high predictive capacity.
According to (Swamy Vigneswara & S Sreejesh, 2011) investors sell their shares to stop loss and use
commodity investment as a hedge over loss. Pre-recession period indicated a negative correlation between
90
equity and commodity markets. However this correlation was higher during the post-recession period. Investors
find commodity market as risk mitigating market.
2.1 RESEARCH GAP
Various studies have tried to identify the relationship using the market prices of gold and crude oil with equity
market, whereas this paper have used the commodity index values to establish the relationship with stock
market index. Since the comparison is between dependant and independent variable and both being index
values, the result is expected to be more reliable with the use of statistical and econometric tools.
3. OBJECTIVE
 To determine the relationship between Commodities &stock markets in India.
4. METHODOLOGY
4.1 Research Design & Hypothesis
Causal research design is used to study the extent of the relationship between independent variables iCOMDEX
Gold &iCOMDEX Crude oil and dependent variables Nifty & Sensex.
The Hypotheses for the study are:
H0: There is no significant relationship between Commodities & Stock markets in India.
H1: There is a significant relationship between Commodities &Stock markets in India.
4.2 Sampling design
The population considered for the study is the index values of commodities and stock markets. Non-probability
sampling design is adopted to select a sample from the population of iCOMDEX Gold, iCOMDEX Crude Oil,
Nifty & Sensex.
4.3 Data used
The secondary data used for the purpose of study are the opening and closing prices of the iCOMDEXGold
&iCOMDEX Crude Oil, for each month for the period January 2012 to Nov 2017. These values are used to
calculate the annual returns which are correlated with the returns of Nifty & Sensex for the same period.
4.4 Data analysis techniques
The following techniques are used for data analysis:
The opening and closing prices ofiCOMDEX Gold, iCOMDEX Crude Oil, Nifty & Sensex for each month is
used to calculate the monthly returns and then the sum of returns between Jan to Dec is considered as annual
returns.
End of month price – Beginning of month price
Monthly return (%) = _______________________________________ x 100
Beginning of month price
4.5 Statistical and Econometric Techniques Used:
 Pearson’s product moment correlation coefficient
 Granger Causality Test.
4.6 Limitations
 Relationship is determined between the indices and not on the individual commodities or shares prices.
 Only two commodity indices are used in the study.
 Study is limited to indicators within the country.
 Only annual returns are correlated not monthly or daily.
5. ANALYSIS AND INTERPRETATION
5.1 Comparison of performance:
Table-5.1: Comparison of performance between annual returns of iCOMDEX Crude Oil & Nifty
Crude Oil Nifty
Year Period Covered
Returns % Returns %
2012 Jan - Dec -11.92153878 26.83777
2013 Jan - Dec 17.59901068 2.245417
91
2014 Jan - Dec -54.5162292 29.68148

2015 Jan - Dec -48.02061035 -6.34202
2016 Jan - Dec 31.03583514 -0.06959
2017 Jan - Nov -6.323809622 15.89049
Correlation
-0.341365936 t test Calculated -0.726364227 t Critical 2.447
Coefficient ‘r’
The above table indicates a negative correlation coefficient of -0.341 between returns of iCOMDEX crude oil &
Nifty for the period Jan 2012 to Nov 2017. The t test carried out to test the significance of ‘r’ presented a
calculated value of -0.726. The critical t value of 2.447 was found from the t distribution table for a significance
level of 5% for a two tailed test. In this case the calculated t value is lesser than the critical t value failing to
reject the null hypothesis.
Table-5.2: Comparison of performance between annual returns of iCOMDEX Crude Oil & Sensex
Period Crude Oil Sensex Returns
Year
Covered Returns % %
2012 Jan - Dec -11.92153878 25.51048981
2013 Jan - Dec 17.59901068 4.592124109
2014 Jan - Dec -54.5162292 28.64366267
2015 Jan - Dec -48.02061035 -6.834748741
2016 Jan - Dec 31.03583514 -0.685796469
2017 Jan - Nov -6.323809622 15.49306616
Correlation t test
-0.313587737 -0.660491156 t Critical 2.447
Coefficient ‘r’ Calculated
The above table indicates a negative correlation coefficient of -0.314 between returns of iCOMDEX crude oil &
Sensex for the period Jan 2012 to Nov 2017. The t test carried out to test the significance of ‘r’ presented a
calculated value of -0.661. The critical t value of 2.447 was found from the t distribution table for a significance
level of 5% for a two tailed test. In this case the calculated t value is lesser than the critical t value failing to
reject the null hypothesis.
Table-5.3: Comparison of performance between annual returns of iCOMDEX Gold & Nifty
Period Gold Returns Nifty
Year
Covered % Returns %
2012 Jan - Dec 3.951122757 26.83777
2013 Jan - Dec -5.208192094 2.245417
2014 Jan - Dec -7.456840484 29.68148
2015 Jan - Dec -12.32908888 -6.34202
2016 Jan - Dec 8.247522124 -0.06959
2017 Jan - Nov 6.242454618 15.89049
Correlation t test
0.198326736 0.404692294 t Critical 2.447
Coefficient ‘r’ Calculated
The above table indicates a correlation coefficient of 0.198 between returns of iCOMDEX Gold & Nifty for the
period Jan 2012 to Nov 2017. The t test carried out to test the significance of ‘r’ presented a calculated value of
0.405. The critical t value of 2.447 was found from the t distribution table for a significance level of 5% for a
two tailed test. In this case the calculated t value is lesser than the critical t value failing to reject the null
hypothesis.
Table-5.4: Comparison of performance between annual returns of iCOMDEX Gold & Sensex
Year Period Covered Gold Returns % Sensex Returns %
2012 Jan - Dec 3.951122757 25.51048981
2013 Jan - Dec -5.208192094 4.592124109
2014 Jan - Dec -7.456840484 28.64366267
2015 Jan - Dec -12.32908888 -6.834748741
2016 Jan - Dec 8.247522124 -0.685796469
2017 Jan - Nov 6.242454618 15.49306616
Correlation 0.184938192 t test Calculated 0.376368686 t Critical 2.447
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The above table indicates a correlation coefficient of 0.185 between returns of iCOMDEX Gold & Sensex for
the period Jan 2012 to Nov 2017. The t test carried out to test the significance of ‘r’ presented a calculated value
of 0.376. The critical t value of 2.447 was found from the t distribution table for a significance level of 5% for a
two tailed test. In this case the calculated t value is lesser than the critical t value failing to reject the null
hypothesis.
5.2 Descriptive Statistics
Table-5.5: Descriptive Statistics (E views output)
GOLD CRUDE_OIL NIFTY SENSEX
Mean 947.3389 631.7050 7391.904 24314.48
Median 940.7300 578.3100 7762.250 25623.35
Maximum 1116.480 1229.370 10452.50 33731.19
Minimum 812.1400 220.4700 4636.750 15517.92
Std. Dev. 64.58368 309.3664 1500.954 4727.602
Skewness 0.223933 0.004138 -0.000960 -0.100351
Kurtosis 2.343286 1.273661 1.852492 1.811980
Jarque-Bera 38.41159 181.1782 80.04913 88.24956
Probability 0.000000 0.000000 0.000000 0.000000
Sum 1382168. 921657.7 10784788 35474827
Sum Sq. Dev. 6081394. 1.40E+08 3.28E+09 3.26E+10
Observations 1459 1459 1459 1459
Descriptive statistics provides brief information on various statistical values.Jarque-Bera is a test statistic for
testing whether the series is normally distributed. The test statistic measures the difference of the skewness and
kurtosis of the series with those from the normal distribution. We reject the hypothesis of normal distribution at
the 5% level but not at the 1% significance level.
5.3 Stationary Test
Table-5.6: Group Unit root (Stationary) Test at 1 level difference
Group unit root test: Summary
Series: GOLD, CRUDE_OIL, NIFTY, SENSEX
Date: 11/23/18 Time: 15:52
Sample: 1/02/2012 11/30/2017
Exogenous variables: Individual effects
Automatic selection of maximum lags
Automatic lag length selection based on SIC: 0
Newey-West automatic bandwidth selection and Bartlett kernel
Balanced observations for each test
Method Statistic Prob.** Cross-sections Obs
Null: Unit root (assumes common unit root process)
Levin, Lin & Chu t* -98.4271 0.0000 4 5828
Null: Unit root (assumes individual unit root process)
Im, Pesaran and Shin W-stat -83.3429 0.0000 4 5828
ADF - Fisher Chi-square 351.091 0.0000 4 5828
PP - Fisher Chi-square 351.285 0.0000 4 5828
** Probabilities for Fisher tests are computed using an asymptotic Chi- square
distribution. All other tests assume asymptotic normality.
Null hypothesis of a unit root, this statistic does not follow the conventional t-distribution, and they derive
asymptotic results and simulate critical values for various test and sample sizes. Since all returns have zero
probability value thus the data is stationary (p<0.05). Now we can do further econometric research analysis
because the data is now stationary.
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5.4 Granger Causality Test

Table-5.7: Granger Causality Test for i=0 i.e. and use return as variables.
Pairwise Granger Causality Tests
Date: 11/23/18 Time: 15:48
Sample: 1/02/2012 11/30/2017
Lags: 2
Null Hypothesis: Obs F-Statistic Prob.
CRUDE_OIL does not Granger Cause GOLD 1457 0.96062 0.3829
GOLD does not Granger Cause CRUDE_OIL 0.01266 0.9874
NIFTY does not Granger Cause GOLD 1457 3.68029 0.0255
GOLD does not Granger Cause NIFTY 3.44049 0.0323
SENSEX does not Granger Cause GOLD 1457 4.39651 0.0125
GOLD does not Granger Cause SENSEX 2.92142 0.0542
NIFTY does not Granger Cause CRUDE_OIL 1457 5.16833 0.0058
CRUDE_OIL does not Granger Cause NIFTY 0.07508 0.9277
SENSEX does not Granger Cause CRUDE_OIL 1457 5.86865 0.0029
CRUDE_OIL does not Granger Cause SENSEX 0.00577 0.9942
SENSEX does not Granger Cause NIFTY 1457 0.14086 0.8686
NIFTY does not Granger Cause SENSEX 0.11219 0.8939
Since the probability values of all observations are more than 0.05 or 5%, we fail to reject the null hypothesis in
all situations thus stating that there exists no univariate or bivariate granger cause between the pairs under test.
30,000
25,000
20,000
15,000
10,000
5,000
0
I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV
2012 2013 2014 2015 2016 2017
Gold Crude Oil

Nifty Sensex
6. CONCLUSION
The study was considered for the period of Jan 2012 to Nov 2017 based on the availability of data. There was a
need to identify if there was a relationship or influence of commodities markets on the stock markets. Hence the
correlation of performance between iCOMDEX Gold, iCOMDEX Crude Oil, Nifty & Sensex was identified to
analyse if there was a correlation between commodities and stock markets. The testing revealed thatiCOMDEX
Crude Oil showed a high degree of negative correlation between Nifty & Sensex howeveriCOMDEX Gold
showed a high degree of positive correlation with Nifty & Sensex. This shows that Nifty and Sensex is highly
correlated to Gold than Crude oil. However, the Granger Causality Test revealed that there was no granger
94
cause between any of the pairs and none of the variable caused the other. The result does not provide enough
evidence to establish a significant relationship between commodity and stock market in India. The results have
been arrived only based on sample data.
REFERENCES
 Aftab, K., Kabir, S., Bashar, O. K. M. R., & Masih, A. M. M. (2015). Time Varying Correlation Between
Islamic Equity and Commodity Returns : Implications for ... Returns : Implications for Portfolio, 49(June).
 DeLegge, R. (2013, January). The Commodity Wave. ALM Media Properties, LLC, (Jan), 1–4.
 Ghorbel, A., Abbes Boujelbene, M., & Boujelbene, Y. (2014). Behavioral explanation of contagion between
oil and stock markets. International Journal of Energy Sector Management, 8(1), 121–144.
https://doi.org/10.1108/IJESM-09-2012-0007
 Ingalhalli, V., G., P. B., & Reddy, Y. V. (2016). A Study on Dynamic Relationship Between Oil, Gold,
Forex and Stock Markets in Indian Context. Paradigm, 20(1), 83–91.
https://doi.org/10.1177/0971890716637706
 Nandini, A. S. (2012). RELATIONSHIP BETWEEN GLOBAL STOCK FLUCTUATIONS AND INDIAN
CAPITAL MARKET – AN EMPIRICAL TESTING . Submitted by : RELATIONSHIP BETWEEN
GLOBAL STOCK FLUCTUATIONS AND INDIAN CAPITAL MARKET – AN EMPIRICAL TESTING .
(pp. 0–13). Bangalore.
 Rossi, B. (2012). The changing relationship between commodity prices and equity prices in commodity
exporting countries. IMF Economic Review, 60(4), 533–569. https://doi.org/10.1057/imfer.2012.20
 Swamy Vigneswara & S Sreejesh. (2011). INTER-LINKAGES BETWEEN COMMODITY MARKETS
AND CAPITAL MARKETS DURING THE GLOBAL FINANCIAL CRISIS. Addleton Academic
Publishers, 6(2011), 66–85.
 Urooj Aijaz, M. F. & S. M. (2013). Impact of Macroeconomic Variables on Stock Market Index ( A Case of,
57(2), 14099–14104.
 www.bseindia.com
 www.nseindia.com
 www.mcxindia.com
 www.moneycontrol.com
95
THE CRITICAL NEED FOR RIGHT-SKILLING OF HUMAN RESOURCE: THE CASE OF THE
INDIAN WORKFORCE
Dr. Yasmeen Rizvi1 and Raksha Garg2

Assistant Professor and Research Scholar2, Centre for Management Studies, Jamia Millia Islamia
1
ABSTRACT
It is a widely recognized fact, that education plays a pivotal role in the progress of an economy. Although India
is the fastest growing economy, “employment problem” has been one of the major issues that are hampering
the productivity and economic growth of the country. Not that the government or the private sector is not taking
adequate steps to provide education to all, but the problem lies in the quality of education. It is because of this,
that the labour force participation rate in India is much lower as compared to the other developed or
developing economies. Right-skilling is the answer to this problem. By right-skilling we mean, providing the
skills to workers/employees that match the job requirements. This study makes a case for vocational training as
a means to reduce the mismatch between demand and supply in the labour market. In addition to this, it is also
important to reduce the discrepancy between labour market participation rate of men and women in our
country. This paper provides deep insights into the above mentioned issues and also provides suggestions as to
how can an economy resolve these issues.
Keywords: Education; Employment; Labour Force Participation; Right Skilling; Vocational Training
CONTEMPORARY ISSUES IN THE INDIAN LABOUR MARKET

The World Bank and the International Monetary Fund have named India as world’s fastest-growing large
economy. According to forecast made by these international institutions, by 2020 India might overtake
Germany to be named among the four largest economies of the world after the USA, China, and Japan. It
already occupies a number three position in terms of purchasing power parity (Babones, 2018). However, there
is still much to be done in the area ‘employment conditions’ if compared with developed and developing
economies. The present challenges lie in lack of quality jobs, informal employment issues, disparities in the
labour market (on the basis of caste, religion, and gender) and gap in the demand of skills required in a labour
and the skills they actually possess. Overcoming these challenges would lead to huge improvement in labour
market/force participation (LMP/LFP). One of the major competitive advantages of India is its demographic
dividend as the proportion of the population in the working age group is more as compared to the total
population (Paul, 2014).
According to a report (EPW Engage, 2018), unemployment is higher among the educated in India. The study
found that the unemployment rate among the educated is not only higher compared to the uneducated, but it
also increased with higher levels of education. In rural as well as urban areas, the unemployment rate among
graduates and above was much higher than among those with secondary education and above. One of the
reasons stated was that the educated were not willing to take up low-grade informal jobs, but at the same time,
sufficient regular salaried jobs were not available for them. According to a report by the International Labour
Organization, nearly 81% of the employed in India are in the informal sector. Also, at the higher level of
education quite often there exists a discrepancy in the labour market because of the gap in the demand of skills
required in a labour and the skills they actually possess. It is thus important to improve the skills of young
Indians and to provide them access to the formal employment so as to reap the benefits of demographic
dividend (OECD Employment Outlook, 2014).
India's Labour Force Participation Rate dropped to 53.8 % in Dec 2017, compared with 53.9 % in the previous
year. One of the major factors responsible for low labour market participation rate in India is the extremely low
rate of women labour market participation and to add to this disparity this rate has dropped even further in the
recent years. As per International Labour Organization’s Global Employment Trends, 2013 report, India ranks
11th from the bottom in female labour force participation. According to the World Bank Group Report, 2018,
the LMP rate of Organisation for Economic Co-operation and Development (OECD) member countries in 2017
was 60.2%
This underutilization of human resource is responsible for slowing down the productivity and economic growth
of our country and therefore this problem has to be treated with utmost priority. The other critical need is to
improve labour market participation rate of women. The objective of this module is to understand these
important issues by providing evidence of the currently existing conditions in the Indian labour market and
identify research gaps for further study in order to find solutions to the existing problems.
96
STATE OF LABOUR MARKET/ FORCE PARTICIPATION IN INDIA

The labour market/force participation rate is the total of number of persons who are employed and number of
persons unemployed but looking for a job divided by the total population that lies in the working age category
(Trading Economics, 2018).This rate is calculated by expressing the number of people in the labour market as a
percentage of the working-age population.
The work force is defined as the sum of the number of employed persons and the number of unemployed
persons. Therefore, to calculate LMP/ LFP, measurement of both employment and unemployment is required. It
includes all persons in the working age who, during a brief specified period, such as a week or a day were in the
following categories: a) paid employment or b) self-employment. The unemployed include all persons of
working age who: a) did not work during the reference period, i.e. not in paid or self-employment; b) currently
available for work, that is, they were available for paid employment or self-employment during the reference
period; and c) looking for work, that is, had taken specific steps in a specific recent period to look for paid
employment or self-employment (International Labour Organization).
India's labour force participation rate dropped to 53.8 % in Dec 2017, compared with 53.9 % in the previous
year (Figure 1). The average of India's labour force participation rate from Dec 1990 to Dec 2017 was 59.4 %.
The data reached an all-time high of 60.8 % in Dec 1994 and a record low of 53.8 % in Dec 2017. In World
Bank’s latest reports, India's population reached 1,316.0 million people in March 2018. Unemployment rate of
India increased to 3.5 % in December 2017
Figure-1: India’s Labour Force Participation Rate (2006—2017)
A comparison with the neighbouring country China and Organisation for Economic Co-operation and
Development (OECD) member countries provides further insights into the challenges faced by Indian labour
market. China's labour force participation rate dropped to 68.9 % in Dec 2017, compared with 69.4 % in the
previous year. (Figure 2).The average of China's Labour Force Participation Rate from Dec 1990 to Dec 2017
was 74.5 %. The data reached an all-time high of 79.1 % in Dec 1990 and a record low of 68.9 % in Dec 2017.
In World Bank’s latest reports, China's Population reached 1,390.1 million people in Dec 2017. Unemployment
rate of China dropped to 3.8 % in Jun 2018. According to the World Bank Group Report, 2018, the LMP rate
for Organisation for Economic Co-operation and Development (OECD) member countries in 2017 was 60.2%
Figure-2: China’s Labour Force Participation Rate (2006—2017)
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India has one of the lowest female labour workforce participation rate in the world. Not only women
participation rates are low, but it has been showing a decreasing trend since 2004-05. Shockingly, this rate is
even smaller in urban areas and among the educated women since most women tends to end up in marginal
jobs, often in home-based work as an unpaid worker or contributing family member thus hampering the female
labour force participation rate.
Talking about the sector-wise employment in India, the service sector is the greatest contributor to India's GDP
but yet employs comparatively lower percentage of workforce whereas the agricultural sector's contribution to
GDP is the lowest among the three sectors but tends to employ comparatively a very large percentage of the
workforce. This situation hampers India’s productive capacity and thus needs to be resolved immediately
(International Labour Organization, 2017).There has been a reduction in the number of minimally skilled jobs
that require employees with lower educational qualification but the high growth sector related vocational
courses are not being offered to the workforce. For e.g., 4.0 million trained and qualified people were required
in the growth sector in Maharashtra in 2012, of which minimally qualified required were only 1.1 million.
Participation in the workforce is decreasing while student participation is increasing. Therefore, more students
are joining upper secondary education and looking for vertical mobility. (Bhardwaj, et al., 2011).
RELATION BETWEEN EDUCATION AND EMPLOYMENT
Education plays a pivotal role in uplifting the status of an individual in the society as well as for the
development of a country. Education provides economic benefits in two important ways. First, education
expands scientific knowledge and transforming this knowledge into productivity enhances an economy’s
technological advancements. Secondly with education the skills and competencies of employees improve and
this improves their ability to perform the present job or to take up new jobs. Education improves an individual’s
ability to socialize since educational institutions teach and reinforce social attitudes and thus employers are
more willing to hire employees with higher education with the expectation that they will be able to fit in the
organization better which will thus improve productivity (OECD). No country has been able to achieve constant
economic development without continuous investment in human capital. It has to be noted that education will
benefit a country only when it is equally distributed else it will lead to lower per capita income. Moreover, the
investment in education will have a significant impact on the economic growth of a country only when it is
applicable in the competitive and open market (Ozturk, 2001).
In general, education is a good insurance against unemployment and to remain employed in difficult economic
times. Education does play a major role in reducing unemployment in a country. The OCED statistics show that
in 2009, the average unemployment rate for those with tertiary education stood below 4.4%, for higher
secondary level, it stood below 6.8% and the rate was 11.5% for those who did not attain higher secondary level
education (OECD, 2011)
Some common questions related to education and LMP in India are: Should the government allocate more
budget in the education sector? If yes, which are the areas in education that need more investments? Is the
quality of education in India such that it matches the skill set of the people with the job requirement? One of the
major problems for the lack of adequate employment in India has been the huge discrepancy between the skills
required for doing the particular job and the skills that the education system has actually taught the prospective
employee. A report (EPW Engage, Economic and Political Weekly, May 4, 2018) has shown that
unemployment is higher among the educated in India (Figure 3.
Figure-3: Unemployment and Education
Source: EPW Engage, Economic and Political Weekly, May 4, 2018

98
The unemployment rate among the educated is not only higher compared to the uneducated, it also increases
with higher levels of education. In both rural and urban areas, the unemployment rate among graduates and
above is much higher than among those with secondary education and above. One of the reasons is that the
educated are not willing to join in low-grade informal jobs, but at the same time, sufficient regular salaried jobs
are not available for them
In India several positions for engineers, doctors, judges and other professions remain vacant each year
(Varghese, 1989). For example, there is a serious shortage of medical colleges. The problem is even more
serious at the post-graduate level of medical education. Low quality of education in many medical colleges is a
serious threat that needs to be addressed. 97% of graduate engineers seek jobs but only 7% are employable.
This is due to the lack of quality that persists in our education system. Skill mismatch, profit-hungry
management, lack of proper faculty, rote learning method, corruption, etc are the primary reasons why
graduates in India are degree holders without suitable skills for finding right jobs in the labour market
(Chakrabarty, 2016).
At the higher level of education quite often there exists a discrepancy in the labour market because of the gap in
the demand of skills required in a labour and the skills they actually possess. This discrepancy comes with the
high opportunity cost for any economy and thus this problem has to be redressed immediately. For solving this
issue, The International Institute for Education Planning, carried out a research project to relate the development
of higher education to the changing needs of the labour market and reduce the mismatch between the type of
training offered by the institutions and the types of skills that the labour market needs. Employment for
educated people has been the serious topic for discussion since the past decade (Varghese, 1989) This field had
received less attention in the past years but because of the increasing unemployability of educated youth, the
mismatch in training acquired and that which is demanded by industry, for example, shortage of quality
professionals like engineers, doctors and technicians and teachers due to lack of infrastructure and quality
education, shortage of English speakers and fall in women labour market participation-to name a few issues-
questions have started to emerge that need correct answers.
RELATION BETWEEN EDUCATION AND LABOUR MARKET PARTICIPATION RATE
It is a very simple concept that when people spend a huge amount of resources in seeking higher education then
they do want to get a return for the expenditure they have made and the time they have invested in educating
themselves. Therefore, the more the population of a country opts for higher education, the more likely it is that
they would look for jobs and this would thus increase the labormarket participation for a country. With
investment in education, the skills and capabilities of employees increases which results in higher income. The
Human Capital theory says that there is a direct relationship between education and productivity and therefore
with higher education, there will be higher payoffs and thus labour market participation is likely to increase.
The government of most of countries including India subscribe to Human Capital school of thought and
therefore allocate budget to education every year. Higher educational attainment comes with many advantages.
In general, when more and more people opt for higher education, the unemployment rate decreases. The main
factor responsible for unemployment, besides lack of jobs, is the inability to apply skills for solving practical
problems on the work front. Another important factor is when the economy is strained, then employers are
unwilling to spend huge resources to train the employees in necessary skills required for the particular job and
thus prefer hiring candidates with the prepossessed skills. Third important problem is lack of English speaking
skills or computer skills (Chakrabarty, 2016). If all these factors are taken care of then more and more people
would find themselves qualified for the particular job and would want to apply for suitable jobs and this would,
in turn, increase the labour market participation in India. When there is a skill mismatch, people end up jobless
and after a point of time, they withdraw themselves from the labour market thus reducing the LMP rate which is
against the economic growth of any country.
DISCREPANCY BETWEEN LMP RATE OF MEN AND WOMEN
The labor market/force participation rate for women is one of the lowest in the world. Despite educational
gains, the labor force participation rate for women in 2017 was 28.5% as compared to 82% for men (WEF
Report, 2017).Increasing women’s labor force participation by 10 percentage points could add $700 billion to
India’s GDP by 2025 (or a 1.4% increase) (McKinsey, 2015). Among developing countries, there exists gender
gaps in labour force participation rates. In the case of India, the gender gap in labour force participation rate is
more than 50 percentage points. Women workers are the most disadvantaged in the labour market as they
constitute a very high proportion among the low skilled informal worker category (Economic survey, 2018).
Employment in India has grown faster for men and in urban areas. Male employment increased by 1.9 percent
per year since 1999- 2000 to 2011-12, while female employment increased by only 0.3% per annum
99
(International Labour Organization, 2017). Although India tops the list of the developing countries in the world,
it has to do a lot of work in order to improve the status of its women. Women in India suffer from
discrimination in many spheres of life and education and employment is one of them. The literacy rate for men
in India is 82.14% whereas the female literacy rate is as low as 65.46%. In some states like Rajasthan, the
difference in literacy rate is even more visible with the male literacy rate of 79.19% and the female literacy rate
of merely 52.12%. This is about women who are illiterate. But what about those women who are literate? Are
they getting equal opportunities in the labour market? Are they being paid wages at par with the male
population of our country? The answer is ‘NO’. This discrimination does not end with education. This is clearly
evident from the labour market participation rate of women in our country.
In addition to education, variations in women's employment rates contribute to differences in general
employment rates between countries. Although discrepancy exists in the employment rates of men and women
across countries, much research work has shown that these differences narrow down with the level of education.
For instance, a study conducted by OECD in 2011 found that employment rates for men and women in OECD
countries increase by an average of 70.1% for men and 48.9% for women with lower secondary education to an
average of 88.6% for men and 80.0% for women with tertiary-type A qualifications. Employment rates for
women with lower secondary education are particularly low: less than 40% in Chile, the Czech Republic,
Hungary, Poland, the Slovak Republic, Turkey, and the United Kingdom. Employment rates for women with a
tertiary-type A education is equal to or greater than 75% everywhere except in Chile, Italy, Japan, Korea,
Mexico, and Turkey, but it is still below men in all countries.
A study was conducted by Bhaduri and Pastore in 2017 to find whether a lower wage rate for women is the
reason why the female LMP rate is lower in India. The analysis shows that women's education has a U-shaped
relationship with participation in paid work. Levels of education higher than compulsory schooling correlate
with an increase in the propensity to participate in paid work. Pay increases significantly along with the increase
in educational levels. However, the increase rate of return is lower for women with each passing year of
education in rural as well as urban areas. This suggests that women suffer high levels of wage discrimination in
the labour market and this may be the reason for lower female LMP in India.
ROLE OF VOCATIONAL TRAINING IN INDIA
Among the above-mentioned factors, the mismatch in the skills is the primary reason for the mismatch between
demand and supply in the labour market. Therefore skill development has been the primary focus of the
government of several countries with a specific emphasis on vocational education and training. And why
shouldn’t it be, given the statistics of unemployment due to the lack of formal skills resulting in lower
productivity and economic setback for a country. Vocational education involves training and is concerned with
training on vocation in order to prepare individuals for jobs. The Indian Education Commission, 1996 noted that
vocational training can bring education closer to productivity (Venpakal, 2015). A study done by Agrawal and
Agrawal, 2017 showed that 'the relative returns to vocational education are higher than that of general
secondary education' (Khan). As India is the fastest growing economy, so in order to keep pace with the
developed countries, India has to buckle up and work towards making the technical and professional education
and training system as good as the internal standards demand it to be.
Vocational training is important as employers find it difficult in finding suitably skilled employees. There is a
mismatch in the type of workers demanded and the type of workers supplied. Skills are a critical asset for
individuals, business as well as society. Although it is imperative to impart basic education to individuals but it
is also crucial to guarantee that the skills taught at school are relevant to the job world; that they are maintained
and improved during work life; and that they are recognized and used by employers once people are in the
labour market (World Economic Forum, 2014). Recognizing the repercussions involved in ignoring this aspect,
the government is taking several initiatives to match the skills with jobs. The above-mentioned facts make a
strong case for improving the vocational training system of a country
Presently in India, vocational training is offered part-time and full-time. Full-time training is usually provided
by the Industrial Training Institute, while part-time programs are offered by the State Board of Technical
Education (Savion, 2018). In order to improve the 'school to work' transition the government of our country has
taken several initiatives and has launched various programs at the state and central level. As per the latest
update (2015) on the website of Directorate General of training, Ministry of Skill Development and
Entrepreneurship, there are a total of 11,964 (Govt. 2284 + Pvt. 9680)numbers of ITIs in all States/UTs.
Training is imparted in 126 trades (73 Engineering+ 48 Non- Engineering +05 exclusively for visually
impaired) of duration 1-2 years. National Trade Certificate, nationally & internationally recognized under the
aegis of National Council for Vocational Training (NCVT) is awarded to successful trainees. However, keeping
100
in mind the fall in labour market participation, the education system of the country needs to be overhauled so
that there is a link between the schools and the workplace.
A way forward would be to strengthen government and private organizations partnership in establishment of
vocational training and entrepreneurship development at the school level as government run institutes and
private organizations are unable to handle the challenge of increasing unemployability of youth that has been
educated in the present conventional education system. For example, the University of Delhi has total of only
905 seats in B. Voc. Courses for students to get an opportunity to take admission in skill based education
programme under a university system and thus become part of labour market. Vocational training initiatives
have not yet been a success story, given the poor quality of training and the lack of awareness among the
masses about the vocational training programs provided by the government and private sector. In fact, the
World Bank report of 2006 shows that only 2% of the population in the working age group of 15-29 have a
formal vocational training and 8% has informal vocational training (Bhardwaj et al, 2011). But this situation is
gradually improving because of the several initiatives taken up by the government and private bodies to help the
masses reap the benefits of vocational training programs by reaching out to them through several initiatives as
discussed in the next topic.
GOVERNMENT INITIATIVES IN RIGHT SKILLING OF INDIAN WORKFORCE
‘Skill India Programme’ aims at providing training to develop the necessary skills of 500 million youth of the
country by 2020. The main features of the programme are: to provide necessary skills to people so that they can
get employed, to promote entrepreneurship, to provide guidance and support for traditional occupations such as
carpenter, blacksmith, etc. Under this programme special emphasis is also given to improve skills in areas such
as construction, transport, textile, etc where there is an inadequate number of skilled people at present (Phukan,
2014).With the help of the World Bank, the government of India has launched the ‘Vocational Training
Improvement Project’. The project aims to design the training program in a way that it is responsive to the
demands of the labour market. The main aim of the project was to improve the quality of vocational training
provided by the industrial training institute. The project aims to support 400 ITIs across the country so that they
can become the Centre of Excellence in selected skill areas that are currently in demand (World Bank, 2007).
The central government has established ‘National Vocational Qualifications Framework’ to qualify workforce
in a nationally standardized and acceptable manner and as per the international standards. NVQF covers
schools, vocational education, and training institutions and higher education sector. NVQF lays down a detailed
list of knowledge, skills, and attitude that the labour must possess to perform a particular task as written by the
particular employment-led sector skill council (Bhardwaj, 2011).The Government of India and the Ministry of
Labour have launched ‘Modular Employability Skills (MES)’ under the ‘Skills Development Initiative (SDI)’.
Under this scheme, the school dropouts and existing workers, mostly in the unorganized sector, are to be trained
for employment skills ‘The Ministry of Skills and Entrepreneurship Development (MSDE)’ is responsible for
the coordination of general skills development efforts throughout the country, building the vocational and
technical training framework, improving skills, building new skills and Innovative thinking for existing and
newly created jobs (National Skills Network, 2016).
‘The National Skill Development Corporation, (NSDC)’ is a unique organization under the Ministry of
Development of Skills and Entrepreneurship. Its main objective is to promote the development of skills by
creating training institutes throughout the country. NSDC provides the necessary funds to companies,
businesses, and organizations that offer training in the needed skills. The existence of multiple sectors in the
country is always a blessing for investors.‘Pradhan Mantri Kaushal Vikas Yojana (PMKVY)’ was launched
with an aim to train around 24 lakhs young Indians so that they could be relevant to the industry, to build on
skills and to prepare them for the global market. Under this scheme, apprentices will also receive financial
support and a certificate on the successful completion of training and evaluation process, which will help them
get a job for a better future. Some other important programs that have been initiated by the government for
providing vocational education in India are National Skill Development Agency, National Rural Livelihood
Mission – Ajeevika Skills, Etc (National Skills Network, 2016).
PRIVATE SECTOR INITIATIVES IN RIGHT SKILLING OF INDIAN WORKFORCE
One major setback to the vocational training in India is the lack of private and industry participation since there
are no incentives for the private and industrial players to participate in imparting vocational training programs.
In fact, all they look for is employees with high qualifications so that they do not have to invest their resources
in building capacity and can milk the cow right from the beginning. A new study published by the National
Skill Development Corporation (NSDC) and Accenture said that private financing and public-private
partnerships are helping India overcome two of the biggest challenges to vocational training: inadequate
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infrastructure and a shortage of offers of work (Canada India Education Council,2013).In order to improve the
vocation education system in India and to improve the technical skills of the working age population, Jindal
Education Initiatives (implementation partner), Wadhwani Foundation (technical partner) and Montgomery
college (Capacity building partner), US entered into a strategic partnership in 2011. The main objective of this
collaboration was to provide an advanced training program for technical trade instructors that include curricula
in a way that is driven by industry work and is progressive. The Jindal Education initiatives have set up
community colleges with the intention to enrol one lakh students in vocational education (Gohain, 2011).
Some other private organizations that are making a significant contribution in vocational training in India are
Nettur Technical Training Foundation, which has 19 training centers and trains more than 10,000 students
annually, and Gedee Institute of Technical Training that offers Certificate and Diploma Courses in Coimbatore.
Lately, many new initiatives have been launched, including IL & FS, Skill Development Corporation, IIJT,
GRAS Academy, NIIT-IFBI, Vidyanta Skill Institute, ICICI Manipal Academy, Apollo Med Skills Ltd.,
Centum Workskills, Hero Mindmine, CII-Edexcel, NIIT Yuva Jyoti, Future Sharp, etc. International institutions
also seek to enter India mainly through associations or joint ventures (Kabir and Saxena, 2014).
CONCLUSION
This module on ‘Education and Labour Market Participation’ discusses the role of education and in particular
higher education in improving the labour market participation rate for India. Although India is the fastest
growing economy with an excellent demographic dividend, it lags behind in the LMP rate due to several
factors; lack of proper skilled based education or vocational training being one of them. This module also
discusses how government and private sector initiatives can improve the LMP in India. No doubt education has
a very important role to play in improving the labour market outcomes for a country but to increase LMP in
India it is important to reduce the discrimination that is faced by women in the labour market. This module also
informs participants that the job market and society in general is hugely biased in favour of men and with
higher education this biasness can reduce to some extent. If women’s salary is at par with the men’s income,
they are more likely to be encouraged in seeking a job and this will transform the state of LMP in India which is
negatively impacted because of the lack of participation of women who form almost 50% of the workforce of a
country. Training courses in certain skills that may encourage women to participate in labour market is also an
area that needs to be researched for further improvements in the existing system. There is also a need to
increase awareness among women about economic empowerment.
The education system of the country may be restructured through forming a link between the schools and the
workplace. Sole dependence on institutions after secondary and higher secondary education may not be the
right way. For example, The University of Delhi has total of only 905 seats in B. Voc. courses for students to
get an opportunity to take admission in skill based education programme under a university system and thus
become part of labour market. A very strong emphasis on vocational training is the need of the hour because of
the change in the state of the labour market which now demands employees with skills that match the job
requirement. The increasing unemployability of educated youth is a serious problem that needs to be resolved.
Although some amount of skill mismatch is unavoidable but if this mismatch persists then it would lead to huge
loss for the individual, organization as well as the society. Studies need to be conducted so as to find out how
the present education system may be restructured. The involvement of school system in vocational training is
also an area of research for policy making. Furthermore, ways should be found to improve the existing quality
of vocational training. There is also an urgent need to increase the strength of teachers/trainers and enhance
their quality. Regarding the issue of vocational courses seats lying vacant, besides improving quality and
infrastructure, there is also a need to spread awareness of the benefits of the programme and thus increase the
acceptability of such courses in Indian society.
REFERENCES
 Agarwal, P. (2006). Higher Education and the Labor Market in India,
http://siteresources.worldbank.org/INTABCDE2007BEI/Resources/PAgarwal.PDF
 Agrawal, T. and Agrawal, A. (2017). Vocational education and training in India: a labour market
perspective, Journal of Vocational Education & Training, 9(2), pp. 246-265.
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Serious Challenge,https://www.forbes.com/sites/salvatorebabones/2018/01/10/india-may-be-the-worlds-
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 Bhaduri, S.K. and Pastore, F. (2017). Are lower Labour Market Returns to Education in India responsible
for low Female Work Participation? An Analysis of NSSO Data: 2011-12, http://www.aiel.it/cms/cms-
files/submission/all20170905153801.pdf
 Bhardwaj, R., Kadam, S. Kumar, P. (2011). Concept Note on Need for Vocationalisation of Education in
India’ Symbiosis Open Education Society, http://www.scdl.net/Downloads/VocationalUniversity
ConceptNote.pdf
 Canada India Education Council (2013). Indian Private Public Partnership to Address Vocational Training
Challenges, http://canadaindiaeducation.com/indian-public-private-partnerships-to-address-vocational-
training-challenges/
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engineers? New Delhi, https://www.indiatoday.in/education-today/featurephilia/story/engineering-
employment-problems-329022-2016-07-13
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Political Weekly, 4 May
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https://timesofindia.indiatimes.com/city/delhi/New-initiatives-to-strengthen-vocational-
education/articleshow/10959391.cms
 International Labour Organization. Labour Force Participation Rate, www.ilo.org/ilostat-
files/Documents/description_LFPR_EN.pdf
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http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/--publ/documents/publication/wcms
202215.pdf
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wcms 568701.pdf
 Kabir, E. and Saxena, L. (2014). India’s Vocational Education and Training Segment,
http://www.technopak.com/files/Vocational_Education_and_Training_Segment.pdf
 Khan, Z. Aims and Objectives of Vocational Education in India, http://www.yourarticlelibrary.com/
education/aims-and-objectives-of-vocational-education-in-india/45176
 King, E. M. (1990).Does Education Pay in the Labour Market? The Labour Force Participation, Occupation,
and Earnings of Peruvian Women. Living Standards Measurement Study Working Paper Number 67,
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bor_Force_Participation_Occupation_and_Earnings_of_Peruvian_Women_Living_Standards_Measurement
_Study_Working_Paper_Number_67
 McKinsey (2015). The Power of Parity: Advancing Women’s Equality in India.
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EN.pdf.
 OECD. Educational Attainment of the Labour Force, Chapter 2http://www.oecd.org/els/emp/3888221.pdf
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Rural Development and Administration, 33(1), pp. 39-47
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Advantages,https://www.mapsofindia.com/my-india/society/skill-india-a-new-programme-to-be-launched-
in-march-2015
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in-india/
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india/labor-force-participation-rate
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Planning (IIEP) Research Report No. 67.
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labour-force-participation-rate
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for Better Skills and Better Jobs, http://www3.weforum.org/docs/GAC/2014/
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 World Economic Forum, The Global Gender Gap Report 2017(2017).
ADDITIONAL BIBLIOGRAPHY
 Das,Sonali, Chandra,Sonali Jain and Kochhar,Kalpana . ‘Women Workers in India: Why So Few Among
So Many?’. International Monetary fund, 2015. Google Books. Web. 05 Sept, 2018.
https://books.google.co.in/books?isbn=1498371744
 Mehrotra, Santosh and Mehrotra, Santosh K. ‘India's Skills Challenge: Reforming Vocational Education
and Training to Harness the Demographic Dividend’. National Institute for Labour Economics Research and
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Vocational-Demographic/.../01994527
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https://books.google.co.in/books?isbn=9811071438
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SMART RETAIL DEVELOPMENT THROUGH USE OF SMART SUPPLY CHAIN ENABLERS IN INDIA
Fahima Sherwani1 and Dr. Saiyed Wajid A2

Assistant Professor1, Jagan Institute of Management Studies (JIMS), Delhi
Associate Professor2, Centre for Management Studies, Jamia Millia Islamia, New Delhi
ABSTRACT
Introduction - The challenges such as environmental and social responsibility, adoption of technology,
collaborative decision making among the retail supply chain stakeholders to reduce cost and achieve higher
level of flexibility and customer satisfaction have scored the attention of both the practitioners and the
academicians towards making smart retail supply chain ecosystem. Over the past decade, the concept of smart
supply chains has emerged as the most promising resolution to these challenges. The need for such study in the
retail sector is more pronounced, given the challenges on one hand and increasing complexities of supply chain
on the other.
Purpose – The purpose of this paper is to report on a study that examines the impact of the identified enablers
in the metamorphoses of common retail supply chain into smart supply chain. The problem here is at this
nascent stage there is a dire need to establish a proper relation between the enablers along with their
importance. The paper aims to fill this gap and examines the hierarchical relationship of the identified enablers
of smart retail supply chain (SRSC).
Design/Methodology/Approach – An approach was adopted using one-to-one, in-depth semi-structured
interviews with the academicians, industry experts and retailers who were directly involved in research or in
introducing these enablers within their respective companies. These factors were then probed through extant
literature. Thus, the ensuing factors enabling the implementation of smart retail supply chain were selected for
the study. The paper presents a novel approach to prioritize the importance of identified factors first and then
to construct causal relations among the factors.
Findings – The all-encompassing role of the identified enablers in today’s business world and the findings of
this study aims to explore and find the factors that would play a vital role in the future of retail firms operating
as smart retail firms in India where use of smart technology is still very much in its infancy for some retailers
although its use has generally continued since 2000.
Originality/Value – The outcomes and future scope of the study illustrate the specific enablers and
implementation issues encountered by retailers, identify the consequences of their implementation on the retail
businesses, and identify how these retailers in India could use and facilitate better implementation of these
enablers in the future. The study aims to make the Indian retail ecosystem more robust with reduced
uncertainties helping in the progression of smart retail in India. The outcomes of the study would assist
researchers and practitioners to understand how these enablers are associated among themselves.
Keywords: MICMAC Analysis, Smart Retail, Smart Supply Chain, Smart Supply Chain Enablers, Total
Interpretive Structural Modelling (TISM)
1. INTRODUCTION
Indian retail is the fastest growing industry in India. Retail sector encompasses products from all other sectors
viz., apparel, food, automotives, electronic products etc. The competency of this industry is dependent on the
competence of its supply chains. Post globalization, the increasing rate of urbanization and disposable income,
exposure to western culture and growing consumerism and changing life styles has lead to rapid growth of this
sector (IBEF report, 2017). This has also presented a major challenge in front of the retailers to increase the
efficiency of their operations. The only resort is to make their supply chains smarter. This necessitates the
adoption of new innovative technologies and tools. Any factor that causes disruption in the smooth functioning
of the retail supply chain might pose as a barrier in the development of smart retail system. Though ample of
literature on retail sector is there however there is limited research that has been done on this aspect of retail
supply chain.
Volatile market conditions and fluctuating consumer demand calls for optimum supply chain configurations to
synchronise supply and demand however lack of clarity and visibility to information inhibits supply chain
response to these unpredictable swings. Retail management has come a long way from the conventional means
in 80s and 90s to the use of latest internet of things (IoT). Now retail chains are global in nature. They not only
make use of smart technologies (GPS, RFID etc) but also its supply chain partners now join hands and make
collective decisions to optimize cost, time and opportunities. For developing smart retail supply chain, a
105
conducive environment is required. A smart supply chain ecosystem is an environment that is an ecosystem
that involves interaction between the various components that makes a smart supply chain. In a smart supply
chain ecosystem we highlight the relationships between various components of the four dimensions of smart
supply chain (figure 1).
Figure-1: Smart Supply Chain Ecosystem

Wu et. al., (2016) defines “smart supply chain” as the new interconnected business system which extends from
isolated, local, and single-company applications to supply chain wide systematic smart implementations. The
emerging studies depict that rise and improvements in technologies have presented solutions such as ICT, RFID
technology and the EPC Network in managing e-commerce supply chains (Wamba et. al., 2006). These along
with other factors such as better instrumentation and tools such as analytics contribute in making a supply chain
smarter (Wu et. al., 2016). Hence it would not be an exaggeration that their usage makes the foundation of
smart retail supply chain. This paper presents a conceptual framework for using advanced technologies,
instrumentation, improving transparency and traceability, intelligent tools etc for the development of smart
retail supply chain in India.
Plethora of studies have been conduction in the area of retail supply chain management and how different tools
and methods can help in improving the efficiency however very few are focused on smart supply chain. This
leaves the canvas wide open for research. Smart supply chain goes one step further in the process of evolution
of supply chains after the extended supply chain. A smart supply chain overcomes the often daunting challenges
that the complexities that conventional and extended supply chains offer. It is marinated with the latest
technologies and tools. Companies aim to improvise their supply chain by adopting emerging technologies and
intelligent infrastructure and business processes (Schuster et al., 2007) by focussing on current capabilities and
building new competencies for the future. Today’s retail business like other business systems is interconnected,
integrated and intelligent (IBM, 2010). As summed by Wu et. al. (2016); it is equipped with smarter supply
chain capabilities such as online or e-supply chain (Akyuz and Rehan,2009), Internet of Things (IoT) (Ma,
2011),ambient intelligence (Kloch et. al.,2010), physical internet (Montreuil,2011), smart environment (Weiser
et.al.,1999), and smarter supply chain (Butner, 2010).
Supply chains today are highly complex and face five major challenges; cost containment, risk, visibility,
customer intimacy and globalization (IBM Report, 2010) which must be addressed simultaneously. Smart retail
supply chains are flexible and thus are responsive, capable of combating and adapting the ever changing
environment.
The characteristics and enablers for SRSC identified from the literature and expert opinion are summarized in
the Table 1.
Table-1: Characteristics and enablers of SRSC
S. No. Characteristics
Smart Retail
of Smart Retail References
Supply Chain Enablers
Supply Chain
1. Technology Utilization (TU) IBM Report (2010), Ke Rong
2. Virtual supply chain using IOT (VSC) (2015), Saudah Ahmad (2014), L.
3. Location Based Services (LBS) Atzori (2010), D Uckelmann
A Instrumented
(2011), Verdouw C N, Beulens and
Van Der Vorst (2013), Tijun, Feng,
Sheng and Shuxia (2014),
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Guillemin P. (2009), Tijun Fan

(2015)
4. Visibility of information (VI) Pascal Pluvinet, Jesus Gonzalez-
5. Coordination among various Feliua, Christian (2012), Farhad
stakeholders (CDN) Panahifar (2014), Singh (2011),
6. Customers Intimacy (CI) Anil Singh (2016), Rajendra Kumar
B Interconnected
7. Governance Mechanisms (GM) Shukla (2013), Daniel Rexhausen
8. Better Understanding of the Processes (2012)
(BPS)
9. Inventory Visibility (IV)
10. Supply Chain Analytics (SCA) Fawcett (2013), Agarwal et. al.
11. Network and distribution analysis (2006), Khan Rai Waqas Azfar
(NDA) (2014), Gunasekaran and Tirtiroglu
12. Modelling event simulation (MES) (2001), Gunasekaran, Patel, &
13. Use of demand signals (UDS) McGaughey (2004), Daniel
C Intelligent
14. Customer Segmentation (CS) Rexhausen (2012), R. Rajesh
15. Leagile SC (LSC) (2015), Mourtzis, Doukas, &
16. Measurement through KPIs (KPI) Bernidaki (2014)
17. Supply chain risk reduction
strategies (SCRR)
18.Adoption of Safety Standards (ASS) Sunku Venkata Siva Rajaprasad
19.Adoption of Green Practices (AGP) (2015), M Bostrom (2015), Kannan
D Sustainability
20. Waste and Hazard Management Govindan (2015), Vachon (2007)
(WHM)
2.1 Research Gap
Extensive literature has been carried out in the context of smart supply chain however it was found that very
limited research work has been done on various aspects of smart retail supply chain. It is also evident that the
work done so far is inadequate to understand the smart retail supply chain and its ecosystem. Literature
indicates requirement for the studies exploring the enablers affecting a smart retail supply chain. Hence the
present study focuses on exploring the enablers of smart retail supply chain and in identifying the relationship
among them.
3. METHODOLOGY ADOPTED: TISM
ISM was introduced by Warfield in 1973. It is an interpretive approach that incorporates experts’ knowledge
and opinions in a systematic manner (Thakkar, 2007). TISM is an extension of ISM . TISM methodology is
used to develop a hierarchical relationship among the variables under study and also shows the interpretation of
links Sushil (2012) explained that TISM methodology consists of following steps (Sushil, 2012):
1. Identifying and defining the elements
2. Define contextual relationship
3. Interpretation of relationship
4. Interpretive logic of pair-wise comparison
5. Develop reachability matrix and transitivity check
6. Level partition on reachability matrix
7. Developing diagraph
8. Interaction matrix
9. Total Interpretive Structural Model
3.1 Justification for selection of TISM
Literature shows that TISM methodology has been used extensively to delineate the relationship between
different variables (Thakkar (2007); Sushil (2012)). In the present study, a similar attempt has been made to
establish a hierarchical relationship among the factor-enablers of smart retail supply chain in India. Hence
considering the similar studies done in other areas, TISM is chosen to achieve this objective.
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3.2 Modelling of the Enablers Using TISM

Earlier, focus group interview was done followed by literature review to identify the various enablers for smart
supply chain. Here, using Total Interpretive Structural Modelling (TISM), we try to build a hierarchical order of
all the variables on the basis of their dependent power and driving power.
TISM helps to identify relationship among different variables. The data collected from expert through the
questionnaire was collated and the analysis was carried out using the average response for each variable. The
relationships among different variables are found out through group decision-making technique like Nominal
Group Technique. Once the relationships between the variables are established, Structural Self-Interaction
Matrix (SSIM) is formed by representing the relationships using the following rules:
V: Factor i helps to achieve factor j;
A: Factor j helps to achieve factor i;
X: Factors i and j helps to achieve each other; and
O: Factors i and j are independent of each other.
Reachability matrix is formed, which is further partitioned into different levels. Then the final model of TISM
is developed. MICMAC analysis is performed, which classifies the variables into four types based on their
driving and dependence powers.
3.2.1 Structural Self Interaction Matrix (SSIM)
The structural self-interaction matrix (SSIM) for the element under consideration is then prepared by filling in
the responses of the group on each pair-wise interaction between the elements. SSIM constructed for the
enablers for the development of SRSC is shown in Table 2.
Table-2: Structural Self Interaction Matrix (SSIM) for Enablers
3.2.2 Reachability Matrix

The SSIM format is transformed into the reachability matrix format by transforming the information in each
entry of the SSIM into 1’s and 0’s in the reachability matrix.
108
Table-3: Initial Reachability matrix
The reachability matrix was then checked for transitivity to obtain the final reachability matrix (Table 4).
Table-4: Final Reachability matrix
3.2.3 Level Partitions

Once the reachability matrix was prepared, it was processed to extract the digraph and associate structural
models. A series of partitions were induced by the reachability matrix on the sets and sub-sets of the elements,
i.e. relation partition and level partition. Thus twelve levels were obtained (Table 5 – Table 16).
109
Table-5: Iteration 1
Element Reachability Set Antecedent Set Intersection
1 1,2,3,4,5,6,9,10,11,12,13,14,15,16,17,18,19,20 1,7,8 1
2 2,3,4,5,6,9,10,11,12,13,14,15,16,17,18,19,20 1,2,7,8 2,3
3 2,3,4,5,6,9,10,11,12,13,14,15,16,17,18,19,20 1,2,3,7,8 2,3
4 4,5,6,9,10,11,12,13,14,15,16,17,18,19 1,2,3,4,5,7,8,9 4,5,9
5 4,5,6,9,10,11,12,13,14,15,16,17,18,19,20 1,2,3,4,5,7,8,9 4,5,9
6 6,15,16,17,18,19,20 1,2,3,4,5,6,7,8,9 6
7 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18,19, 7,8 7,8
20
8 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18,19, 8 8
20
9 4,5,6,9,10,11,12,13,15,16,17,18,19, 1,2,3,4,5,7,8,9 4,5,9
10 6,10,11,12,14,15,16,17,18,19,20 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
11 6,10,11,12,14,15,16,17,18,19,20 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
12 6,10,11,12,14,15,16,17,18,19,20 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
13 10,11,12,13,14,15,16,17 1,2,3,4,5,7,8,9,13 13
14 6,14,15,16,17,18,19,20 1,2,3,4,5,7,8,9,10,11,12,13,14 14
15 15,16,17 1,2,3,4,5,6,7,8,9,10,11,12,13, 15
15
16 16 1,2,3,4,5,6,7,8,9,10,11,12,13, 16
15,16,17,18,19,20
17 16,17 1,2,3,4,5,6,7,8,9,10,11,12,13, 17
15,17,18,19,20
18 16,17,18,19,20 1,2,3,4,5,6,7,8,9,10,11,12,18, 18,19,20
19,20
19 16,17,18,19,20 1,2,3,4,5,6,7,8,9,10,11,12,19, 18,19,20
20
20 16,17,18,19,20 1,2,3,4,5,6,7,8,9,10,11,12,20 18,19,20
110
1 1,2,3,4,5,6,9,10,11,12,13,14,15,17,18,1 1,7,8 1
9,20
2 2,3,4,5,6,9,10,11,12,13,14,15,17,19,20 1,2,3,7,8 2,3
3 2,3,4,5,6,9,10,11,12,13,14,15,17,19,20 1,2,3,7,8 2,3
4 4,5,6,9,10,11,12,13,14,15,17,18,19,20 1,2,3,4,5,7,8,9 4,5,9
5 4,5,6,9,10,11,12,13,14,15,17,18,19,20 1,2,3,4,5,7,8,9 4,5,9
6 6,15,17,18,19,20 1,2,3,4,5,6,7,8,9 6
7 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,17,1 7,8 7,8
8,19,20
8 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,17,1 8 8
8,19,20
9 4,5,6,9,10,11,12,14,15,17,18,19,20 1,2,3,4,5,7,8,9 4,5,9
10 6,10,11,12,14,15,17,18,19,20 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
11 6,10,11,12,14,15,17,18,19,20 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
12 6,10,11,12,14,15,17,18,19,20 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
13 10,11,12,13,14,15,17 1,2,3,4,5,7,8,9,13 13
14 6,14,15,17,18,19,20 1,2,3,4,5,7,8,9,10,11,12,13,14 14
15 15,17 1,2,3,4,5,6,7,8,9,10,11,12,13,15 15
17 17 1,2,3,4,5,6,7,8,9,10,11,12,13,15,17, 17
18,19,20
18 17,18,19,20 1,2,3,4,5,6,7,8,9,10,11,12,14,18,19, 18,19,20
20
19 17,18,19,20 1,2,3,4,5,6,7,8,9,10,11,12,14,18,19, 18,19,20
20
20 17,18,19,20 1,2,3,4,5,6,7,8,9,10,11,12,14,18,19, 18,19,20
20
1 1,2,3,4,5,6,9,10,11,12,13,14,15,18,1 1,7,8 1
9,20
2 2,3,4,5,6,9,10,11,12,13,14,15,19,20 1,2,3,7,8 2,3
3 2,3,4,5,6,9,10,11,12,13,14,15,19,20 1,2,3,7,8 2,3
4 4,5,6,9,10,11,12,13,14,15,18,19,20 1,2,3,4,5,7,8,9 4,5,9
5 4,5,6,9,10,11,12,13,14,15,18,19,20 1,2,3,4,5,7,8,9 4,5,9
6 6,15, 18,19,20 1,2,3,4,5,6,7,8,9 6
7 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,1 7,8 7,8
8,19,20
8 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,1 8 8
8,19,20
9 4,5,6,9,10,11,12,13,15,18,19 1,2,3,4,5,7,8,9 4,5,9
10 6,10,11,12,14,15, 18,19,20 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
11 6,10,11,12,14,15, 18,19,20 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
12 6,10,11,12,14,15, 18,19,20 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
13 10,11,12,13,14,15 1,2,3,4,5,7,8,9,13 13
14 6,14,15,18,19,20 1,2,3,4,5,7,8,9,10,11,12,13,14 14
15 15 1,2,3,4,5,6,7,8,9,10,11,12,13, 15
15
18 18,19,20 1,2,3,4,5,6,7,8,9,10,11,12,14, 18,19,20
18,19,20
19 18,19,20 1,2,3,4,5,6,7,8,9,10,11,12,14, 18,19,20
18,19,20
20 18,19,20 1,2,3,4,5,6,7,8,9,10,11,12,14, 18,19,20
18,19,20
111
1 1,2,3,4,5,6,9,10,11,12,13,14 1,7,8 1
2 2,3,4,5,6,9,10,11,12,13,14 1,2,3,7,8 2,3
3 2,3,4,5,6,9,10,11,12,13,14 1,2,3,7,8 2,3
4 4,5,6,9,10,11,12,13,14 1,2,3,4,5,7,8,9 4,5,9
5 4,5,6,9,10,11,12,13,14 1,2,3,4,5,7,8,9 4,5,9
6 6 1,2,3,4,5,6,7,8,9 6
7 1,2,3,4,5,6,7,8,9,10,11,12,13,14 7,8 7,8
8 1,2,3,4,5,6,7,8,9,10,11,12,13,14 8 8
9 4,5,6,9,10,11,12,13 1,2,3,4,5,7,8,9 4,5,9
10 6,10,11,12,14 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
11 6,10,11,12,14 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
12 6,10,11,12,14 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
13 10,11,12,13,14 1,2,3,4,5,7,8,9,13 13
14 6,14 1,2,3,4,5,7,8,9,10,11,12,13,14 14
1 1,2,3,4,5,9,10,11,12,13,14 1,7,8 1
2 2,3,4,5,9,10,11,12,13,14 1,2,3,7,8 2,3
3 2,3,4,5,9,10,11,12,13,14 1,2,3,7,8 2,3
4 4,5,9,10,11,12,13,14 1,2,3,4,5,7,8,9 4,5,9
5 4,5,9,10,11,12,13,14 1,2,3,4,5,7,8,9 4,5,9
7 1,2,3,4,5,7,8,9,10,11,12,13,14 7,8 7,8
8 1,2,3,4,5,7,8,9,10,11,12,13,14 8 8
9 4,5,9,10,11,12,13 1,2,3,4,5,7,8,9 4,5,9
10 10,11,12,14 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
11 10,11,12,14 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
12 10,11,12,14 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
13 10,11,12,13,14 1,2,3,4,5,7,8,9,13 13
14 14 1,2,3,4,5,7,8,9,10,11,12,13,14 14
Table 11: Iteration 7

1 1,2,3,4,5,9,10,11,12,13 1,7,8 1
2 2,3,4,5,9,10,11,12,13 1,2,3,7,8 2,3
3 2,3,4,5,9,10,11,12,13 1,2,3,7,8 2,3
4 4,5,9,10,11,12,13 1,2,3,4,5,7,8,9 4,5,9
5 4,5,9,10,11,12,13 1,2,3,4,5,7,8,9 4,5,9
7 1,2,3,4,5,7,8,9,10,11,12,13 7,8 7,8
8 1,2,3,4,5,7,8,9,10,11,12,13 8 8
9 4,5,9,10,11,12,13 1,2,3,4,5,7,8,9 4,5,9
10 10,11,12 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
11 10,11,12 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
12 10,11,12 1,2,3,4,5,7,8,9,10,11,12,13 10,11,12
13 10,11,12,13 1,2,3,4,5,7,8,9,13 13
112
1 1,2,3,4,5,9,13 1,7,8 1
2 2,3,4,5,9,13 1,2,3,7,8 2,3
3 2,3,4,5,9,13 1,2,3,7,8 2,3
4 4,5,9,13 1,2,3,4,5,7,8,9 4,5,9
5 4,5,9,13 1,2,3,4,5,7,8,9 4,5,9
7 1,2,3,4,5,7,8,9,13 7,8 7,8
8 1,2,3,4,5,7,8,9,13 8 8
9 4,5,9,13 1,2,3,4,5,7,8,9 4,5,9
13 13 1,2,3,4,5,7,8,9,13 13
1 1,2,3,4,5,9 1,7,8 1
2 2,3,4,5,9 1,2,3,7,8 2,3
3 2,3,4,5,9 1,2,3,7,8 2,3
4 4,5,9 1,2,3,4,5,7,8,9 4,5,9
5 4,5,9 1,2,3,4,5,7,8,9 4,5,9
7 1,2,3,4,5,7,8,9 7,8 7,8
8 1,2,3,4,5,7,8,9 8 8
9 4,5,9 1,2,3,4,5,7,8,9 4,5,9
1 1,2,3 1,7,8 1
2 2,3 1,2,3,7,8 2,3
3 2,3 1,2,3,7,8 2,3
7 1,2,3,7,8 7,8 7,8
8 1,2,3,7,8 8 8
1 1 1,7,8 1
7 1,7,8 7,8 7,8
8 1,7,8 8 8
1 1 1,7,8 1
113
1.2.4 Formation of TISM based Model
Figure-2: TISM Diagraph

114
Based on the level partitioning, the ISM is developed (Figure 2). As it is evident by the diagraph better
understanding of the processes, governance mechanism and technology utilization act as the main drivers
(enablers) of smart retail supply chain.
4. MICMAC Analysis
MICMAC analysis (Mathiyazhagan, 2013) is performed, which classifies the variables into four types based on
their driving and dependence powers as shown in Table 17.
Table-17: MICMAC Table
S. Variable Type Dependence and Driving Power Variable Name
No. (Quadrant)
1 Autonomous Variables Weak dependence and driving power UDS
(A)
2 Dependent Variables Strong dependence and weak driving CS, LSC, KPI, SCRR, ASS, AGP,
(B) power WHM and SSCE.
3 Linkage Variable (C) High dependence and driving power CI, SCA, NDA and MES
4 Driving Factors (D) Weak dependence and strong driving BPU, GM, TU, VSC, VI, CDN
power and IV
The driving power Vs dependence power diagram (MICMAC diagram) is then constructed as shown in figure
3.
D C
B
A
Figure 3: MICMAC Analysis of Enablers

(Driver-Dependence Matrix Diagram)
5. RESULTS AND MANAGERIAL IMPLICATIONS
The results of the study indicate that the smart retail supply chain depends on the twenty variables as discussed
in section 2. The paper aimed to identify and analyze the interactions among these enablers. To achieve this
TISM-based framework has been developed to show their hierarchical relationship. The top-level variables
having weak driving power have strong dependence on other variables. These variables depend on other
variables such as coordination among stakeholders, use of IoT and technology. The primary focus of the top
management should be on the most crucial factors viz understanding of business processes and governance
mechanism to frame appropriate policies that would consequently promote the adoption of other enablers and
help in making a supply chain smart.
The TISM model shows both direct and indirect relationships with the interpretation of the links i.e., how one
factor is effecting the other factor hence making this model self explanatory (figure 2).
The managerial implications that come into view from MICMAC analysis (driver-dependence matrix diagram)
and TISM model are as follows:
 There is only one variable (UDS) in the autonomous region A, hence it can be inferred that the effect of
demand signal as an enabler of SSC is not much significant.
115
 Region B in Figure 3 consists of variables CS, LSC, KPI, SCRR, ASS, AGP, WHM and SSCE. These
variables are called Dependent variables. They occupy top level in the TISM hierarchy. These variables do
not affect variables above their own level and they are influenced by other variables in the system.
 Region C consists of linkage variables which act as the connecting link between the variables in the system.
These include CI, SCA, NDA and MES and have both high dependence and driving power. If not managed,
they may result into unstable system as they can drive other factors and can also get influenced by other
factors.
 Region D consists of driving variables. They occupy the lowest level in the TISM hierarchy. They drive
other variables in the system. Variables BPU, GM, TU, VSC VI, CDN and IV fall under this category.
6. CONCLUSIONS
This paper adopts a novel approach to deal with the problems that are cropping with the growth of retail sector
and to ensure that the retail sector could evolve as smarter. The implementation of the model is proposed as a
way to deal with this scenario the research done in the area of smart retail supply chain is very limited and not
much has been done to identify and prioritise these enablers which would help in evolution of smart retail
supply chain. The developed framework would enable the managers to better understand the driving power of
these enablers and divert focus more on these factors to drive other enablers and achieve the ultimate goal.
Experts both from academics and retail sector were consulted for their opinion on the adopted methodology.
The outcome shows that domain expertise (better understanding of the processes), governance mechanism and
technology utilization act as the main drivers (enablers) of smart retail supply chain. To develop a smart retail
supply chain, it is essential to have a good understanding of business process and the technology which could
deployed with lesser cost. Also tools such as supply chain analytics, location based services and CPFR gives an
edge to it making the supply chains smarter. The study shows that green supply chain practices helps in making
the organizations more socially responsible but also helps in reducing risks and making the supply chain
sustainable. The effectiveness of these factors could be measured against key performance indicators. The
outcome can have great significance for research and management in smart retail domain in the future.
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THE IMPACT OF DEMONETIZATION ON CONSUMERS PURCHASE ON RETAIL STORE
Amgad S. Khaled1, Fatehi Ali Mohammed Almugari2 and Prof. Salma Ahmed3
Research Scholar1 and Professor3, Department of Business Administration, Aligarh Muslim University, Aligarh
Research Scholar2, Department of commerce Aligarh Muslim University, Aligarh
ABSTRACT
Demonetization is the act of stripping a currency unit of its status as legal tender. It affect different sectors of
the economy at large. In India demonetization took place on November 8, 2016 with withdrawing five hundred
and one thousand notes.This study assesses the impact thatdemonetization had on the online purchase activityof
the customers. This research deals with the consequences of demonetisation on rural areas with insufficient
banks/having no Banks, Village markets, Real estate, Health, E-business, Retail industry, Household and Cross
sector credit customers. The present research is conclusive, descriptive and is based on single cross sectional
research design. Quantitative data was generated on the basis of the research instrument Questionnaire).
Students belonging to Department of Buiness Administration, Aligarh MuslimUniversity were the
respondents.In all 102 responses were received. The studyconcludes that demonetization did have an impact on
consumers purchase behaviour. Though they did not stop purchasing off-line, they did postponed purchase and
as such so consumer stopped visiting retail store. Also, they engaged in purchasing less frequently. They shifted
from purchasing off- line to online.
Keywords: Demonetization, online purchase, mode of payment, new currency, bank, old currency, cashless
INTRODUCTION
Demonetization“is the act of changing the existing currency in different form. The old units are replaced by
new currency. In other words, demonetization means either introducing new notes or coins of the same currency
or fully replacing the old currency with new currency”. There is one important thing exist on economics, which
is remonetisation, in which forms of payment is restored as legal tender. There are many reasons as to why
governments’ demonetize their nation’s currency; some reasons being resisting inflation, resisting corruption,
and also discouraging a cash system in the country. The impact of demonetization is on various sectors. The
study throws light on the impact of demonetization on the Unbanked/ Inadequately Banked Villages, Mandi,
Real Estate, Health Sector,Online Transactions & Payment Wallet, High-End Retail & White Goods,
Household Sector and Cross Sector Credit customers.
1.1 Impact of Demonetisation on different sectors
This research deals with the consequences of demonetisation on rural areas with insufficient banks/having no
banks, village markets, real estate, health, e-business, and retail industry, household and cross sector credit
customers.
 Impact on Unbanked/ Inadequately Banked Villages
The situation in villages due to the lack of adequate amounts of cash was more abysmal than it was in the cities
and the towns. Banks in villages cater to the needs of more than twice customers compared to banks in the city.
Further, since the village economy runs mostly on cash, the most disastrous effects of demonetisation was seen
here. AReserve Bank of India survey published in December 2015 states that, banks in villages and sub-
urban areas cater to almost 12, 863 people. Whereas, the banks in cities and metropolitan areas look after the
financial needs of around 5, 531 people. The problem for people residing in villages is further compounded by
the fact that rural bank branches open only for a couple of days in a week. There is also an urban-rural disparity
in terms of the ATM machines available. In Delhi there exists 9,070 more ATMs compared to Rajasthan,
although the latter is the largest state in terms of geographical area (Source: Media Report). The report further
found out that apart from farmers, majority of the small scale businesses are taken care of by only the concerned
owner. This explains, why cash is the most prevalent medium of transaction in villages. Demonetisation has had
an adverse impact on these areas, even leading to the destruction of local businesses in some cases. While
demonetisation was intended towards turning the village economy to a cashless economy, unfortunately, that
cannot happen overnight, and simply pushing demonetisation down its throat has only lead towards its
destruction.
Government aid for farmers can only be availed by those possessing a KCC / Agricultural loan account. This
leaves out marginal farmers who, in the absence of the above mentioned requirements cannot avail any
benefit.Due to this they were severely impacted as they did not have any means of withdrawing INR 25,000 in
cash. Moreover, small farmers do not usually keep such large amounts in their accounts. This is because of their
low income, and also due to lack of adequate information.
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 Impact on Seasonal Workers/Daily Workers

Demonetisation had a disastrous effect on seasonal workers and daily wage earners. This is because, these
workers received their payments in cash on the day of their labour, which they could not use to buy the
essentials that is required. Further, their main source of earning was through the sale of products such as
vegetables, milk, eggs, etc. If not sold on time, these products can turn stale and these labourers did not have the
means to sustain themselves in the absence of adequate savings.
➢ Impact on the Village Marketplace
This sudden, unannounced financial decision by the Indian Government had a serious effect on the village
market also. A news report by Times Now news channel stated that demonetisation had caused serious loses at
the vegetable market in Chandigarh, which also happens to be the biggest North Indian vegetable market.
Producers carrying produce from distant places like Indore and Nasik had complained about their inability to
sold their products because of the lack of cash flow. The situation had turned so severe that certain traders did
not earn enough money to go back to their hometowns from Chandigarh.
 Impact on Real Estate
Another area that underwent the consequences of demonetisation was the real estate business. It led to a
reduction in the number of real estate property buyers leading to a fall in the prices for a short period. But,
demonetisation had also brought about some betterments for this industry.Whileunorganised builders were
badly impacted due to the lowering of the costs in the cement and ceramic industries. However, there also exists
a contrarian explanation that since loans are used to finance majority of the expenditure in this sector,
demonetisation did not cause a severe damage to the extent that did for other sectors
Cross Sector Credit Impact
Other associated sectors with the real estate, cement and steel had been on a negative credit. This had led to a
tumultuous consequence for daily wage earners, and the granting of job contracts. This is because, since the real
estate sector employs a lot of construction labourers, a negative impact on the industry had had the worst results
on the daily wage earners and seasonal workers such as the construction labourers. But, experts suggest that the
situation in this industry might improve in the long run.
Impact on E-business
Online business or e-business was one of the sectors that benefited immensely from demonetisation. Post-
demonetisation there had been a massive increase in e-shopping and the usage of payment wallets. According to
Paytm, a major Indian payment, they witnessed a massive 35 million increase in transactions through its app,
following demonetisation. Moreover, in Hyderabad, following demonetisation 20,000 small businesses had
started using Paytm.
Impact on Health Sector
During demonetisation people who went for their check-ups in private hospitals, faced hardships since these
hospitals were not ready to accept the banned 500 and 1000 rupee notes. There were also instances when these
hospitals refused their services when patients were not able to produce new notes. This research cannot confirm
the veracity of such reports but believes that such instances were not unlikely.
Impact on the Retail Industry
The retail business and the selling of white goods also suffered in the aftermath of demonetisation. Sale of
white goods such as TV, Refrigerator & Washing Machine had turned damp since these products are mostly
purchased in cash. A minor effect was also seen in the food and grocery business in the supermarkets.
➢ Impact on the Household Sector
It is a commonplace feature in Indian households that the housewives save a certain amount of money from the
total which is used to meet the household expenses. This money is usually hidden from other family members
and used during emergency situations. The sudden announcement of demonetisation had a very adverse effect
on these housewives’ saveings. This saved money could no longer be used. Fortunately, these housewives were
provided some relief money by the Government amounting to upto 1.5 Lakhs- 2 Lakhs INR.
It could be said that all low scale industries which are cash driven were adversely affected by demonetisation, at
least for a short time. This adverse impact had also a negative consequence on the overall economy, and it will
require time for the Indian economy to be in its earlier state once again.
To Conclude
It is difficult to predict the long term consequences of demonetisation by only looking at its short term impacts.
However, forcing everyone to go for a cashless economy in such a large country as India cannot be a measure
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that cannot have problematic consequences. It is extremely difficult to bring about such a flawless
transformation. What demonetisation has led to is a sudden shortage in money supply and bank deposits. This
coupled with the adverse impact on the real estate has contributed to a decline in the GDP growth of the
country. But, everything is not yet that gloomy. If the Government is able to resolve the cash crunch situation,
things might just be salvaged and the decline in the GDP might be arrested.
LITERATURE REVIEW
In her research called “Demonetization as a prelude to complete financial inclusion “ Sherline T.I (December
2016) had set out to study how demonetisation could lead towards financial inclusion. Here financial inclusion
referred to the capability of providing financial benefits for disadvantaged social groups at reasonable prices.
Her research suggested that financial inclusion could help increase savings and provide more credit. Her
research also found that demonetisation is expected to have benefits in the future. Further it could lead to the
betterment of medium to long term Current account and saving account (CASA) ratio. Demonetisation is also
expected to lessen the usage of cash in the real estate business which will further bring about a reduction in the
inflation rates.
The impact of demonetisation was researched by M. Angel Jasmine Shirley (February, 2017). The initial
section of her research described its effect on the Indian economy. It stated that on the day following
demonetisation the the BSE SENSEX and NIFTY 50 stock had seen a slump by nearly 6%. In the following
days there was an intense unavailability of cash, which would led to a reduction in production. There was also a
lack of adequate new notes in the banks, which had a terrible impact on the economy. The research also studied
the consequence of demonetisation outside India. After demonetisation there was a reduction in the
consumption of goods which are exported, so that an import-export balance could be maintained.
Demonetisation also had a serious effect on the local businesses, reduced Government liability, farming and
fishing industry, business, drop in industrial output, black money, impact over counterfeit currency, hawala,
bank deposits, jewellery and real estate, IT sector etc. The research pointed out the flaw in the understanding of
black money, the elimination of which was touted to be the goal of demonetisation. While the goal was noble,
however, black money is not kept in cash but mostly as land, gold, real estate property, etc.
Demonetisation brought about immense hardships on the common peoples’ lives even leading to death due to
lack of proper execution.
Research was conducted on demonetisation and bank payments by Chabi Gupta (December 2016). She
conducted her research by first of all presenting an account of the Indian banking sector and payment banks.
These are banks which operate under the ambit of RBI and caters to needs like small payment services, keeping
bank accounts for people who are economically marginalised and small businesses. After having provided this
account, she showed how demonetisation affected these banks. A Reserve Bank Of India (RBI) report states
that till March 2016, around Rs.16,415 billion was in the market out of which 500 rupee notes were of around
47.8%in value and 1000 were of 38.6% in value. Jointly they had 86% value in the economy.
3.1 Objective of the study was to identify weather consumer
1. Reduce the frequency of purchasing after period of demonetization.
2. Stop purchasing after period of demonetization.
3. Postponed purchasing after period of demonetization.
4. Did not reduced purchase but shifted to purchase online.
5. Reduce purchase modeoff-line and increase purchases mode online.
3.2 data collection
The proposed research is carried out with a view to analyse the impact of demonetization on consumer purchase
on retail sector. The present research is conclusive, descriptive and is based on single cross sectional research
design. Quantitative data was generated on the basis of the research instrument Questionnaire). Students
belonging to MBA department Aligarh MuslimUniversityIn all 102 responses were received.
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DATA ANALYSIS
4.1 Respondents profile
122
Online mode helped them in paying using card (debit card, credit card). And enable them to reduce on
transaction which involved payment by cash. Most consumers used net banking facility (27%) , may mode
payment by using debit & credit card (25%, 19%), respectively; and 21% took benefit of provision of making
cash on delivery
The study also focused on the impact of demonetization on mode of purchase post demonetization a large
number of consumers (67%) shifting to purchase online from purchasing off-line.
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It also resulted in reducing their frequency their frequency of purchasing. A large number (61%) reduced the
frequency of purchase.
4.3 Summary of analysis
ITEMS Observed N Interpretation
Male 54
GENDER Female 48 There are 54% male and 48% female in survey
Total 102
20-25 64
In survey there are 64% respondents have age
AGE 26-30 38
limit 20-25 and 38% have limit of age is 26-30.
Total 102
Student 80 Most of the respondents that we surveyed were
OCCUPATION Research scholar 22 students 80%, and the rest of them were research
Total 102 scholar 22%.
Engage with online YES 102 It shows that all the respondents are opting for
shopping? Total 102a online shopping.
BOOK 30
Which products do ELECTRONIC 28 the item they purchase most was books, which
you usually shop GARMENT 20 was closely followed by electronic item. They
online.? APPAREL 24 also purchase garments
Total 102
FLIPKART 40
what are your AMAZON 28 their most preferred site wherefrom they
preferred online SNAPDEAL 28 purchase was flipkart, snapdeal, amazon and E-
shopping websites? EBAY 6 bay was the least preferred site
Total 102
FLIPKART 37
rank the best three. it show that respondents rank the sites flpkart
AMAZON 31
(Where 1 is for 37%, snapdeal 34% and then comes Amazon
SNAPDEAL 34
most preferred) 31%.
Total 102
Have you stopped NO 102
purchasing off-line my studies also focused on impact
post Total 102a demonetization on consumers purchase activity
demonetization and it reveals that the consumers did not stop
Have you YES 58 purchasing off-line during the phase of
postponed NO 44 demonetization through a large number did
purchasing post postpone purchase
Total 102
demonization?
Have reduced your YES 41
It also resulted in reducing their frequency their
purchasing NO 61
frequency of purchasing. A large number (61%)
frequency post
Total 102 reduced the frequency of purchase.
Demonization?
124
YES 67 The study also focused on the impact of

Have you shifted
NO 35 demonetization on mode of purchase post
to purchase off-line
demonetization a large number of consumers
to purchase online
Total 102 (67%) shifting to purchase online from
post demonization?
purchasing off-line.
Debit Card 25 Online mode helped them in paying using card
Credit Card 19 (debit card, credit card). And enable them to
Cash On Delivery 21 reduce on transaction which involved payment
which is your
Net Banking 27 by cash.
payment mode for
online shopping Payment Wallet 10
Most consumers used net banking facility (27%)
these days?
, may mode payment by using debit & credit
Total 102 card (25%, 19%), respectively; and 21% took
benefit of provision of making cash on delivery
Did your payment No 102
Their mode of payment did not change during
mode change due
Total 102a the demonetization period
to demonetization?
Affected My Off-
Describe any 71
Line Purchase
change that has The study also focused on the change in
Affected My
come about in your 15 purchase activity post demonetization and it
Online Purchase
purchase activity revealed that a large number 71% off-line
ShifftedPuchase
post 16 purchase activity was affected
More To Onlinne
demonetization?
Total 102
CONCLUSION
The studyconcludes that demonetization did have an impact on consumers purchase behaviour. Though they did
not stop purchasing off-line, they did postponed purchase so consumer stopped visiting retail store. They
engaged in purchasing less frequently. Theyshifted from purchasing off- line to online.
They shifted to make payment online and use the same mode of payment as before.
 Consumers stopped visiting retail store.
 Frequency of visiting to retail store decreased.
 Purchase from in store centres retail.
REFERENCES
 Amgad Saeed "The Implementation of Rid Technology in Retail Industry in India." IOSR Journal of
Business and Management (IOSR-JBM) 20.5 (2018): 13-18.
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some selected sector In India.” International Journal of Research, February 2018.
 Bailey, J.P. (1998) ‘Intermediation and electronic markets: aggregation and pricing in internet commerce’,
PhD Thesis, Technology, Management, and Policy, Massachusetts Institute of Technology, Cambridge,
MA.Kwak, Hyokjin, Richard J. Fox, and George M. Zinkhan. 2002."What products Can be Successfully
Promoted and Sold Via the Internet?" Journal of Advertising Research 42 (1): p23.
 Balabanis, G., & Reynolds, N. (2001). Consumer attitudes towards multi-channel retailers’ web sites: The
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shopping medium. International Journal ofRetail and Distribution Management, 27(6), 209-223.
 Chabi Gupta (December 2016). Payment banks and Demonetization. International Journal of Research and
Science. ISSN: 2454-2024(online).
 Chung, E. (2001). Factors influencing purchase decisions of onlineapparel shoppers. Unpublished doctoral
dissertation, University of California,Davis.
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 Cohen, J. (1988). Statistical power analysis for the behavioral sciences,2d ed. Hillsdale, NJ: Erlbaum.
 CyberAtlas. (1998). who’s on the Net in the U.S.? [On-line]. Available:
 http://cyberatlas.com/market/demographics/index.html
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International Journal of Trend in Research and Development. (IJTRD).ISSN 2394-9333.
 Prelec, Drazen, and Duncan Simester. "Always leave home without it: A further investigation of the
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 Retail Merchandiser (2003) ‘Online spending jumps 18 per cent,’ Retail Merchandiser. [Online], [Retrieved
December 22, 2003], http://web.lexisnexis.com/universe/document
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2(12).retrieved from.
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field experiment. American Economic Journal: Economic Policy. 3, 180–205.
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crore-of-property-tax-4372156/
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&sa=X&ved=0ahUKEwjdzIG186_TAhUKPY8KHYxoAQsQ_AUIBygC&biw=1600&bih=755#imgrc=mY
CDgsuYRPWUbM:
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VOIDS AND ABYSSES IN INFORMATION TECHNOLOGY ACT, 2000 VIS-A-VIS

E-COMMERCE: DEFIES AHEAD
Unanza Gulzar
Assistant Professor, School of Law, the North Cap University, Gurugram
ABSTRACT
Today in India electronic commerce is fastest growing and as a rule exciting channel for commercial
transactions. According to ASSOCHAM-Forrester study, Indian e-Commerce is growing at an annual rate of
51%, the highest in the world, and is expected to jump from $30 billion in 2016 to $120 billion in 2020, even
though being hit by the sound effects of the government's scheme of demonetization. However, at the same time
e-commerce, certainly, affords us transactions that otherwise would not have been possible. In this background
the paper argues, that despite the shift towards e-commerce in India yet, surely, there are inadequate laws in
protecting a person over internet. However, at the same time even after the Information Technology
(Amendment) Act, 2008, section 10-A is incorporated which validates the e-commerce including e-shopping not
including in advance attendant philosophy of contract creation which gave rise to number of queries than the
solutions provided by this amendment. Further, the paper argues that The Indian Contract Act, while
prescribing the behaviour in which traditional agreement is to be prepared and executed. But, in e-commerce
transactions what happens is that the contractual terms are already set by the seller and the user is being
afforded the choice of accepting or rejecting the agreement and acceptance alone entitles him to access the
services. Therefore, leaving a person in a position where he can’t bargain. Lastly, the paper came up with
certain suggestions keeping in view above unfilled space.
Keywords: Contract, E-commerce, Information Technology, Jurisdiction, Privacy
1. INTRODUCTION
Technology has fundamentally changed the way the businesses were handled by society today. The global
presence of internet has enabled businesses to reach new markets and millions of new potential customers. By
this, electronic commerce commonly known as e-commerce have developed and is one of the wildest
developing region around the world and India’s greatest increasing and mainly electrifying means for business
communications. While being able to access global markets, e-commerce has enabled businesses to bypass the
traditional intermediaries in domestic jurisdictions. Besides, owing to its lower transaction costs, e-commerce
has caused a steady increase in the number of sellers and suppliers in the market, thus increasing diversity and
competition in the market.
Electronic commerce as an indication of globalisation represents critical periphery of achievement in the virtual
world across the globe. Today Internet development has led to a mass of fresh growth for example limited
restrictions for corporations as customers turn exclusively towards internet to purchase products at possible
meagre price. Further, internet being an effectual medium of changing straightforward behaviour of doing
commerce. However, electronic commerce is preferable rather useful because of numerous reasons, say for
example, access to products, which may not be accessible otherwise, becomes quite convenient. That is true
particularly in rural areas. Besides, it acts as an effective mode of entering into transactions, for consumers as
well as retailers and has made possible low value cross-border transactions to an extent that could have been
unthinkable previously.
1.1 Growth of E-commerce
In India electronic commerce are likely persist the extraordinary development. Number of reasons are lucidly
associating the development of E-commerce around the globe, and more specifically in India. Furthermore, the
swiftness of development of electronic commerce in India is incredible. There are number of factors which led
to the growth of e-commerce like easily accessible and financially cheap qualities of internet, increasing use of
tablets, smartphones, and for professionals with their busy schedule etc. The growth of internet in India is
tremendous as it holds first rank in it but China is having largest electronic commerce market followed by USA
all around the globe. Further, as per the report of ASSOCHAM-Forrester study, annual growth of e-commerce
in China is 18% but at the same time India is having tremendous annual growth of 51%. Moreover, in India the
estimations of future in online sales is expected to be welcoming as the as it is anticipated to reach $120 billion
by 2020. Keeping in view proclivity of Indians towards Mobile phones and thereby increasing sales of mobile
phones which have, percentage of e-commerce sales is increasing day by day.
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1.2 The trenches – Determinations and Consequences

The electronic commerce in India is highly hostile as it is a field where chief electronic commerce actors
struggling amongst themselves in enlarging their province. The e-commerce sites like Amazon, Snapdeal and
Flipkart have shown mega sales on their sites but the competition is increasing, thereby price cutting is high in
number. At the same time Snapdeal is the most unfortunate rival because by confronting different backlashes
and polemics throughout its being into existence.
The Amazon is providing better quality and services than flipkart thereby is ahead of it in the line of
competition of best downloaded app rating by ‘App Annie’. However, ‘Amazon Prime’ is the most successful
and had gained Leading status in e-commerce market compared to ‘Flipkart First’, thereby Amazon is ahead of
Flipkart. However, Snapdeal is now improving after learned from its mistakes. The ‘Unbox Zindagi’ campaign
is a steps towards restructuring its own identity.
Given that the phenomenon of e-commerce is only recent to the whole world including India, there is a dearth
of scholarly writings which can explore the challenges it poses to consumers besides offering legal ways to
tackle them. So far, the research has been confined to rather a historical point of view. At the most, the authors
have given a textbook analysis of the issues. The enormity of this new way of formation of contracts calls for its
deep understanding on both sociological and legal counts. This impels the researcher to examine the existing
laws related to contracts executed electronically.
Habul in his article titled “Consumer decisions making in online shopping environments: the effects of
interactive decisions aid, ‘Marketing Science’ (2001), focussed on a questions including that why a traditional
market have been changed into virtual market? The most commonly reasons cited by him for shopping online is
convenience and comparison of prices. Moreover the capability of electronic commerce is that a person need
not to leave his home and goods or services are provided to him at doorstep.. Moreover he cites reasons why the
number of internet users who are shopping online goods or services is increasing day by day.
However, Tim Gerlach, in his article ‘Using internet content filters to create E-borders to Aid international
Choice of law’ (2005)’ analyses that despite being trendy, allowing ease and quickness and received with a
huge response by consumers both in urban and rural areas, online shopping cannot be said to be full proof.
Rather it has become easy target for the evildoers. Online shopping poses a wide range of challenges from the
consumer protection perspective, ranging from invasion of privacy to jurisdictional issues. He discusses all
these challenges in detail.
Gregory Karp in article titled ‘Right tools can make online shopping easier’(2009), explores that electronic
commerce can be a best friend of elegant customers with the capability to without doubt evaluate shops and can
look for relaxations and can buy with a few clicks on mouse. A customer can now easily compare prices and
can look for discount offers
Forrester in his book titled ‘Trends in Indians e-commerce market’ (2012), analyse that there are hundred crore
wireless subscribers and six crore smart phone users in India. There are 145 million internet users and they
spend 20-25 hours /month for online shopping (Also McKinsey 2012). This is one of the reason why shoppers
get attracted. However the author gives statistical data in his book on online shopping in India. Techno Pak
(2012) discussed in their report that how the earlier people were afraid to purchase online and how the trend is
changing from online to offline purchasing. Further the total retail size in India is 455 billion dollar. Out of this
organised retail is thirty four billion dollar seven percent of total retail).
Dr. Jyoti Ratan in her book titled ‘Cyber laws’ (2013) argues in detail that how the amount of trade has grown
extra-ordinary with widespread internet usage and how the globe has now became a global market by shifting
traditional world into virtual world. Further, paced special emphasis on advantages for both vendor and vendee
in the sense that vendor can have reach to any corner of world and simultaneously the purchaser is having
exceptional choices. Effectiveness to a great extent is enlarged, paper work abridged, time period concise and
payment narrowed. Moreover the author focuses on Information Technology Act 2000.
Moreover according to Juneesh k, in his article titled “Online shopping problems and solution, (2014) discusses
the problems which the online shoppers are facing those are like receiving damaged products, wrong products,
delay in delivery of products or fails to receive any product at all which is eventually affected on consumer’s
right. Further, approximately 40% of internet users around the world purchase products through online medium
via different apparatus and this indicates greater than 1 billion purchasing over internet and is anticipated to
grow endlessly.
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An article titled ‘What is E-Commerce’ by Katherine Arline, (2015) gives the historical perspectives of online
shopping and further explains the different concepts of Electronic Commerce. It further analyses that with the
beginning of internet machinery, the nature of e-commerce, its evolution have taken form and rotate
dramatically. Further, medium of the E-commerce grow with the enlarged accessibility of internet entrance and
the beginning of famous internet vendors in the 1990’s and early on 2000’s. In 1995 Amazon started
functioning as a book delivering trade in Jeff Bezo’s Garagr. At the same time in 1997 EBay exploded Beanie
Babis Frenzy and in 1995 enabled customers to vend online against each other and which in 1995 launch
online.
However, ‘Professor Farooq Ahmed in his Book on Cyber law (2015),’ evaluates in detail that how the Shopper
as a consumer suffers despite having enumerable laws in India like Indian Contracts Act, 1872, Consumer
Protection Act, 1986, Information Technology Act, 2000. Despite all these laws certain queries are raised which
needs to be answered from the Indian Perspective by the agencies are: what are the questions related to
formation of contract created by IT Act? How far the Indian Contract Act, is stretchy sufficient to contain these
questions and to offer for their settlement? Does the IT Act include questions left cover by the Contract Law?
How far the main principles of contract formation been changed by the Information Technology Act? What
questions are left for courts to decide?
2.1 RESEARCH GAPS
Online Commerce or E-commerce, certainly, affords us transactions that otherwise would not be possible.
However, as experience shows, it is not immune to consumer harm either. It is evident that much progress has
been made in jurisdictions like United Kingdom and USA with respect to the protection of consumers on the
Internet. Very little attention, however, has been paid to the online consumer protection in India. Further,
despite the increasing growth of annual rate of e-commerce, India is far behind in protecting consumers which
are discussed as under:
2.1.1 Electronic commerce issues under Information Technology Act, 2000
The issues under Information Technology Act, 2000 related to electronic commerce are as under:
I. One of objective of Information Technology Act, 2000 reiterated by Information Technology (Amendment)
Act, 2008 is to legalize the electronic commerce. At the same time in the IT Act 2000 there was no provision
which validated electronic contracts despite the fact that in the Model law there was direct provision to this
effect. The IT (Amendment) Act now provides that
“where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of
proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic
record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or
means was used for that purpose”.
This provision makes it aptly clear that e-contracts are valid and enforceable but without laying down the
principles of formation of contract which can give rise many questions than the solutions provided for the same
by the amendment.
Are electronic contracts now exclusively dealt under IT Act? Are Common law principles followed by the
Indian Courts to interpret provisions of the Indian Contract Act, applicable to the Electronic Contracts also?
Has the IT Act in any way changed or modified substantive provisions relating to the Contract formation? Has
the IT Act provided additional requirement for the formation of electronic contacts?
II. Further, one of the requisite under section 10 of Indian contract Act, 1872 is mutual consent of both the
persons which must be offeror and offeree as provided under Section 2 (a) and (b) and the person equally
includes both legal and natural person but at the same time the word computer does not fall in any of the
two class. Therefore any agreement performed by an independent computer will not fall under the above
definition. Therefore two options would have been available before passing the IT Act to legislatures. One
to embrace computers as parties second to treat computers as an agents. But the court in State Farm Mutual
Automobile insurance company v. Brockhorst support of treating computers as the agents.
III. In traditional contracts common law courts have clarified distinction between dichotomy of offer and
Invitation to treat. But it is equally difficult to prove on websites carrying such statements. Now the
question arises are those statements simply an offer or information provider to customer. The distinction
between invitation to treat and offer on websites is difficult to prove, the reason being that these sites are
structured in such manner that acceptance means goods are in accumulation and proposal can be
involuntarily withdrawn. At the same time there is an argument that vendor may refuse to sell off his
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products to certain or persons. Therefore every statement has to be interpreted by the words used and
practice of deal.
IV. The phrase ‘incorporation by reference’ is used for a condition to refer a document where its provisions are
defined somewhere else. Communication over internet is structured in a technique that huge messages are
communicated with concise information to information detailed at other place. In such a situation question
arises that does the terms by incorporation by reference form a part of actual agreement and if yes under
what conditions?
The Information Technology Act is silent on conferring legal status on such terms. Infact it was not even in
original United Nations Commission on Trade Law model but was later realised and express provisions to such
an extent was incorporated in the Model law by Article 5 bis and such type of provision is missing in IT Act.
Also, due to the significant difference amongst physical contracts and electronic contracts, the tests developed
by courts in traditional contracts like standard form of contracts may be unsuccessful whilst applied to
electronic contracts. Moreover the terms and conditions must always be brought to the notice of other party but
at the same time opinions differ in electronic contracts.
3. CHALLENGES AND ENCOUNTERS TO ELECTRONIC COMMERCE
Apart from above problems, there is the revolution in the modes of business which has thrown newer challenges
to the consumer, like, invasion of privacy, insecure payment methods, jurisdictional issues etc discussed as
under:
3.1 Incursion of Privacy
To make out a case for privacy invasion in the world of online shopping, it is arguable that the huge network of
computers that makes up the Internet has brought people closer and made many communications that were once
considered private less so. Internet users are, invariably, required to give their personal information, which, they
otherwise regard as private. The personal information may range from an individual’s financial details to sexual
preferences to medical history to shopping patterns to address and family details without disclosing the need of
its collection. In fact these organizations construct’s a detailed personal profile of a user as a result of activity
carried on the internet may not be a concern for a user as long as they get something for it in return. Also,
scheme aiming at providing suitable protection to online shopper must effectively shield the online shoppers
engaging in cross-border trade and should afford shield to sensitive data. For example, when a person buys any
good online, he is required to visit a particular website where he is asked to fill in his/ her name, address, phone
number, date of birth etc. But, at the same time, there is no guarantee to this person sharing his personal
information with some unidentified person. “Violation Privacy over internet even includes, Dissemination of
complex and trustworthy personal information to financial to medical of persons and establishments; tracing
happenings of shoppers by means of net cookies distributing spam emails; and Irrational check and examination
on worker’s doings, together with their email communication.”
3.2 Jurisdictional Issues
Over the past epoch, the internet has made our globe lesser in terms of online market. Moreover it has the
capability to cross boundaries little of parting one’s breathing area has made a jurisdictional vacuum which is
up till now to be occupied. “In international transactions many challenging questions plea for answers. Like,
where can the plaintiff file a case? Law of which country will apply? For instance, a shopper who lives in India
possibly will purchase a couple of fabrics as of a professional situated in United Kingdom through the website
of professional” . On the face of it, such professional will have contacts to dual nations i.e., India and United
Kingdom. Likewise, contacts to another nations may too rise; for instance, if the website of the UK professional
is maintained by a machine server located in the USA, or bought fabrics have been synthesized by an
establishment in China. It is possible that dealer and purchaser might be living in two diverse nations and the
business is situated in the third nation. Therefore in case of differences, questions arise which nation is having
jurisdiction? Of which nation’s law is applicable? How the judgement will be implemented?
“In India Jurisdictional matters are obtained by any of the following like when cause of action arises, what is
the place of residence of parties or place of business? But the cause of action is a personal test among the three
and is utmost possible to be deliberated in electronic commerce subjects. The aforementioned looks that
Section 13 of the IT Act, 2000 is never in synchronization with section 11 of CP Act, 1986. Section 13 delivers,
wherever an instigator (offeror here) or the Receiver (offeree) has more than one place of business then
principal place of business shall be deemed as the place where the electronic record have been dispatched or
acknowledged. The place of business will obtain the jurisdiction of the court and in case there is a disagreement
amongst them concerning agreement shaped by electronic means, at that time the case intend to be in the law
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court in the interior the limited restrictions of whose jurisdiction, foremost domicile of professional of the
contrasting party is located.
“In contradiction of it, the Consumer Protection Act lays, that a shopper can file a grievance contrary to the
opposed in a District Forum inside the native boundaries of whose jurisdiction the contrary party, has a division
workplace.” So, there is an apparent conflict between the two sections as section 13 is likely to cause
inconvenience to the consumers especially where the opposite party has principal office outside India.
3.4 Reticent Payment method And Digital Payment Failures
Again, online shopping is similarly vulnerable to the insecurity in payment systems. This is so because nearly
each of these devices claim participation of a third party to assist as an intermediary to the transaction. “The
intermediary may have a contractual relationship with the buyer, the seller, or both depending on the
mechanism of the transaction. In some cases, one party may not even have the knowledge that an intermediary
is being used.” The chief benefit of this instrument lies on the fact that they are resourceful and expedient
selection as it qualifies a shopper to purchase from everywhere.
The disappointment of electronic payments at all times emerges in the air though making electronic
communications whether a shopper is making payment by net banking, debit or credit card. An uncertain
internet link or a mechanical problem frequently consequences in to be paid sum being deducted as of shopper’s
account short of being accredited to vending party. “Besides recovering this sum is whatever nevertheless a
swift course; a person has to notify the website and at that time have to wait round 7-10 days earlier the sum is
reimbursed in their account. But then again this condition is gradually enlightening as the segment is
concentrating further on cashless businesses and shoppers are receiving extra information and paying online.”
3.5 Deferred Delivery
Adjournment in the conveyance of goods endures to persist one of the utmost common grumble of the
consumer. The webstores does not give any security as to the period of conveyance. Thus it is contended that
those online stores should be fixed with accountability in the background of facilities they provide under CP
Act as it would else amount deficiency in service under CP Act.
3.6 Week Comment Scheme
In the online mode of shopping barely at hand is any complaint redressal mechanism. These online shops only
deliver telephone number, email id and address on their online website. But then again practically at the most
these online stores does not retort outcome is stroking the consumer in distress.
3.7 Other Legal Issues Online consumer face
There are no adequate laws, protecting the online consumer, in place in India. It is true, that the provisions of
the laws, for example, The Consumer Protection Act, 1986, The Indian contract Act, 1872, The Sale of Good
Act, 1930, which apply to off-line transactions, also do apply to those concluded online also. Yet, they, surely,
are inadequate in the overall protection of the shopper in the online transactions as there are number of
loopholes present.
Yet another concern with respect to online shopping is the complexity of contractual terms the sellers employ in
the agreements. Remember, the Indian Contract, while prescribing the method and form by which agreements
are formulated and then executed, also lays down certain criteria for the contracting parties under section 10 to
enter into a valid and binding contract like that of (a) competence of parties (b) lawful consideration (c) free
consent (d) lawful object (e) intention to create legal relations. But, in e-commerce transactions (online
shopping),what happens is that the contractual terms are already set by the seller and the consumer is only
required to click on an ‘Ok,’ ‘I Agree’ or ‘I Accept’ button to enter into a contract. Therefore, with this shift in
the means of entering into a contract, the user is generally being afforded the choice of accepting or rejecting
the agreement and acceptance alone entitles them to access the services. There is no opportunity for
negotiations of terms, therefore, leaving the consumer in a position where he can’t bargain. Interestingly, the
primary purpose of the terms and conditions is to absolve the service provider from all forms of liability like in
case of the defect in goods, deficiency in the overall services etc. This has limited the scope of remedies
available to the consumers. Delay in the delivery of goods also happens to be the most common grievance
among the consumers in case of online shopping. However, the term consumer defined under Consumer
protection Act 1986, does not cover online consumer. Moreover, given that the average length of these
contractual terms and conditions is, more often than not, tedious, it is not humanly possible for an ordinary
internet user to read them before clicking on the ‘I Agree’ button. A simple perusal of the different terms and
conditions imposed by the online business sellers on the consumer clearly indicate that a large number of terms
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are against some established fundamental legal principles recognized under different laws like Indian Contract
Act 1872, the Sale of Goods Act, 1930 and The CP Act, 1986 This rings true in other jurisdictions as well.
Keeping in consideration the requirement of documentary evidences it is likewise problematic to usage of the
Consumer Protection Act, 1986 to decide e-Shopping grievances, because in e-Shopping accessibility of
documentary evidences is circumscribed. Moreover, ever since there is no geographical restrictions for Internet,
instituting Internet jurisdiction is so far one more problematic job. Prosecuting a trader in overseas is time
consuming, challenging, costly and it cannot be known from website where the vendor is founded. Besides, it is
difficult task to know which law of the nation is applicable to an agreement, the law of the nation where the
Products were transported or the law of the nation where products were purchased. Action under law will take
in to initiate court proceedings against vendor in his country thus can cause inconvenience to shopper to a large
level.
Non-Bargainable nature and privacy invasion of E-Shopping agreements are others zones of shopper
disappointment. Further, shoppers cannot take recourse to traditional systems of complaint redressal mechanism
as a vendor is frequently unidentified with no physical site or address.
The 2008 amendment in IT Act, 2000 reveals the mounting significance of an Internet in the life of any Indian.
The foremost concerns which are observed, into comprise privacy, slashing, authority regulating and sentences
for transgressors. Nevertheless, the IT Act, does not emphasis on the protection of shoppers and is of restricted
significance of shoppers shopping over Internet.
4. CONCLUSION AND SUGGESTIONS
If we talk of future as per the study conducted by ASSOCHAM, in India the number of online consumers in the
year 2016, was 69 million and 100 million in the year of 2017 and which is expected to reach to 65% by the
end of 2018. Keeping in view the rising rate, it is submitted that the fate of electronic commerce will revolve to
around the theory of survival of the fittest. Further, in near future the electronic commerce entrepreneurs will
come in clash against each other for shares in the market and at the same time it will be very hard for new
entrepreneurs to compete with giant marketers unless they will come up with some new ideas and construct
something which may be new, novel and distinct. The outlook of electronic commerce seems intense in India
and development is on plan.
Keeping in view fast-tracking progression of e-commerce because of an enjoyments and satisfactions of
customers over the internet without any definite protection. It is therefore suggesting following measures:
I. The term ‘consumer’ defined under Consumer Protection Act, 1986 should now include even the term
online consumer.
II. Necessary amendment should be made were IT Act, 2000 and Contract Act, 1872 must not clash against
each other.
III. IT Act 2000 needs to be amended and a chapter should be incorporated On Electronic commerce.
IV. Settlement of all issues especially jurisdictional issues when it comes to cross country market must be
settled.
V. Restricted terms should be mentioned in online transactions and other party must be given opportunity to
negotiate.
VI. The Information Technology Act needs to be amended to decide the legal validity of the concept of
Incorporation by reference.
REFERENCES
 Beck and Lynch., (2001)., ‘Profiles of Internet buyers in twenty countries evidence for region specific’, J
IBS, 32: 725-748.
 Chaudhary Abijit and Kuilboer. (2002), “E-Business and E-Commerce Infrastructure”, McGraw-Hill, New
York.
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 Miller Roger. (2012), “The Legal and E-Commerce Environment Today”, Thomas Learning, Stamford.
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Comp. L. Rev, 31, retrieved from http://lawdigitalcommons.bc.edu/iclr/vol31/iss2/8
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 Nissan off Daniel. (2009), “Future Shop: How the New Auction Culture Will Revolutionize the Way We Buy,
Sell and Get the Things We Really Want”, The Penguin Press, London.
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Law and Jurisdiction, World Law Review, 5: 32.
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Springer-Verlag Heidelburg Publications, Germany, Berlin.
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enforceability solely on the grounds that it is not contained in the data message purporting to give
rise to such legal effect, but is merely referred to in that message.
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0B4XaA30casoDSmEtWnBJdlBZcEk/edit (Last visited July 3, 2018).
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Indian Perspective. IJORAITICAC (4) 185.
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your business, retrieved from, : https://yourstory.com/2017/04/common-problems-online-
shopping/.
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TRADE AND INVESTMENT POLICIES OF INDIA AND BIMSTEC COUNTRIES: CURRENT

TRENDS AND EMERGING CHALLENGES
Jyotsna1 and Prof. N. U. K Sherwani2

Research Scholar and Professor2, Department of Commerce and Business Studies, JMI, Delhi
1
ABSTRACT
The World’s South - Asian and region of South - East - Asia regions, are the fastest growing economy of
asia, which is showing progress and advancement of social, technological and economic. BIMSTEC, is
youngest association and recognized for the collaboration of BIMSTEC countries are India, Bhutan, Nepal,
Myanmar, Srilanka, Thailand and Bangladesh which are brag contact from the Region of Himalayas and
Indian- Ocean. BIMSTEC Countries has already outlined an ambitious plan to build economic corridors
linking India with Southeast Asia. This Paper focuses on inter- regional cooperation to strengthening trade and
Financial soundness among BIMSTEC and India. To see the impact of economic integration on inter-regional
trade and inter-regional financial indicators among BIMSTEC and India, an empirical study has been
conducted. The empirical findings suggest that BIMSTEC-India cooperation is essential for economic and
social growth of BIMSTEC countries. This paper recommends for development of trade performance of India
the various measures should be taken: elimination of political disputes, removal of protectionism, outburst of
other regional agreements, elimination of bureaucratic inactivity, centralization of political and economic
authority, identification of new market for export, arrangement for regional transport and communications
infrastructure etc.
Keywords: inter-regional trade, Trade balance, financial indicators, BIMSTEC
INTRODUCTION
“BIMSTEC needs to eschew parochialism, pettiness to succeed”, says secretary general Abul Hassan Mahmood
Ali, Hon’ble Foreign Minister of Bangladesh on 20th anniversary of BIMSTEC. The foreign minister, however,
said 20 years - for a regional organization is “not a long time and Even then BIMSTEC has achieved some
progress during the last 20 years”. He also said the grouping has “enormous” resources and potentials to fulfil
the ‘aims and purposes’ of the Bangkok Declaration after establishment of BIMSTEC in 1997. BIMSTEC
involving five south and south- West Asian countries(Bangladesh, Bhutan, India, Nepal and Srilanka) and two
south- East Asian nations (Myanmar and Thailand), bridging subregions.
The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation or BIMSTEC to focus on
“undertaking more realistic and result-oriented and mutually beneficial projects”. India resolve to turn this
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regional organization into a more dynamic, result oriented and efficient platform for our future progress and
prosperity.
This paper recommends development of trade and investment performance of India, policies that will help
BIMSTEC in current trends. Challenges which are India and BIMSTEC facing to overcome trade and
investment problems in current scenario? The various measures should be taken: elimination political disputes,
removal of protectionism, outburst of other regional agreements, elimination of bureaucratic inactivity,
centralization political and economic authority, identification new market export, arrangement for regional
transport and communications infrastructure etc.
LITERATURE REVIEW
Relations of economics plays important role in bilateral relations between India and BIMSTEC. The economic
relations have been multifaceted, embracing trade transactions, credit arrangements, joint ventures, transit
facilities and transport development. The relations have continued even in adverse political relations. This is
mainly because of the operation of objective factors of BIMSTEC such as Geographical Proximity, Common
Language, Similarity Consumption pattern, Common Development needs and experience, and Infrastructure
(Dubey, 2013). Devi (2007) examined study on economic cooperation in BIMSTEC its emerging trends and
prospects. Study analyzed that there was significant change in the trade orientation of BIMSTEC nations from
1990s and most of them exhibited higher outward orientation. The relevance of regional bloc enhancing the
trading and investment patterns and analyzed the existing socio- economic performance of individual member
nation. Formation of BIMSTEC trading bloc, majority of South Asian countries were able to improve their
export competitiveness to some extent in international market and FTA under BIMSTEC umbrella help to
expand size of market in international market of member nations. Murty et.al (2007) acknowledged a study on
possibilities of cooperation in BIMSTEC. The study concluded that to achieve high level of economic
integration within BIMSTEC nations, identify potential areas of trade and economic cooperation for individual
economy and reduce the poverty and high mortality rate to promote economic cooperation among nations.
Study stated that among BIMSTEC nations India and Thailand both lead in merchandise trade and Sri Lanka
and Bangladesh appear as important exporters of manufacturing goods in the BIMSTEC area.
Free trade benefits developing countries because trading with developed countries 1) allows them to exploit
advanced technology and expertise to enhance productivity in their home country and 2) increases demand for
domestic goods and services produced. International trade is therefore an engine of growth (Awokuse, 2007).
Export promotion enhances technical changes, and brings economies of scale which in turn reduces inefficiency
and increases productivity (Fatima 2002). Exports increase the level of domestic and foreign competition, and
efficiency resulting in higher productivity and output, and industrialization. Import penetration provides foreign
competition and the capacity to utilize a wider variety of capital goods to domestic firms, allowing them to
become more efficient. Grossman and Helpman (1991) find that through imports, domestic firms get access to
foreign technology and knowledge, and hence imports also play significant role in economic growth. Small
open developing nations require import factors of production that allow them to produce their exported goods.
It is necessary to clarify the individual growth effects of the two trade components as the growth impacts of
exports and imports differ, both qualitatively and quantitatively (Iyer et al., 2009). South Asian nations to
establish connection and enlarge economic cooperation show their purpose to support economic associations
with the ASEAN countries. BIMSTEC might be used as instrument for South Asian nations to set up and
enlarge a good quality relationship with the ASEAN nations (Devi, 2007). Vanajamani (2007) discussed a
study on India’s political economic relation with some BIMSTEC nations. The economic integration among the
BIMSTEC nations, South Asian nation’s exports services had been grown especially commercial services
export show significant growth. In case of Sri Lanka, commercial service exports had made vibrant growth in
total exports and Bangladesh made remarkable increase its share of export in transport sectors. But from the
observations or evident the trade performance of BIMSTEC countries at the global level had been miserable in
relative sense. India play an significant role to be future cooperation in South Asia in general and BIMSTEC in
particular.
Chowdhury and Neogi (2014) study on Trade Complementarity and Similarity between India and BIMSTEC
in Context of Regional Trade Agreement (RTA). The paper revealed important element of BIMSTEC region
in India’s “Look East” strategy and enhances a new dimension to India’s economic cooperation with South East
Asian nations. India and BIMSTEC free trade agreement stimulate trade and better connectivity among India,
Nepal, Bangladesh, Myanmar, Sri Lanka, Bhutan and Thailand. The trade structure between India and
BIMSTEC exposed the complementary sectors and products available for improving trade cooperation among
trading partners. India’s trade cooperation with selected BIMSTEC countries, in all product classifications was
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vital player in the region. Emerging economic structure permits better collaboration from India in the
regionalization efforts in Asia.
Debashis Chakraborty (2007) has conducted study on Trade Performance and Integration Experience of
BIMSTEC: A Review of Issues. Looking into the current trade dynamics of BIMSTEC, it is observed that there
is considerable scope to enhanced intra-bloc trade once the FTA is in place, when the dynamic effects would set
in. Moreover, apart from the trade in final products, trade in intermediate products is also likely to increase
within BIMSTEC, resulting from possible production integration among members.
OBJECTIVES
1.) To assess Regional –Economic- cooperation to strengthening trade /and Financial soundness among
BIMSTEC and India.
2.) To see the impact of economic integration on trade indicators and financial indicators among BIMSTEC
and India.
3.) To analyze BIMSTEC-India cooperation is essential for economic and social growth of BIMSTEC
countries.
4.) To examine the challenges faced by India while trade and investment with BIMSTEC countries.
RESEARCH HYPOTHESES
H1: There is Economic relationship between India and BIMSTEC.
H2: There is need to study economic integration of trade indicators and financial indicators between India and
BIMSTEC.
H3: Whether it is essential to assess impact on socio- economic environment on Trade indicators and financial
indicators between India and BIMSTEC.
H4: India facing challenges to find solutions of regional integration and co-operation in BIMSTEC.
FINDINGS
BIMSTEC comprises a group of nations characterized by varying sizes of economies, differences in resource
endowments, openness, and trade and investment liberalization. The member nations are having surplus
resources which could be productively invested in other resource deficit countries of the region. In view of the
growing importance of reinvigorating economic activities towards regional integration, this is of vital interest to
examine pattern of macroeconomic developments in the member states. It identifies the areas of convergence
with respect to GDP growth, prices, resources mobilization and external sector performance. The combined
GDP of the BIMSTEC region grew impressively of $ 2.7 trillion economy during period 2016-17.
In line with the global trends in 1990s and 2000s, most countries in region have embraced a conscious policy of
trade and investment liberalization. In the recent years, BIMSTEC have invariably followed investment policies
with aim of raising export competitiveness; encourage foreign competition and bridging the supply bottlenecks.
The paradigm, infrastructure investment has been given utmost priority in country development strategies. For
instance, World Bank prescribes a significantly higher level of FDI inflows to support congenial growth
environment in to compensate for domestic resource constraints and to enable the countries from knowledge
and technological spillovers. The current trends in FDI flows show increasing contribution of FDI to fixed
capital formation in the BIMSTEC.
Table1 presents selected financial indicators for BIMSTEC countries. FDI inflows to Bangladesh, Myanmar
and India has showing increasing during period 2010 - 2015 but Myanmar has showing highest increasing
Trend for this period i.e 0.1 to 6.5. Exchange rates also showing increasing trends to all BIMSTEC except
Bangladesh. Myanmar is showing highest increasing Exchange rates i.e 5.6 to 1162.6 from 2010 to 2015.
Bhutan, Srilanka and Thailand are showing negative Gross International reserves for the year 2015.
Table1: Selected Financial Indicators for BIMSTEC
Indicators 2010 2011 2012 2013 2014 2015
Bangladesh FDI, net inflows (% of GDP) 1.07 0.98 1.19 1.27 1.44 1.7
Exchange rate to the US dollar (annual average) 69.6 74.2 81.9 78.1 77.6 77.9
Gross International reserves 8.06 17.90 39.01 41.82 23.40 23.18
Bhutan FDI, net inflows (% of GDP) 4.75 1.71 1.37 2.77 0.43 0.5
Gross International reserves 12.49 -21.20 20.90 3.84 25.60 -11.4
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India FDI, net inflows (% of GDP) 1.60 1.99 1.31 1.51 1.65 2.1
Gross International reserves 5.55 -0.58 0.56 -0.78 9.05 8.69
Myanmar FDI, net inflows (% of GDP) 0.1 0.1 1.79 3.84 2.17 6.5
Gross International reserves 9.80 21.78 -0.12 20.16 -74.0 76.74
Nepal FDI, net inflows (% of GDP) 0.55 0.50 0.49 0.39 0.03 0.2
Gross International reserves 6.50 23.30 19.32 23.01 14.39 31.03
Srilanka FDI, net inflows (% of GDP) 0.84 1.46 1.37 1.25 1.20 0.8
Gross International reserves 34.40 -6.34 5.45 5.54 9.48 -11.07
Thailand FDI, net inflows (% of GDP) 4.32 0.67 3.24 3.77 0.92 2.3
Gross International reserves 24.28 1.66 3.77 -7.85 -6.02 -0.45
Source: https:// Knoema.com/atlas/topics/economy
Trade performance could be better assessed by examining the trends in inter- and intra-regional export and
import flows among the member countries. The current balance Trade of Bhutan and Nepal is increasing
continuously from 2010 to 2015. Trade balance of Myanmar and Nepal is increasing for the period 2010 to
2015 but deceasing of India, Srilanka and Thailand. Merchandise trade is decreasing of Bangladesh, India,
Srilanka, Nepal and Thailand for the year 2015.
Table 2: Selected Trade Indicators for BIMSTEC
Indicators 2010 2011 2012 2013 2014 2015
Bangladesh Current balance Trade (% of 37.8 47.4 48.1 46.3 44.5 42.1
GDP)
Trade balance (% of GDP) 40.8 47.2 44.1 42.0 36.8 34.5
Merchandise Imports from high income
economics % of total merchandise Imports 40.5 36.8 37.2 35.7 35.7 35.0
Merchandise Exports from high income
economics % of total merchandise Exports 74.3 74.8 73.7 73.2 72.6 72.2
Merchandise Trade (% of GDP) 40.8 47.2 44.5 44.1 42.0 36.8
Bhutan Current balance Trade (% of GDP) 113.2 111.7 101.8 102.7 93.6 92.9
economics % of total merchandise Imports N/A N/A N/A N/A N/A N/A

economics % of total merchandise Exports N/A N/A N/A N/A N/A N/A
India Current balance Trade (% of GDP) 49.7 55.6 55.8 53.8 49.0 42.2
Myanmar
Current balance Trade (% of GDP) 0.2 0.2 22.4 38.6 42.3 47.3
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Nepal Current balance Trade (% of GDP) 46.0 41.8 43.7 48.1 52.3 53.3
Srilanka Current balance Trade (% of GDP) 46.4 55.0 51.5 49.3 50.3 49.6
Thailand Current balance Trade (% of GDP) 127.3 139.7 138.5 133.3 132.1 126.6
Source: https://data.worldbank.org/data catalogue was accessed on 25 December 2017
METHODOLOGY
The MODEL
Empirical estimation impact of selected Financial Indicators of BIMSTEC on FDI net inflows, Exchange rate
and Gross International reserves. The empirical estimation of impact of selected Trade Indicators of BIMSTEC
countries on current balance Trade and Merchandise Trade balance, we use the following empirical models:
1.) Yi= b0 + b1(FDI net inflows) i + b2(Exchange rate US dollar) i+ b3(International Reserves) i+ E
2.) Yi= b0 + b1(current balance Trade) i + b2(Merchandise Trade balance) i+ E
The equation (1 and 2) is estimated to measure the impact on socio- economic environment on Trade indicators
and financial indicators between India and BIMSTEC countries. The dependent variable of the equation is
country. Explanatory variables that are going to be estimated for Financial indicators are FDI net inflows,
Exchange rate and International Reserves in equation (1). Explanatory variables for Trade indicators that are
going to be estimated are current Balance Trade and Merchandise Trade balance in equation (2).
The Data
Logistic Regression for seven-member nations of BIMSTEC namely Bangladesh, Bhutan, India, Myanmar,
Nepal, Srilanka and Thailand is used in the empirical analysis. The range of data is from 2010 to 2015. Data has
been collected from the Knoema, Asia Regional Integration Center(ARIC), Integration Indicators Database of
the Asian Development Bank(ADB), the world Bank Data Bank and the UNCTAD data base. In our regression
analysis, we use the R software technique for the above-mentioned equations.
Empirical Results and Discussion
According to table 3, results of our empirical estimation for the impact of FDI net flows, Exchange rate and
International reserves on financial indicators of BIMSTEC countries. The Deviance residuals is showing Min.,
1st Quartile, Median, 3rd Quartile and Max. Exchange rate has highest 1st Quartile, Mean, Median, 3rd Quartile
and Max. as compared to FDI and International reserves. Only Min. is highest of International reserves among
Exchange rate and FDI net flows. It means Exchange rate has impact more as financial indicators on BIMSTEC
countries and least impact of FDI as financial indicators on BIMSTEC countries.
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Table 3: summary
FDI_net.Inflows Exchange.rate_US.dollar International.Reserves
Min. :0.030 Min.: 5.40 Min.: 74.04
1st Qu.:0.695 1st Qu.: 46.70 1st Qu.: 0.05
Median :1.320 Median: 71.45 Median: 8.87
Mean :1.620 Mean: 150.33 Mean: 10.26
3rd Qu.:1.94 3rd Qu.: 101.20 3rd Qu.: 22.70
Max. :6.500 Max. :1162.60 Max.: 76.74
The results of the econometric analysis have been shown in tables below. The Creating the Logistic
Regression model for financial indicators of BIMSTEC countries.
Call: glm(formula = country ~ FDI_net.Inflows + Exchange.rate_US.dollar +
International.Reserves, family = binomial(link = "logit"),
data = Finance_data)
According to Table 4, the International reserves has positive impact with below 0.05 and not significant. The
intercept is also showing results below 0.05 and not significant. The FDI net inflows and Exchange rate are
significant results. This means International reserves are more impact as financial indicators on BIMSTEC
countries.
In case of null deviance and residual deviance, the null deviance should be greater than residual deviance. The
residual deviance is 25.136 as compared to Null deviance is 34.450. The number of Fisher Scoring iterations is
also below 8 i.e 7.It means these variables has good impact as financial indicators of BIMSTEC countries.
Table 4: Coefficients
Estimate Std. Error z value Pr(>|z|)
(Intercept) 3.066352 1.191522 2.573 0.0101 *
FDI_net.Inflows -0.025555 0.418097 -0.061 0.9513
Exchange.rate_US.dollar 0.007783 0.006006 -0.061 0.9513
International. Reserves -0.110580 0.047479 -2.329 0.0199 *
Signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1
(Dispersion parameter for binomial family taken to be 1)
Null deviance: 34.450 on 41 degrees of freedom
Residual deviance: 25.136 on 38 degrees of freedom
AIC: 33.136
Number of Fisher Scoring iterations: 7
According to Table 5, Anova test for deviance check and comparison between FDI net Inflows, Exchange rate
and International reserves as financial indicators of BIMSTEC countries. After comparing these variables FDI
net inflows has highest Residual deviance but International reserves has highest deviance residuals in the Anova
test.
Table 5: anova
Df Deviance Resid. Df Resid. Dev
NULL 41 34.450
FDI_net.Inflows 1 0.5252 40 33.925
Exchange.rate_US.dollar 1 0.4986 39 33.426
International. Reserves 1 8.2897 38 25.136
The results show the value of vif is below 5 in Table 6, therefore there is no multicollinearity between FDI net
inflows, Exchange rates and International reserves variables of financial indicators of BIMSTEC countries. It
means that these variables are individually affected as a financial indicators to BIMSTEC countries.
Table 6: Multicollinearity test: vif(Finance_model)
FDI_net.Inflows Exchange.rate_US.dollar International.Reserves
1.1017 1.4058 1.3117
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If over-dispersion is less than 1 than variables are free from over-dispersion. According to Table7, value of
output shows of FDI net inflows and International reserves variables as financial indicators on BIMSTEC
countries is below 1. It means these variables of financial indicators are free from over- dispersion. Exchange
rate has highest impact on BIMSTEC countries as financial indicators.
Table 7: overdispersion test: overdispersion_indicator
1 2 3 4 5 6 7
-0.41376522 -0.16189760 -0.04018656 -0.03616542 -0.10121094 -0.10272531 0.03017090
8 9 10 11 12 13 14
0.02640120 0.03475874 0.02759106 0.03939351 0.02652938 0.02796905 0.02715699
15 16 17 18 19 20 21
0.02720592 0.02705667 0.02847984 0.02836769 0.02979386 0.03941807 0.02632444
22 23 24 25 26 27 28
0.02632457 0.02631579 0.02714071 0.02775798 0.03549726 0.03173339 0.03396176
29 30 31 32 33 34 35
0.02913436 0.04348769 0.04962875 0.02658273 0.02717534 0.02717102 0.02762098
36 37 38 39 40 41 42
0.02644356 0.04199188 0.02749739 0.02790217 0.02676206 0.02681671 0.02726385
Trade Potential of the BIMSTEC countries
The results of the econometric analysis have been shown in tables below. According to table 8, results of our
empirical estimation for the impact of current balance Trade and Merchandise Trade balance on financial
indicators of BIMSTEC countries. The summary is showing Min., 1st Quartile, Median, 3rd Quartile and Max.
Current balance Trade has highest 1st Quartile, Mean, Median, 3rd Quartile and Max. as compared to
Merchandise Trade balance. Only Min. is highest of Merchandise Trade balance. It means current balance trade
has impact more as Trade indicators on BIMSTEC and least impact of Merchandise Trade balance as Trade
indicators on BIMSTEC.
Table 8: summary
current.balance. Trade Merchandise.Trade. Balance
Min: 0.20 Min: 27.10
st
1 Qu.: 44.88 1st Qu.: 37.55
Median: 49.65 Median: 42.05
Mean: 64.86 Mean: 56.20
3rd Qu.: 93.42 3rd Qu.: 78.00
Max.: 139.70 Max.: 121.70
According to Table 9, Anova test for deviance check and comparison between current balance Trade and
Merchandise Trade balance as trade indicators of BIMSTEC countries. After comparing these variables both
have almost equal Residual deviance but Merchandise Trade balance has highest deviance residuals in the
Anova test.
Table 9: Anova Test:
Df Deviance Resid Df Resid. Dev
NULL 41 34.450
Current balance Trade 1 2.69113 40 31.759
Merchandise 1 0.08197 39 31.677
Trade balance
If over-dispersion is less than 1 than variables are free from over-dispersion. According to Table10, value of
output shows of current balance trade and Merchandise Trade balance variables as Trade indicators on
BIMSTEC countries is below 1. It means these variables of Trade indicators are free from over- dispersion
Table 10: overdispersion test
1 2 3 4 5 6 7
-0.3333333 -0.3333333 -0.3333333 -0.3333333 -0.3333333 -0.3333333 0.3333308
8 9 10 11 12 13 14
0.3333311 0.3333306 0.3333297 0.3333308 0.3333311 0.3333309 0.3333295
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15 16 17 18 19 20 21
0.3333295 0.3333309 0.3333294 0.3333310 0.3333309 0.3333309 0.3333309
22 23 24 25 26 27 28
0.3333295 0.3333309 0.3333309 0.3333309 0.3333310 0.3333295 0.3333309
29 30 31 32 33 34 35
0.3333309 0.3333309 0.3333309 0.3333295 0.3333309 0.3333309 0.3333309
36 37 38 39 40 41 42
0.3333309 0.3333309 0.3333295 0.3333309 0.3333309 0.3333310 0.3333295
CONCLUSION
BIMSTEC is a natural choice for strengthening integration between South Asia and Southeast Asia. Through
improved cross-regional relationships, particularly in commerce, culture and connectivity, BIMSTEC may truly
come of age in the years to come.
The Bay of Bengal plays a key role in the region’s maritime architecture. BIMSTEC’s resurgence, centering on
the Bay of Bengal, is critical to the Asian integration process in the backdrop of the Regional Comprehensive
Economic Partnership (RCEP). There is great expectation for member countries to build a stronger, more
inclusive and people-driven BIMSTEC. India’s involvement in the grouping holds promise to foster the
regional integration process.
To sum up, there exists huge potential for intra-regional trade in the BIMSTEC region. The estimated
financial and trade potential for different indicators are showing that there must be more intra- regional
relationship between all member countries. No BIMSTEC country is found to emerge as the single dominant
financial and trade indicators of the regional economies. But, India, Srilanka and Thailand are considered as the
leading for financial and trade indicators within the region. Each member country has at least some presence in
each sectors of the region’s trade. Dominating financial indicator is Exchange rate followed by International
reserves and dominating trade indicators in the region are current trade balance.
This paper recommends for development of trade performance of India the various measures should be taken:
elimination of political disputes, removal of protectionism, outburst of other regional agreements, elimination of
bureaucratic inactivity, centralization of political and economic authority, identification of new market for
export, arrangement for regional transport and communications infrastructure etc.
REFERENCES
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Integration. Manila.
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Transition Economies. Economic Letters, 94, 389-395.
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BIMSTEC Countries in the Context of the Regional Trade Agreement (RTA). International Journal of
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 https://bimstec.org/? Page_id= 237
 https:// bimstec.org/? Page_id= 189
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2018-08-30
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cooperation/
 http://sameaf.mfa.go.th/en/organization/detail.php?ID=4493
 https://aric.adb.org/initative/bay-of-bengal-initative-for-multi-sectoral-technical-and-economic-cooperation
 https://www.scielo.org.co/scielo.php?script=sci-arttext&pid=s1657-42062016000100003
 https://unu.edu/media-relations/releases/global-income-inequality-unu-wider-press-release.html
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IMPACT OF INFORMATION &COMMUNICATION TECHNOLOGY ON CUSTOMER

RELATIONSHIP MANAGEMENT: PERSPECTIVES AND ROAD AHEAD
Dr. S. Veeramani1, Syed Shaamikh Ahsan2 and Sonakshi Singh3

Assistant Professor1 and 2, Centre for Management Studies, JamiaMilliaIslamia, New Delhi
M.Phil Scholar3, Department of Rural Management, Babasaheb Bhimrao Ambedkar University, Lucknow
ABSTRACT
Businesses are at its transition from a physical world to cyberspace. The pace of changing business
environment with the aid of information and communication technology has created situations wherethe
necessity of customer relationship management has become immensely vital. CRMoffers a business a well-
rounded view of its customers and provides awareness of their dynamicbehavior. In today's challenging
business environment, it is dominant to maintain and retain a customer, as the costs of acquiring new
customers are comparatively much greater than retaining a customer. CRM when well maintained and well
executed, it can offer much-needed benefits which ultimately helps in understanding behavior patterns and
preferences, ability to perform customer profiling and targeting suitable customers for further promotions,
cross-selling and up-selling opportunities, identifying the most valuable and least valuable opportunity. Whole
CRM process can be amalgamated into a software or application system that facilitates collection, organization
and management of the customer’s information. A CRM system needs its ICT enabled implementation
appropriately. CRM data helps in ensuring effective coordination of marketing campaigns, which ensures that
the promotions do not target those who have already purchased the particular goods or product. Businesses
and firms can also use the sorted CRM data to introduce loyalty programs that facilitate the purchasing of a
particular product with a higher customer retention ratio. The need of the hours it to study the interface
between ICT and CRM as this paper aspires to explore not just customer literacy but customer techno-literacy
which is also the aim of the paper. The methodology used is descriptive primarily; in addition to primary data
sources, secondary data sources are also utilized and applied.
Keywords: CRM, ICT, Cyber-space, Business Environment.
INTRODUCTION
The conceptual perspective of CRMis under regeneration in the cyberspace where customers/ consumers have
ample choices to choose from. ThePresent era is dominated by Information and communication technology,
which has to be critically examined to upgrade CRM practices. Customer Relationship Management has
become one of the newest innovations in customer service. The very firstCRM factor is defined as a customer-
led approach that emphasizes on the process of creating, collecting, coordinating, and sharing information about
target customers to generate better response and fulfillment of customer needs (Javalgietal., 2005; Desppande&
Farley, 1998).The conventional methods of customer relationship management are completely different when
we talk about the online behavior of consumers. The question is not only of retention of prevailing consumers
but also of creating new consumer base in the competitive business environment.
What is CRM?
According to Peppers & Rogers, (1993) a more popular approaches with the recent application of information
technology is to focus on individual or one-to-one relationships with customers that integrate database
knowledge with a long- term customer retention and growth strategy .Shani and Chalasani (1992) have defined
relationship marketing as “an integrated effort to identify, maintain, and build up a network with individual
consumers and to continuously strengthen the network for the mutual benefit of both sides, through interactive,
individualized and value- added contacts over a long period of time”.
Customer Relationship Management is an upright concept or strategy to solidify association with customers and
at the same time reducing cost and enhancing productivity and profitability of a business. An ideal CRM system
is a centralized collection of all data sources under an organization and provides an automatic real time vision
of customer information. From the Information Technology perspective, CRM is considered as an enterprise
wide communication and integration of various technologies such as data warehousing, web site, intranet and
extranet, mobile application system, marketing, accounting, etc.
A CRM system is vast and significant, but it can be implemented for small business as well as large enterprises.
Usually, an organization consists of various departments which primarily have access to customer’s information
either directly or indirectly. A CRM system piles up information centrally, examines it and then makes it
addressable within all the departments. For instance, an international call center which uses a CRM tool called
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“XYZ” and is integrated with a phone and a computer system or a laptop. Now this system automatically
perceives which customer is calling before the executive attends the phone, the CRM system brings forth the
customer details on the computer or laptop screen and also indicates what opportunity of deals can be cracked
with that particular customer, what the customer had already purchased or ordered in past and what is the
probability of buying in future. Not only this, but it also highlights what all products best suit this customer. For
a finance department it may show the information regarding the current balance and for accounting department,
it may pop out the information regarding the recent purchases by the customer. These all pieces of data are
stored in the CRM database and is available as and when it is required.
For all business units,CRM system is a well-defined platform to interact with their clients and fulfill all their
needs and demands very effectively which ultimately triggersconstructionof a sustainable relationship. A CRM
system can be costly and time taking to implement or integrated but once it’s accomplished, it serves the best
way of dealing with customers. In turn, customers feel a gratitude of self-satisfaction and loyalty which results
in better bonding with supplier or service provider and hence increasing the business in the long run. A CRM
system is not only beneficial in dealing with existing customers but also useful in acquiring new customers.
The robust advancement in information technology (IT) has promptedfirms to come up with new technology-
based solutions—namely, CRM technology—to manage customer relationships. Such technologiesare a suite of
IT solutions designed to support the CRM process (Rigby, Reichheld, and Schefter 2002) According to El-Sawy
The unease with CRM technology use and implementation is similar to the disillusionment that firms
encountered in the late 1980s with the use of IT to automate business activities. The frustration with IT systems
led to a focus on information process redesigning in organizations to take advantage of the technology. There is
anessential need ofresearch on as how such situationscould be adopted in the environment where markets are
volatile and customers are emotional.
VARIOUS APPROACHES TO CRM& SYSTEMS
According toGreenberg, “CRM systems basically make three things possible:
(1) Its having an integrated, single view of customers, by using analytical tools.
(2) Managing customer relationships in a single way, regardless of the communication channel: telephone,
website, personal visit, and so forth.
(3) Improving the effectiveness and efficiency of the processes involved in customer relationships
Source:https://www.jagsheth.com/relationship-marketing/customer-relationship-management-emerging-
practice-process-and-discipline.
The early approaches to (CRM) can widely be discussed as under:
1. The Anglo-Australia Approach
2. The Nordic Approach
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3. The North American Approach.

1. The Anglo-Australian approach-: The Anglo-Australia Approach integrates the contemporary theories of
quality management services marketing and customer relationship economics to explain the emergence of
relationship marketing.
2. The Nordic approaches-: The Nordic Approach is the union of interactive network theory, services
marketing and customer relationship economics. Marketing as an interactive process in a context where
relationship building is an area of key concern for a market. 3.
The North American Approach-:The North American approaches on the relationship between the buyer and
seller, operating within the context of the organizational environment which facilitates the buyer-seller
relationship. One of the broadest approaches to CRM emerged from the research conducted by scholars at the
Centre for Relationship Marketing and Service Management, Cornfield University, U.K. The broadened view
of relationship marketing speaks abouta total of six crucial market domains, not just the traditional customer
market. It also advocates for a transition for marketing from a limited functional role to a cross-functional role
and a shift towards marketing activities for customer retention in addition to the conventional customer
retention and acquisition. CRM is a discipline plus a set of distinct software and technologies that mainly
focuson automating and improving the business processes eventually supplementing effective customer
relationship management in the areas of sales, marketing, customer service andsupport. CRM applications
smoothen multiple business functions andcoordinate multiple channels of communication with the customer -
face to face, call centre and web. CRMenfolds methods and technologies used by companies tomanage their
relationships with clients. Stored information about existing and potential customers is analyzed and used in
favorable directions. Automated CRM processes are often used to generate automatic personalized marketing
tasks based on the customer information stored in the system.
THE EMERGING APPROACHES TO CRM
According to Parvatiyar&Sheth, 2000several software tools and technologies claim solutions for various
aspects of CRM,which have been recently been introduced for commercial application; the majority of these
tools assure to individualize and personalize relationships with customers by providing dynamic information at
every point in the interface with the customer. Techniques such as collaborative filtering, relational databases,
rule-based expert systems, artificial intelligence are increasingly being applied for developing enterprise-level
solutions aiming to managecustomer interaction information. The objective of this study is not to evaluate these
application tools or technologies, rather, those aspects are considered elsewhere by the authors as well as by
several commercial research organizations, such as Forrester Research and the Gartner Group. The researchers
of CRM are in estimation that it evolves as a discipline and no more only as domain.
Source: www.jagsheth.com/relationship-marketing/customer-relationship-management-emerging-practice-
process-and-disci.
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OBJECTIVE OF THE STUDY

1. To critically examine the conceptual framework of CRM in the modern era of electronic commerce.
2. To study CRM approaches towards cyberspace and its evolution.
3. To find future prospects of CRM and ICT interface
4. To find out the major challenges to CRMin the time of ICT.
HYPOTHESIS
1. CRM evolves from domain to discipline in the age of electronic commerce.
2. The interface between ICT and CRM made relationships at a highly dynamic pace.
3. CRM is no more strategy but necessity in the era of business warfare at cyberspace.
The research methodology is descriptive in nature and data is collected primarily from secondary sources as
well as primary data sources. Research is quantitative in nature for which the data is collected from all
secondary sources. The evolution on CRM in cyberspace is a new domain of research and not many pieces of
researches have been done so far and hence this study is an attempt to touch the epistemological side of CRM
interface with ICT.This descriptive study aims at generating knowledge that may be used to describe or develop
a profile of a problem which is structured and well understood. According to Cooper &SC hinder,2003,
explanatory research design aims at connecting ideas in order to understand the interaction of variables in terms
of cause and effect relationship.
ANALYSIS AND FINDINGS
The changing pace of CRM needs to be corroborated with whatever existing before the invasion of ICTs; the
term customer relationship management and relationship marketing have been used interchangeably to reflect a
variety of themes and perspectives. Some of these themes offer a very narrow functional marketing perspective
while others offer a broad and somewhat paradigmatic approach. A narrower perspective of customer
relationship management is databasemarketing emphasizing the promotional aspects of marketing linked to
database efforts, another viewpoint is to consider CRM only as customer retention approach in which variety of
after marketing tactics are used to focus on customer bonding. A more popular approach with recent
application of information technology is to focus on individual or on creating one to one relationship with the
customer that incorporates database knowledge with long-term customer retention and growth strategy. CRM
intends towardsdevelopingstrong, lasting relationship with individual accounts, the study finds that CRM is
more strategic in character and its role is more from manipulating the customer (telling & selling) to genuine
customer involvement (communicating & sharing the knowledge). The present state of IOT (internet of things)
is more to do with CRM and there is scope for ample research in this area.
The extensive research by Roger Buehrer and Christian D. Mueller on various views such as acommunity
views : This category analyses four main aspects: solution categories offered, business scope of the CRM
solution, size of target companies for the CRM software and business sector predominantly served; b) Process
view: knowledge, intention, contracting and settlement. More specifically, the processes that were asked for,
comprise management of the knowledge phase, administration management, marketing management, customer
service management, sales management, logistics management and field service management; c) Functionality
View: functionality view provides a valuable overview of the different functions that support the processes in
the process view. In order to do so, the functionality view is divided into three criteria: functionalities that
support interaction between the company and its customers/ partners; analytical functionalities to support
evaluation of the processes/ customers/ etc. and functionalities to access customer interaction and partner
interaction data; and d) Infrastructure View: comprise CRM architecture, sovereignty of data, scalability of
software, support of user interfaces, support of operating system aswell as interfaces to databases and IT
systems.
The opportunities that can be best harvested by CRM can be discussed under the following heads:
CRM will gradually reduce an organization’s dependence on periodic surveys to gather data. Collection of data
related to buying and consumption behavior will be primarily app driven. In many cases, the transaction data is
automatically collected sometimes real time as in the e-commerce transaction. This rich source of customer
information and knowledge updated through regular interactions and actual customer transactions and purchase
behavior will positively help marketers to develop and market customer-centric products successfully.
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Customized promotions-based customer preferences and purchase patterns will substantially reduce the
unnecessary wastefulexpenditure of mass communication and even direct mailing.
CONCLUSION
Expansion and rise of cyberspace have enriched the business environment; obviously, there are contrary
resultsof the same but the reach of technology into the core of business processing cannot be taken lightly. ICT
have reformed the way business world thinks and enabled the CRM process on a faster pace.
In the emerging competitive situation almost all industries and markets, a relationship marketing strategy has
become crucial for survival. CRM continuously targets to exploits the new technologies, particularly the
interactive ones: Internet, interactive TV, web-TV, kiosks, fax, e-mail, voice mail, personal data assist, mobile
phones, smartphones, etc., which can enhance CRM user based contents and receive feedback from the
user.Social media has also changed the very notion of CRM, and social media is not possible without
cyberspace and IT-enabled apps. There is need for an app. based relations with customers which is completely
different from traditional CRM practices.At this instant customer tends to create their own world with vendors;
it can be also VRM (Vendor Relationship Management) instead CRM on social media, but there is need to
develop a diagnostic model in these lines.
FUTURE OF CRM AT CYBERSPACE - ROAD AHEAD
Societies in which today’s consumers’ lives are informative about the business world;the gadget on the palms of
customer can decide what to buy, when to buy, how to buy and from whom? Even without physically visiting
the market; there is self-control on impulse character due to freedom and options extended by the ICT which
needs careful attention in order to cognize the adverse. Electronic CRM may attract regulatory compulsions due
to its speedy and wild pace in customer relations. There is ample scope to explore and research as ‘CRM’ is
driven by market or customer, it is the prompting question which can be taken aschallenge when we research
CRM at Cyber space if not in physical space. Within the Apps dominated market – customer relations is an
inevitable challenge for which business world need to develop compatible solutions.
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INFLUENCE OF CONSUMERS’ CHARACTERISTICS ON IMPULSE BUYING TENDENCY
Dr. Saiyed Wajid Ali1 and Swati Sudan2

Associate Professor and Ph. D. Research Scholar2, Centre for Management Studies, JamiaMilliaIslamia, New
1
Delhi
ABSTRACT
Several decades of research has attempted to unveil the various factors that influence impulse buying behaviour
in consumers. However, definitive conclusions have still not been arrived at, since a plethora of studies offer
contradictory results. This study is an effort to shed light how certain consumers’ characteristics namely,their
ageand gender influence their tendency to buy on impulse. This knowledge would be highly useful to retailers
who aim to enhance their profits by employing strategies that trigger impulse buying behaviour among
customers.
Keywords: age, consumer behaviour, consumer characteristics, gender, impulse buying
1. INTRODUCTION
Post the liberalisation of Indian economy, various organised retailers have mushroomed across the length and
breadth of the country. The Indian retail sector has also witnessed phenomenal growth in e-tailing due to
scientific and technological advancements in telecommunications and transportation. The consumers of today
are spoilt for choice as they have a wide assortment of merchandise to choose from.
The spurt in organised retail has been accompanied by a rise in disposable incomes in a large percentage of
Indian households. This led to an increase in the Indian consumers’ spending power. Accordingly, the
consumption basket of the Indian consumer also changed dramatically over the last three decades. From buying
mere necessities, Indian spending evolved to a more discretionary spending. Since the consumers have greater
amounts to spend, shopping has transformed from being a chore to a recreational activity.The shopping
experience has become as important for the consumers as the products bought, and retailers strive to provide a
sensory immersion to the consumers through visual merchandising and unique store layouts.
The success of a retailer revolves around decoding how the consumers’ go about the process of making their
buying decisions. With the aim of attaining deeper insights into the behaviour of the consumer, various models
of consumer behaviour have been proposed. Traditional decision making models in consumer behaviour rely on
viewing the consumer as a rational being, who when faced with several alternative courses of action, will
choose that alternative which offers maximum utility to him/ her. Thus, consumers, who evidently have finite
resources to fulfil their needs and wants, must make an optimal choice, after due consideration of all the options
available, to best fulfil their desires, within their resources.
The drawback of thesetraditional models is that they do not address purchase behaviours which are not
completely under the consumer’s volitional control.Though, the traditional models contribute greatly to the
field of consumer behaviour by providing conceptual frames of reference, they have certain limitations in
explaining certain distinctive kinds of consumer behaviour. An important supposition that is at the core of most
models is the assumed rationality of consumer decision making which has been questioned due to its inability to
explain many non-conscious consumer purchase behaviours.
Hoch &Loewenstein (1991) point out that the behaviour of consumers, which makes them act against their
better judgement, to engage in purchase behaviours that they may later regret, is very perplexing. The
researchers state that though much of the consumer behaviour can be explained by the rational choice model, a
deeper insight into consumer behaviour is needed to understand that in making their buying decisions,
consumers are not merely influenced by long term rational concerns. This was also highlighted by Mason
(1984) who suggested that exceptional behaviours could not be explained using common consumer behaviour
models.
A commonly observable behaviour, wherein the consumers seemingly depart from rational decision making is
when the consumers give in to their sudden urges for immediate consumption without thought to future
consequences. Thus, the phenomena of impulse purchasing/ excessive buying/ addictions refute the rational
economic man theory as the consumer is no longer behaving rationally. For several decades, consumer
behaviour theorists have been attempting to gain insights into these puzzling, yet highly prevalent forms of
consumer behaviour.
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With the rise in disposable incomes and recreational shopping, a significant proportion of the consumption
basket is bought on impulse. The evolution of India from a utilitarian subsistence economy to a consumption
economy is now nearly complete. Easy credit availability, greater disposable incomes, expansion of organised
retail to tier II cities and better shopping environments have all been instrumental in this transformation.Given
the growing significance of impulse buying behaviour today, the present paper aims to add to marketers’
understanding of impulse buying by examining how age and gender influence impulse buying.
The research pertaining to impulse buying has evolved over several decades. The research in this interesting yet
puzzling area of consumer behaviour has seen a marked shift from being product-centric to consumer-centric
(Rook, 1987).
Viewed byPiron(1991) as an unplanned, “on-the-spot” purchase arising out of being exposed to certain stimuli,
he proposed classifying impulse purchases on the basis of emotional and/or cognitive reactionsexperienced by
the consumer at the time of purchase. In agreement with him, Baun&Groeppel-Klein (2003) also highlighted
the spontaneity and positive emotions associated with this type of “stimulus-controlled” purchase behaviour
characterised by low cognitive control.In a more recent description of impulse buying, Sharma, Sivakumaran
and Marshall (2010) reflected upon the “lack of cognitive control” resulting from a complex emotional appeal
felt by the consumer in proximity of the product, and stated that the swiftness of the execution of the impulse
purchase prevented any deliberation by the consumer on the future consequences of the action.
Weun, Jones and Beatty (1997) defined impulse buying tendency as the “degree to which an individual is likely
to make unintended, immediate, and unreflective purchases (i.e., impulse purchases).” (p. 306). In agreement
with Piron’s (1991) proposition, Verplanken&Herabadi(2001) made a distinction between the cognitive aspects
vis-à-vis the affective aspects of impulse buying tendency underlining that while the cognitive aspects referred
toan absence of forethought, planning and deliberation, affective aspects referred to thepresence of an
experiential component (positive feelings such as pleasure, excitement, etc. and/or negative feelings such as
guilt) associated with the purchase.
There exist certain contradictions in the findings concerning the relationship of age and gender with impulse
buying as reported by past researchers. While some researchers have reported that age and impulse buying are
negatively related (McGoldrick, Betts and Keeling, 1999), others contend that age has a positive/ no significant
influence on impulse buying (Obeidat, 1989). Also, Hausman (2000) reported that the consumer’s gender did
not have any significant effect on impulse buying, while other researchers (Dittmar& Drury, 2000; Coley,
2002)reported that women have a greater tendency to shop impulsively. Such mixed results are puzzling and
might have been an outcome of sampling or methodological differences, creating a need for future researchers
to focus on the role played by these sociodemographic factors in impulse buying behaviour. To address this, the
present study is aimed at examining the relationships of age and gender with impulse buying tendency. The
research hypotheses for the study are as follows:
H1: The mean cognitive impulse buying behavioural tendency (CIBT) of consumers of at least one age group is
different from the mean cognitive impulse buying behavioural tendency (CIBT) of at least one other age group.
H2: The mean affective impulse buying behavioural tendency (AIBT) of consumers of at least one age group is
different from the mean affective impulse buying behavioural tendency (AIBT) of at least one other age group.
H3: The mean cognitive impulse buying behavioural tendency (CIBT) of male consumers is significantly
different from the mean cognitive impulse buying behavioural tendency (CIBT) of female consumers.
H4: The mean affective impulse buying behavioural tendency (AIBT) of male consumers is significantly
different from the mean affective impulse buying behavioural tendency (AIBT) of female consumers.
3. METHODOLOGY
In line with the objective of this paper, since consumer characteristics were being studied, the unit of analysis
for this research was individual consumers and sample size was 724.The sample was drawn from the
Delhi/NCR region through non-probability snowball sampling.
The study made use of a structured, self-report questionnaire to obtain primary data from the respondents on the
various variables of interest.The questions were closed ended questions. The independent variable age was
measured on an ordinal scale and had six ordinal categories namely 20 or below (coded as 1), 21 - 30 (coded as
2), 31 - 40 (coded as 3), 41 - 50 (coded as 4), 51 - 60 (coded as 5), and Over 60 (coded as 6).The independent
variable gender was measured on nominal scale and had two categories namely male (coded as 1) and female
(coded as 2).
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The respondents’ impulse buying behavioural tendency, which was the dependent variable in this study, was
measured using a 20 items scale adapted from the retrospective self-report scale developed by Verplanken and
Herabadi (2001). The 20 items of the scale were divided into two dimensions namely, cognitive (comprising ten
items) and affective (comprising ten items). The measurement scale employed a five point Likert Scale (ordinal
scale) wherein respondents indicated their degree of agreement/ disagreement with the statements contained in
the questionnaire (responses ranged from strongly disagree (1) to strongly agree (5)). The Cronbach’s alpha
coefficients for both dimensions were greater than 0.7 indicating good internal consistency and establishing the
reliability of the research instrument.
While the maximum respondents (43.9%) belonged to the age group of 21-30 years, the least number of
respondents belonged to the age groups of 20 years or below(1.8%) and over 60 years of age (1.8%). The
breakup of respondents pertaining to other age groups was: 34.7% (31-40 years) , 13.3% (41-50 years) and
4.6% ( 51-60 years).Gender-wise categorisation of the respondents indicated that 43.5% of respondents were
women as compared to 56.5% male respondents.
4. ANALYSIS AND RESULTS
The tests of normality for data collected from each of the age groups (Kolmogorov-Smirnov statistic and
Shapiro-Wilk statistic) indicated non-normality of the data. This necessitated the use of non- parametric tests to
analyse the data and therefore,Kruskal-Wallis test was employed for data analysis.
The results obtained from the Kruskal Wallis Test (CIBT across age groups) test run on the data (Table 1)
clearly indicated a significant effect of the age group of consumers on their cognitive impulse buying
behavioural tendency (CIBT) (χ2 (5) = 16.005, p < .05). Since the test was significant at the 0.05 level of
significance,it led to rejection of the null hypothesis and acceptance of the alternate hypothesis. (H1accepted). It
led us to the conclusion that the mean cognitive impulse buying behavioural tendency (CIBT) of consumers of
at least one age group is different from the mean cognitive impulse buying behavioural tendency (CIBT) of at
least one other age group.
Table 1: Independent samples Kruskal Wallis Test Results(CIBT across age groups)
Source: Analysis of primary data

A post hoc analysis shed light on the consumers’ age groups which differed significantlyfrom other age groups
in their mean cognitive impulse buying behavioural tendency (CIBT). Pairwise comparisons (Figure 1 and
Table 2) conducted to ascertain which pairs of groups differ significantly from one another revealed that
consumers of age group 51-60 years differed significantly in their mean cognitive impulse buying behavioural
tendency from consumers of age groups 21-30 years and 31-40 years. The pairwise comparisons revealed that
the highest mean cognitive impulse buying behavioural tendency was displayed by the consumers of age group
over 60 years.
Figure 1: Pairwise comparisons of mean CIBT of different age groups
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Source: Analysis of Primary data

Table 2: Pairwise comparisons of mean CIBT of different age groups

The results of data analysis (shown at Table 3 ) using the Kruskal Wallis Test (AIBT across age groups) pointed
to a significant relationship among the age group of consumersand affective impulse buying behavioural
tendency (AIBT) (χ2 (5) = 64.914, p < .05). Since we obtained significant test results at the 0.05 level of
significance, we rejectedthe null hypothesis and accepted the alternate hypothesis. (H2accepted). We thus
concluded that the mean affective impulse buying behavioural tendency (AIBT) of consumers of at least one
age group is different from the mean affective impulse buying behavioural tendency (AIBT) of at least one
other age group.
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Table 3: Independent samples Kruskal Wallis Test Results(AIBT across age groups)
Source: Analysis of Primary Data

A post hoc analysis determined the consumers of which pairs of age groups differed significantly in their mean
affective impulse buying behavioural tendency (AIBT). Pairwise comparisons (Figure 2 and Table 4) conducted
to ascertain which pairs of groups differ significantly from one another revealed that consumers of age group
21-30 years differed significantly in their mean affective impulse buying behavioural tendency from consumers
of age groups 31-40 years, 41-50 years and 51-60 years. The pairwise comparisons revealed that the highest
mean affective impulse buying behavioural tendency was displayed by the consumers of age group 21 - 30
years.The mean Affective impulse buying behavioural tendency displayed by the consumers of age group over
60 years was also fairly high.
Table 4: Pairwise comparisons of mean AIBT of different age groups
Source: Analysis of data

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Figure 2: Pairwise comparisons of mean AIBT of different age groups

The tests of normality for data collected from both genders (Kolmogorov-Smirnov statistic and Shapiro-Wilk
statistic) showed that the data is not normally distributed for both genders. Thus, data was analysed using the
Mann Whitney U test which is a non- parametric test.
The results of the Mann Whitney U Test(influence of gender on CIBT) are shown at Table 5 and Table 6. Mann
Whitney U Test revealed that there was a significant effect of gender on cognitive impulse buying behavioural
tendency (CIBT) (U = 71,569, p = .010). The test being significant at the 0.05 level of significance led us to
reject the null hypothesis and accept the alternate hypothesis. (H3accepted). We may thus conclude that the
mean cognitive impulse buying behavioural tendency (CIBT) of consumers of both genders are significantly
different from each other.Results presented at Table 6are a clear indicator that female consumers can be
considered as having the higher mean cognitive impulse buying behavioural tendency (CIBT) (since they have
the higher mean rank) when compared with male consumers.
Table 5: Test Statistics Table- Influence of gender on CIBT

Table 6: Comparisons of mean ranks of both genders
GENDER N Mean Rank Sum of Ranks
CIBT 1 409 345.01 141111.00
2 315 385.20 121339.00
Total 724
The results of the Mann Whitney U Test (influence of gender on AIBT) are shown at Table 7. Mann Whitney U
Test revealed that there was no significant effect of gender on affective impulse buying behavioural tendency
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(AIBT) (U = 63,971, p = 0.873). Since the test did not yield significant results at the 0.05 level of significance,
we rejected the alternate hypothesis and accepted the null hypothesis. (H4rejected). This led us to infer that the
consumers’ gender does not significantlyinfluence their mean affective impulse buying behavioural tendency
(AIBT).
Table 7: Test Statistics Table - Influence of gender on AIBT

5. DISCUSSION OF RESULTS
5.1 Age and Impulse buying behavioural tendency
The consumer age variable has been of key interest to consumer behaviour theorists and marketers and there
exists ample literature which suggests the use of age as a basis for market segmentation since product needs and
consumption patterns vary with age (Gunter, 1998; Schiffman, O'Cass, Paladino, & Carlson, 2014; Lantos,
2015). Researchers examining impulse buying behaviour of consumers have also repeatedly deliberated upon
theconnectionbetween this important variable and impulse buying. A study of Jordanian women's consumption
patternsby Obeidat (1989) revealed that their impulsivity becomes lower as they grow older.McGoldrick, Betts
and Keeling (1999) also suggested that consumers belonging to younger age groups were more likely to engage
in spontaneous buying. Other researchers (Wood, 1998; Kacen& Lee, 2002; Tuyet Mai, Jung, Lantz & Loeb,
2003; Silvera, Lavack&Kropp, 2008; Ghani & Jan, 2010) also found support for a significant inverse
relationship between age and impulse buying. Not only in the context of purchase, but when Steinberg et al.
(2008) studied the general trait of impulsivity, they found evidence that it declines with age. Pentecost and
Andrews (2010) compared fashion related impulse buying among four key cohorts - Generation Y, Generation
X, Baby Boomers and Swing (Generation Y being the youngest among them) and found that Generation Y were
more impulsive than the other cohorts in their purchases. However, some researchers (Verplanken&Herabadi,
2001; Dincer, 2010) reported on the basis of their analyses that there existed a lack of any significant correlation
between consumers’ impulse buying tendency and their age. These confounding conclusions might have been
the consequence of the narrow age range of consumers studied by these researchers. Interestingly,
Verplanken&Herabadi (2001) reported discrepant findings in their examination of relationship of age with
impulse buying tendency in two separate studies conducted on different samples (first study conducted on a
student sample; whereas the second study included a more age-wise diverse set of respondents).While findings
of the first study indicated that there existed no significant correlation between consumers’ impulse buying
tendency and their age, the more age-wise diverse second study found that impulse buying tendency and age
exhibited a negative correlation.
The results of our analysis show that there exists a significant difference in the mean cognitive impulse buying
behavioural tendency and mean affective impulse buying behavioural tendency among consumers of various
age groups. It was disappointing, however, that the direction of the relationship between age and impulse
buying behavioural tendency was not conclusive. This was because even though there was evidence of decline
of impulse buying behavioural tendency with growing age, we found an increase in both the mean cognitive
impulse buying behavioural tendency and the mean affective impulse buying behavioural tendency in
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consumers over 60 years. Although, the reason for this deviation in behaviour is unclear, it might be caused due
to a higher disposition of consumers over 60 years to seek excitement from shopping episodes (as an escape
from boredom in their lives) or due to effects of aging on cognition, memory and decision processes. Also,
older consumers of present times are not confined and withdrawn like their predecessors one/two generations
ago and many of them still lead active lifestyles, have much greater spending power as compared to other age
groups and are more willing to spend (an indicator could be the large number of older people vacationing
abroad). However, it needs to be highlighted that the number of respondents in this age group were quite less
and hence it is felt that these relationships need further exploration.
5.2 Gender and Impulse buying behavioural tendency
Gender has been a key variable of study for the consumer behaviourists and its impact on consumer behaviour
is well documented (Holbrook & Schindler, 1994; Rocha, Hammond & Hawkins, 2005; Otnes, &Zayer, 2012;
Hoyer, MacInnis&Pieters, 2016). Speaking of impulse buying too, the role played by the consumers’ gender
has been studied by several scholars. While some researchers claim that gender has no significant influence on
impulse buying (Hausman, 2000; Kwon & Armstrong, 2002; Dincer, 2010, Ghani & Jan, 2010), there are other
researchers who report that women have a greater tendency to shop impulsively (Dittmar& Drury, 2000; Coley,
2002; Lin & Lin, 2005; Silvera, Lavack&Kropp, 2008; Pentecost & Andrews, 2010; Tifferet and Herstein,
2012). In stark contrast, however, Zhang, Prybutok and Strutton (2007), conducted a study of online shopping
habits and revealed males to be more impulsive than females when it comes to online shopping. Dittmar,
Beattie and Friese (1995) made a distinction in the types of goods bought impulsively by men and women
highlighting that while instrumental and leisure objectsmade men act on impulse, women indulged in impulse
purchases of products representing symbolism and self-expression. Interestingly, Verplanken&Herabadi (2001)
reported discrepant findings in their examination of gender differences in impulse buying tendency in two
separate studies conducted on different samples (first study conducted on a student sample; second study
conducted on a more diverse sample in terms of age), and found that while in the first study women exhibited a
higher impulse buying tendency than men, in the second study the difference in impulse buying tendency
between men and women was not significant. Coley and Burgess (2003) stated that men and women were
significantly different in their impulse buying related cognitive and affective processes and also the product
categories bought by both genders on impulse were different. Gąsiorowska (2011) found gender to be a
moderator in the relationship between impulse buying tendency and individual differences variables; and
amplified that while sensation seeking and reactivity led women to shop impulsively; formal attributes of
behaviour were related to impulse buying tendency in men.
In the current study, the analysis showed that men and women differ significantly in the cognitive aspects of
impulse buying (women showed greater cognitive impulse buying tendency than men). However, the results of
the analysis did not indicate any significant differences among men and women’s affective aspects of impulse
buying. This implies that a lack of attention, absence of forethought, poor planning/ deliberation,
memory/information overload, indecisiveness were possible causes of significantly higher impulse buying in
women as compared to men. However, our findings did not indicate any difference in affective triggers of
impulse buying among men and women, such as intensity of urge to buy, depth of emotions associated with the
purchase, and desire to change negative moods etc. Thus, these findings partially contradict the findings of
Coley & Burgess (2003) who found that both cognitive and affective impulse buying related processes for men
and women were significantly different. Researchers (Kimura & Hampson, 1994; Kimura, 1996; Putrevu,
2001; Cosgrove, Mazure& Staley, 2007) suggest that there exist gender based differences in brain morphology,
brain function, neurochemistry, hormones and social roles leading to differences in cognitive patterns,
information processing and different approaches to problem solving among men and women. This may be the
probable cause why men and women exhibit differences in the cognitive aspects of impulse buying. Summing
up, we found that both genders exhibited differences in their cognitive aspects of impulse buying tendency,but
they weren’t different from each other in the affective aspects.
6. SUMMARY AND RECOMMENDATIONS
A key concern of marketing activity is the formulation and evolution of strategies and optimisation of the
marketing mix with a view to maximise profits. This requires a key understanding of the drivers of the
consumers’ product decisions. Numerous consumer behaviour models suggest that not only do the various
environmental, social and marketing stimuli exerta major influence on purchase related decisions, but consumer
characteristics also play a major role. Like planned purchases, excessive consumption behaviours like
compulsive buying, addictions, and impulse buying too are impacted by these stimuli and consumer
characteristics. The rising significance of purchase behaviours like impulse buying makes it important for the
156
marketers/ retailers to improve their grasp of the factors that promote/ inhibit such behaviours and to devise
strategies to lure customers into buying more in every shopping trip.
The results of the present study revealed two key findings with respect to influence of age on impulse buying
tendency. Firstly, impulse buying shows a declining trend with age, implying that as the consumers age their
self-control strategies become more effective and they tend to shop more diligently. Thus, the target segment,
for the marketers aiming to enhance impulse buying behaviour of their products, is young adults (children and
adolescents were not part of the study). Utilising family life cycle concept marketers/ retailers may to some
extent predict the purchase behaviour and consumption patterns of consumers. Since at this stage of life the
consumers are likely to be setting out on their career paths or starting their married life, typical products that
would interest them are likely to include clothing, footwear, books, grocery, cosmetics, personal care items,
mobile phones, laptops, entertainment related products, cooking appliances, home appliances etc. Marketers of
these product categories must actively target the young adults though competitive pricing, attractive window
displays, floor merchandising, bundling of complementary goods, cross merchandising, and lucrative
promotional offers. Shelf placement of items must be carefully planned, as placement of products at eye-level is
likely to grab the attention of the shoppers.
Secondly, the analysis also revealed that older consumers (over 60 years) have a high tendency to shop
impulsively. As described previously, the probable causes for this finding could be a decrease in cognitive
processing abilities or the use of shopping as a means of alleviation from loneliness and boredom. In the present
day, many consumers of this age group are affluent, with high disposable incomes and willingness to spend.
However, marketing to this segment of consumers presents its own set of challenges and there aren’t many
products/ offerings designed catering to the specific needs of the elderly. Given their purchasing power, many
products are likely to grab their attention such as clothing, jewellery, health foods, preventive health programs,
tailor made vacations, stylish (but easy to operate) mobiles, electronics and home appliances, socially
conspicuous goods, luxury products etc. Since consumers witness slowing down of cognitive processes and
memory with growing age, easy to understand terms and conditions, easy operability and a promise of
convenience are likely to catch their attention convincing them to buy on impulse. Relationship marketing
strategies and personal attention of the salesperson are also likely to work well with these consumers as most of
these consumers witness a decline in their social ties with age. Relationship marketing offers them the comfort
of a personal touch which is likely to convince them to purchase the product. Many of these consumers are
looking at shopping as a recreational activity and have a greater tendency to browse for products as they have a
lot of time to spare. This is likely to give them more time to spend on non-planned shopping activities
increasing the likelihood of impulse buying. Thus retail stores must work on enhancing the customer’s retail
experience to encourage these consumers to shop more.
In the present study, women shoppers were found to be more impulsive than male shoppers in terms of their
cognitive impulse buying tendency. This finding is important because traditionally, women play the social role
of buying products not only for themselves but also for the whole family. This makes women shoppers a very
powerful market segment with immense purchasing power. Marketers need to understand that women make
buying decisions differently when compared to men as they have their own set of preferences, attitudes and
priorities. Tailoring products, services, marketing messages, media to suit the needs and mind-set of women is
likely to enhance impulse purchases. Women are more people oriented than men so featuring people on the
packaging is likely to differentiate the product on the retail store’s shelf. Rather than facts and features,
focussing on the benefits offered by the product help women to see the big picture of product usage more
clearly and making them more likely to purchase the product. Even marketing communications must be
designed around people, relationships and product benefits to catch women’s attention. Sensory enhancement of
the product through touch, texture, smell etc. is also likely to draw a favourable response from the women
consumers. Ease of storage and longer shelf life are also likely to convince women to buy more as it is likely
that they are the ones responsible for storage of the product post its purchase.
7. LIMITATIONS OF THE STUDY
In the present research work, the method used for data collection was snowball sampling technique which is a
non-probability sampling technique. If future researchers can replicate the research findings using probability
sampling techniques, it would improve the confidence with which generalisations regarding the relationships
examined are made.
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COMPULSORY LICENSING AND GENERIC DRUGS: HEALING OR HARMING INDIAN

ECONOMY
Dr. S Z Amani1 and Nisha Dhanraj Dewani2

Professor and Research Scholar2, Department of Law Jamia Millia Islamia, New Delhi
1
ABSTRACT
The issue of compulsory licensing (CL) and generic medicines (GM) engrosses the concept of patent which is
an essential part of patent. With the post 2005 amendments within the Indian Patent Act, 1970, several changes
have appeared in the pharmaceutical sector for example i.e., changes within the market structure, changes in
distribution policies, worth of the drugs, market competition and worth of branded drugs, the supply of drugs at
the level of doctors, and lastly the accessibility of essential drugs to the people across the country. These
changes stanch the verity that the Patent regime has been changed, which in one way causes deregulation on
the prices of drugs where the firms are open to monopolize the market in respect of prices of newer drugs even
without considering the very objectives of Doha Declaration. Secondly, the foreign investors are preventing life
saving drugs in fact they are obstructing to reaching them to the Indian market because they have invested
millions in research. Recently the ‘Natco decision, 2012’ has goaded severe ponder at the international front,
specifically TNC and Pharmaceutical manufacturing units of USA. It was argued that India’s licensing policy
of sec 84 to 92A given under Chapter XVI violate the TRIPS agreement. Therefore by looking at the growing
concerns and apprehensions rose over the above subject in India, this article is aimed to examine certain
questions: How the current practices of CL affect the long run of pharmaceutical industry in India? Will the
population of developing nations have access to essential medicines? Will the potential of pharmaceutical
industry confirm India’s position on CL in global market? Thus this article opens up with a brief analysis of the
interaction between patents and GM. This includes an outline of the Indian market in respect of pharmaceutical
trade and the right of access to medicines as an indication of human rights.
Keywords: BRICS, compulsory licensing, generic drugs, global economy, TRIPS.
1. INTRODUCTION
India's economy is a mixed economy that is still developing. It is the 6th largest nominal GDP economy in the
globe and the 3rd largest by Purchasing Power Parity (PPP) and Gross Domestic Product (GDP) development,
an average of 7.1% in 2016-17, which ranked India among the world's best-performing countries, but fell from
7.1% to 6.5% in FY 20 due to major reforms nevertheless it is estimated that India would be the world’s fast
major economy in future if India keeps improving the climate for rapid growth on the strength of its sustainable
engines i.e., private investment and exports (Economic Survey, 2018). However, the other major components of
this sustainable engine are the precious industries such as Information Technology, Telecommunications, ITES,
Pharmaceuticals, Banking, Insurance, Light Engineering Goods, Auto Components, Textiles & Apparels, Steel,
Machine Tools and Gems and Jewelry that are creating demand for Indian goods and services in global and
domestic markets. Indian policymakers supported a deeply isolated, self-reliant economy after independence in
1947, with a primary focus on poverty reduction. Through state-driven industrialization, India attempted to
accomplish advancement and pursued a socialist economic model.
In the name of generic, the Indian Pharmaceutical manufacturing units have made a noteworthy input to global
healthcare by ensuring high-quality, inexpensive and available medications worldwide. Over the past decade,
the sector has risen quickly and has been instrumental in global access to lashing generics. India is a
remarkable hub for generic, R&D and pharmaceutical production due to its powerful value chain capacities
(Khader and Feroz Ali, 2008). India's pharmaceutical industry ranks third in volume terms in the globe and 14th
in value terms. India is contributing the world's second-largest share of pharmaceutical and biotech labor. The
share of above industry rose by 9.5% in March 2018 (Gopal Nair, 2008). India also represents the second
biggest amount of Abbreviated New Drug Applications (ANDAs) and, between April 2000-December, 2017, is
the world leader in ‘drug master files’ (DMFs) apps with the U.S. ‘Indian Drugs & Pharmaceuticals’ IDP
industry receiving cumulative US$ 15.59 billion in FDI. Currently, the supply over 80% of the antiretroviral
medicines used worldwide to fight AIDS (Acquired Immuno Deficiency Syndrome) has been increased. India,
however, did not have a product patent between 1970 and 2005. The Indian pharmaceutical industry evolved at
a very rapid pace without any product patent. With the impact of the Trade-Related Aspects of Intellectual
Property Rights (TRIPS) Agreement of the World Trade Organization (WTO), India was needed to implement
product patent protection in its patent law. The Indian government amended its patent law in 2005 despite
objections to the implementation of a product patent. The Patents (Amendment) Act, 2005 specifically contains
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some sections directed at promoting a compulsory licensing scheme. The Indian government awarded the
country's first compulsory license in 2012 against a foreign business namely Bayer Pharmaceuticals, which
became a key problem on the global platform. Even United States had also pressurized India to revise its IPR
policy for medicines as per their Office of the ‘United States Trade Representative’ (USTR) sec. 301 which if
effected would certainly harm the compulsory license purposive mechanism and Indian economy. Apart from
that, as India is member of BRICS nation so access to medicine is a prerequisite to right to health. Even the
constitutions of South Africa, Brazil and Thailand have provisions for guaranteeing a right to health to their
citizens.
There was an abundance of literature accessible by many writers on Pharmaceutical Patents and Indian
Economy, but the focus was on pre-TRIPS scenario literature, TRIPS agreement and post-TRIPS scenario in
order to inculcate the significance this research then follows the effect of the Doha Declaration on access to
essential medicines. Existing literature has been widely studied to lay the appropriate basis for a critical
evaluation of the WTO TRIPS Agreement and the Doha Declaration, particularly with regard to medicine.
Gopal kumar Nair (2008) noted the impact of TRIPS on Indian pharmaceutical industries in his article in
particular. He focuses on the importance of the fresh pharmaceutical industry patent system in India. He also
implemented amendments to the 1970 Patent Act to fulfill TRIPS commitments. In addition, Liu Jodie (2015)
noted the flexibility of TRIPS with respect to compulsory licensing and ever-greening regulations, which raised
the bar for what pharmaceutical companies had to demonstrate to acquire a drug patent in the first location with
special regard to Patent Amendments 2005. In addition to the documents, Munnazzar Ahmed concentrated on
problems such as access, affordability and availability with the distinctive mention of instances such as TRIPS
and Doha Declaration in his book on Legal Implication of compulsory licensing in India-in the light of Natco v.
Bayer. The author undertook a critical evaluation of the 1970 Indian Patent Act along with the 2005
amendments. He has affirmed strongly that since the introduction of TRIPS, access to medicine i in the
limelight that has made generic drug manufacturing a strong determinant of the economy of India as it raises the
amount of FDI. Therefore, establishing appropriate policies for generic drugs becomes crucial for the
government. This book provides an open platform for discussion on the significance of generic drugs, which is
the goal of the current studies. Further, Robin Feldman (2017) has recently argued about the elevated prices of
prescription drugs that dominate public health. He shows the internal workings of the pharmaceutical industry
in this groundbreaking job and shows how drug companies twist health policy achieves objectives that are
contrary to the public interest. Also taken into consideration was the latest scenario of the Indian Economy due
to branded medicines, generic drugs and mandatory licensing.
2.1. RESEARCH GAP
Although compulsory licensing is not new in India but generic drugs have been discussed between developing
nations and advanced nations in regards to access to medicine. Recently, when India was extremely criticized
for compulsory licensing regulations saying that, in its "National Manufacturing Policy," the Indian government
unreasonably promoted compulsory licensing as a mechanism for carrying out technology transfer in certain
industries, which suggests that the government is using compulsory licensing simply as a instrument to attain its
industrial policy objectives rather than as a instrument. Many overseas pharmaceutical industries eventually
became unwilling to apply for a patent in India by loosening India's FDI and transfer of technology. Finally,
several difficulties have affected the pharmaceutical industry, such as the patent cliff, important price erosion,
distributor-level consolidation, enhanced competition, and enhanced regulatory scrutiny in worldwide markets.
3. PATENT, COMPULSORY LICENSING AND INDIAN ECONOMY
Compulsory licensing and Generic Medicines is necessarily the subject of the patent idea. The term "patent"
derives from the Latin phrase "litterae patentes" meaning a document issued by or on behalf of the sovereign,
addressed to all subjects and with the large seal pendulum at the bottom of the document so that it can be read
without breaking the seal (Philip W. Grubb 2004). The Great Council of Venice granted ‘Ser Franciscus Petri
of Rhodes’ the first patent for a technological invention in 1416. In India, the Patents Act, 1970 does not define
what a patent is; it simply states that a patent is a patent for any invention issued under the Act that does not
provide a clear image of the significance of the word patent. However, paragraph 2(1) (m) of the Patent Act
offers that for an "invention" a patent may be granted. Furthermore, the concept of invention referred to in
paragraph 2(1) (j) refers to a fresh product or method involving an inventive step capable of industrial
application. Thus, three patentability conditions are "new" "inventive step" and "industrial implementation."
Patents may be the most significant legal tools to protect intellectual property rights. An innovation must be
novel to be patentable in the sense that it does not constitute portion of the prior art or, more usually, that it is
not already in the public domain. An inventive step must also be involved in a patentable innovation, which
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means that it must not be obvious to an individual with normal abilities in the specific field of implementation.
Innovation must also be helpful in order to be patentable; that is, it must allow the feature non- obvious to a
specific issue. Where the permit is given by the patent proprietor himself or is known as a voluntary permit
under his jurisdiction. However, it is known as mandatory permit where it was not so awarded but by the
government in compliance with the provisions of the law in question. For any matter protected by a patent,
compulsory licensing could usually be given. It can be a patented product, a patented method, and the products
directly acquired through that method such as medicines, drugs, foods, etc. Article 31 of the TRIPS (which
relates to use without the right holder's authorization) sets out the conditions governing the use of compulsory
licensing by WTO members, the most important of which are:
(a) An entity (pharmaceutical company) providing compulsory licensing should not have been able to obtain a
voluntary license from the right holder on' reasonable' terms of trade;
(b) Appropriate remuneration must be paid to the patent-holder if compulsory licensing is granted;
(c) The compulsory licensing must be granted primarily for domestic supply.
The WTO General Council in 2003 adopted a decision to implement paragraph 6 of the Doha Declaration on
TRIPS and Public Health, which ultimately resulted in the form of a protocol to amend the TRIPS Agreement
in 2005. The decision of paragraph 6 revised the requirement of Article 31(h) and permitted Member States to
issue compulsory licenses to export patented pharmaceutical products to nations with insufficient or inadequate
manufacturing capacity.
With regard to the above TRIPS clauses, sections 84 to 92 A of the Indian Patent Act, 1970 deal with
compulsory licensing where sec. 92A, which was inserted with the 2005 amendment, was intended to take into
consideration the primary goals as described at the Fourth Ministerial Conference, held in Doha in 2001.
Pursuant to Section 84(1) of the Indian Patent Act, 1970, any interested individual may apply for a compulsory
license on the grounds that the patented invention:
(a) if the invention does not satisfy the reasonable requirements of the public;
(b) is not available to the public at a reasonably affordable price; and
(c) is not worked in the territory of India.
In relation to the above-mentioned basis, compulsory license may also be awarded by the Patent Controller in
accordance with a notification given by the Central Government if there is either a "national emergency" or
"excessive urgency" or "government non-commercial use"
In 2004, however, Canada became the first nation to enforce the 2003 judgment on the basis of paragraph 6 of
the Doha Declaration, enabling mandatory licenses to export generic versions of patented drugs to nations with
calamitous government health tribulation (Vipin and Mahendra, 2016) and the first ever compulsory license
issued to Hyderabad-based Natco Pharma for manufacturing on 9 March 2012. In Natco case, it was discovered
that only 2% of the cancer patient population had simple access to the medication and that Bayer sold the
medicine for a month's therapy at a very elevated cost of 2.8 lakh INR. The Indian Patent Office also granted a
compulsory license to Natco Pharma on the basis that Nexavar was being imported into the land of India,
ensuring that the tablets would be sold for Rs. 8,880/-per month. It was established that Natco Pharma would
pay Bayer 6 percent of the drug's net revenues as royalty. This judgment raised controversy over the granting of
the same as the businesses argued that developing such drugs implies investing a lot of cash in R&D, time and
effort, and therefore they should be granted the freedom to enjoy the monopoly right to use it, receive profit,
and thus balance the costs incurred during R&D. The other argument that was raised was that, as in this
situation, the controller did not provide for a fair and affordable cost. While the controller approved the cost of
Natco, for some parts of society the same may not be affordable. But by giving CL, the issue is that it harms our
economy? In response, a 2015 Global Burden of Disease Study was performed in which many nations were
analyzed between 1990 and 2015 for a span of 25 years. India landed 154th among 195 nations in the last
quarter of the index. India's lagging behind nations such as Nepal, Bhutan, and even Bangladesh has conducted
badly on the healthcare index. The research financed by the Bill and Melinda Gates Foundation disclosed that
India improved 14.1 points in its index rating over the 25-year period from 30.7 in 1990 to 44.8 in 2015.
However, in the fields of tuberculosis, diabetes, rheumatic heart disease and chronic renal disease, it did not
perform well (Times of India, 2017). Besides that India has no manufacturing ability to produce fresh drugs, but
in addition to these poignant reasons, if India keeps the compulsory license too free, innovators can be deprived
of their monopoly rights in complete. As a consequence, large pharmaceutical companies could be discouraged
from investing in drugs, such as malaria or dysentery, which only have a market in developing nations. It would
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also become unattractive to collaborate with businesses in such nations. India could eventually become isolated,
with less control over drugs that might be required in the future to treat its populations (Munnazzar, 2009).
4. ARE GENERIC DRUGS ELEVATING OR DISPARAGING THE LEVEL OF INDIAN
ECONOMY?
According to the World Health Organization (WHO), nearly 30% of the world's population lacks access to
essential drugs, and in some nations such as Africa and Asia the figure may increase. The price of the drug, its
manufacturing and market process is hampering access to drugs and it appears that governments in LDC and
DC nations are doing very little to address this issue. In India, the procurement cost of essential medicines is
usually smaller than the International Reference Pricing (IRP) and the accessibility of these medicines in the
public sector has always been an issue.
4.1. Evolution of Generic Medicines in Indian Pharmaceutical sector
The Indian pharmaceutical sector is one of Indian economy's fast-growing industries and has trampled rapidly
over the years. Indian pharmaceutical industry growth can be split into four phases. The first phase is the pre-
1970 era in which foreign businesses with little national involvement dominated the Indian market. Even the
prices of drugs were high and ungoverned, and unbridled profiteering. But then India became the zenith among
developing nations in encouraging production and technological capacity in pharmaceutical goods with the
development of policy reforms and innovation with legal reforms over two decades (1955–1970). The second
phase is the 1970-1990 period. Several national businesses began activities during this era which made the
Indian Patent Act, 1970 to get implemented. In fact many export initiatives had been taken. The third phase
was 1990–2010. The cost of an anti-ulclear medication–Rantidine in India was 16.58 times smaller than that
marketed by Glaxo in the UK even in 1993. India's generic production was well recognized for its critical role
in providing accessible medicines in the developing world, particularly for newer drugs such as anti-retrovirals
(ARVs) required in HIV treatment. The price of HIV treatment in the first generation also fell from over
$10,000 per patient per year in 2000 to $350 by 2001. Indian companies also created generic fixed-dose
combinations (FDCs) that simplified AIDS treatment in resource-limited environments, including India,
dramatically. Liberalization resulted Indian parts to start activities in foreign nations during this era. In 2005,
the Patents Act, 1970 was revised, leading to the implementation in India of product patents. Also India became
the global leader in the manufacture and supply of generic drugs. Generic Drug is a pharmaceutical medication
equivalent to a brand name product in dosage, strength, route of administration, quality, efficacy, and scheduled
use. The term may also refer to any drug that is marketed under its chemical name without advertising, or to a
product's chemical composition instead of the brand name under which the product is sold. On the other hand,
India's Medical Council's 2002 code of ethics makes it mandatory for physicians to prescribe drugs by their
generic names. In addition, in an amendment to the Code of Conduct for Physicians in October 2016, the
Medical Council of India (MCI) suggested that all physicians legibly prescribe medicinal products with generic
names and guarantee that medicinal products are rationally prescribed and used.' All generic manufacturing,
packaging and testing sites must meet the same quality standards as brand name drugs. The generic drug
manufacturer must also show that its drug is the same as the (bioequivalent) brand name drugs. Henceforth
India's pharmaceutical sector is developing, producing and marketing generic drugs. India's generic home is
now entering a strategic alliance with global pharmaceutical companies to strengthen its generic portfolio. In
addition thereto, India's generic drug amount accounts for 20 percent of worldwide exports, making India the
largest generic medicine supplier in the world (Amanpreet and Rekha, 2015).
4.2. Major Indian generic drugs investment throughout the International Pharmaceutical Market–2017.
 In 2016, the generic industry stood at US$ 26.1 billion. Indian pharmaceutical companies also received
approximately 300 approvals of generic medications in the U.S. in which the generic market is expected to
touch US$ 88 billion by 2021.
 Sun Pharmaceutical Industries Limited, India's largest drug supplier, has entered a distribution contract with
Japan's Mitsubishi Tanabe Pharma Corporation to market 14 prescription medicines in Japan.
 The worldwide U.S . based medication manufacturer Abbott Laboratories plans to establish an I&D center i
n Mumbai to support the creation of the latest formulatios, signs, dosage and packaging for Abott's worldwi
de generic brand.
 Dr. Reddy's worldwide generics segment accounted for about 80% of the company's income in 2018. The
firm submitted 20 abbreviated new drug applications (ANDAs) as of March 2018 and had 110 generic
applications pending authorization with the US FDA. Five first-generic-to-launch (FGTL) medicines were
also introduced in Brazil, 2018.
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 In terms of market capitalisation, Lupin, India based pharmaceutical company is the seventh biggest generic
pharmaceutical company worldwide. The generic company of Lupin accounted for 90% of the complete
sales of the company in the US in 2018. As of March 2018, the IQVIA Generics Module ranked 51 of the
company's 157 generic products as number one by market share in the US.
 Biocon is one of the leading biopharmaceutical companies that manufactures ACPs. Its total revenue in
FY17 was 633.11 million dollars compared to 537.04 million dollars in FY16. The company's consolidated
earnings in the third quarter reached Rs 1,057.9 crore (US$ 163.41).
 Sun Pharmaceutical Industries (Sun Pharma) recorded net sales of approximately $4.11bn in 2018.
According to AIOCD AWACS MAT, an India-based pharmaceutical industry study firm, branded generics
business in India contributed 31 percent to the company's total profits in 2018 and Sun Pharma had the
biggest market share of 8.2 percent in the country's branded generics sales in the same year.
 Cipla is a pharmaceutical company based in India with a broad footprint covering the United States,
Europe, Australia, New Zealand, South-East Asia, Middle East, Africa and Russia. According to IQVIA,
US-based consulting firm, as of March 2018, the firm was listed as one of the top ten generic businesses in
the U.S. with 13 out of 52 products ranked number one.
4.3. Market segment by value
India is an intriguing nation and is similar in terms of economic growth to other Asian nations. When the FDI is
growing, technology is transferred in the health industry. The following table offers products and their market
share in the Indian pharmaceutical industry:
Product Market Share
Anti-infectives 16%
Cardiovascular 13%
Gastro Intestinal 11%
Vitamins, Minerals 8%
Respiratory 9%
Pain/analgesic 7%
Anti-diabetic 7%
Others 29%
Source: A brief report on pharmaceutical industry in India- July (2015)
5. GOVERNMENT GENERIC DRUGS INITIATIVE THROUGH JAN ANUSHADHI SCHEME (JAS)
The "Jan aushadhi scheme" was established in India by Jan Aushadhi Stores (JAS) for quality generic medicinal
products at an affordable price for everyone, particularly the poor across the whole nation. The state
governments is in the process to supply stores government hospital premises or other suited locations in order to
operate this system. In addition, the Pharma PSUs of India (BPPI) will provide Rs.2.50 lakhs with one time
support, including the expenses of furnishing and installation.
Any NGO / charitable organization / institution / self-help group may also open the Jan Aushadhi shop outside
the clinic, provided that they have at least three years of good healthcare operations experience. The JAS is also
eligible for a drug sales incentive @ 10% of monthly revenues, subject to a cap of Rs. 10000/-p.m. for the first
12 months. In the event of shops in the northeast and in other challenging regions, i.e. Naxal areas / tribal areas
etc. the incentive level is 15%, subject to a cap of Rs. 15,000 per month.
More than 175 Jan Aushadhi stores in different countries / UTs have been established. As required by the
company to open, JAS is launched at the places. Steps are also taken to open shops of Jan Aushadhi in the
AIIMS, major hospitals and health institutes.
5.1. Other Initiatives:
 In March 2018 the DCGI announced its plans to launch a single window to provide authorization, authoriza
tions and other data. The move seeks to push forward the initiative Make in India.
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 In order to prevent misuse owing to simple accessibility, the government of India is planning to establish an
electronic pharmaceutical platform to control the Internet under a new policy.
 "Pharma Vision 2020" was presented by the Indian Government to make India the worldwide leader in the
production of end-to-end medicines. Time was decreased for approvals to encourage investment in new
installations.
 Government implemented processes for dealing with the question of affordability and accessibility of
medicine, such as the Drug Price Control Order and the National Pharmaceutical Pricing Authority.
6. CONCLUSION
A nation's wealth is said to heavily rely on its citizen’s health. Not only for the third-world countries but also
developed countries, the provision of public health care has always remained as a significant problem. These
health problems have been raised through international treaties and conventions as well as many states
constitutions and municipal regulations recognize the significance of a healthy life. Despite criticism and
disadvantages of compulsory license, sovereign states have efficiently acknowledged at global level the right to
compulsory license in order to prevent abuses of monopoly rights but to harm our Indian economy because it
restricts the exploration of inventions. Since 1970, India has struggled to produce generic drugs that made India
produce more than 20 percent of the generics in the world. Many measures have been taken by the Indian
government to decrease costs and decrease health care expenses. The rapid market implementation of generic
drugs has stayed focused and the Indian pharmaceutical companies are anticipated to profit. Furthermore, the
focus on rural health programs, lifesaving drugs and preventive vaccines also augurs well for pharmaceutical
firms. To increase our Indian economy with regard to generic medicines, all these initiatives are essential.
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tanabe/article21675025.ece1 (accessed on 23/03/2018)
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TEXTILE AND CLOTHING EXPORT COMPETITIVENESS OF INDIA AND PAKISTAN IN

WORLD TEXTILES MARKET: A POST MFA SCENARIO
Dr. Sabiha Khatoon

Post-Doctoral Fellow (U.G.C.), Department of Commerce, Aligarh Muslim University, Aligarh
ABSTRACT
The present study analysed the competitiveness for Textiles and Clothing of India and Pakistan in world textile
and clothing market. Balassa’s (1965) Revealed Comaparative Advantage Index has been applied on Textiles
and Clothing export data of these two countries after the phase-out of Multi-Fibre Agreement (MFA). For this
purpose a period of ten years after the phase-out of MFA has been taken into account i.e. from 2006 to 2015.
The results show that Pakistan has a greater RCA for both Textiles and Clothing over India but at the same
time India enjoys a larger share in world Textiles and Clothing market. Government of both countries has been
implementing number of productive remedial measures with a view to enhance the status of their T&C industry.
Keywords: Balassa’s Index, Clothing, India, Pakistan, Revealed Comparative Advantage, Textiles.
1. INTRODUCTION
Textile industry has always remained crucial for both developed and developing countries. For developing
countries this sector has always been a great source of income as it dominates around 45% of developed market
imports and for developed countries a threat to their domestic industries. Because of this threat developed
nations started imposing quota restrictions under an agreement called Multifibre Agreement (MFA) on export
of textiles and clothing by developing countries. This MFA period (1974-1994) was the darkest period for
textiles and clothing trade of developing countries. In order to protect their textiles and clothing sector,
developing countries joined hands and started agitations against quantitative restrictions under MFA. These
quotas started phasing out from 1 Jan 1995 and finally dissolved on 1Jan 2005 with the help of WTO. Removal
of quota restrictions on one hand triggered the growth of textile and clothing industry of some developing
countries but on the other hand increased competition among them. After the removal of restrictions under
MFA South Asian belt experienced mixed feelings. Some developing countries loosed their battle while some
emerged as the winners like India and China. Pakistan also registered its victory along with India and China.
India recoded a 28% growth in textile exports and Pakistan recorded an average monthly growth of 22.1% for
the first four month of 2005 (see World Economy & Development in Brief) . As far as the domestic status of
T&C industry of India and Pakistan is concerned it is dominating in both the nations. In case of India it is the
second largest employer just after agriculture and in case of Pakistan this sector dominates the agriculture and
manufacturing sectors. In India T&C sector contributes 14% to industrial production, 4% to GDP and accounts
nearly 15% of total exports (see Ministry of Textiles, GOI). In Pakistan T&C sector contributes around 55% of
the international exports, 8.5% to GDP and employees nearly 15 million of country’s production labour force
(Fibre2Fashion.Com). It is very clear that both India and Pakistan have rich textiles base and produce low
priced products but still these two nations are not able to take the full advantage of availability of abundant
cotton and cheap labour supply. In spite of this fact both countries have competitiveness in producing textiles
and clothing and trying hard to improve and maintain their competitiveness in international market.
This paper is an attempt to measure and compare the competitiveness of textile and clothing industry of India
with Pakistan. In order to achieve this objective Balassa’s (1965) Revealed Comparative Advantage (RCA)
concept is used for export data.
Why Pakistan Textiles Industry?
In Pakistan T&C sector dominates the agriculture and manufacturing sector. Textiles and clothing exports
dominate the total export basket of Pakistan. It contributes around 50% of the international exports, 8.5% to
GDP and employees nearly 38% of country’s total production labour force (Textile Industry Division, Govt. of
Pakistan). The size of Pakistan textiles sector is much larger than that of India.
Chaudhary and Saleem (2001) studied Pakistan’s exports, comparative advantage of exports, compatibility
and commodity concentration of exports and export volatility by applying different indices such as comparative
advantage index, commodity concentration index, export instability index, complementarity index etc. The
results indicate that, from 1972 to 1998, the growth rate of Pakistan’s exports has increased, despite the wide
variation in growth rates of demand for exports, across the trading member states. The results of
Complementary Index suggests that Pakistan’s exports are not closely linked to the dominant trading partners
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imports, the commodity concentration index indicates that Pakistan’s exports consist upon few products,
concentrated in few markets whereas Comparative advantage index shows mixed results i.e. the only the minor
exports group (carpets and rugs) has enjoyed comparative advantage, while exports like textile and leather
group did not experience comparative advantage. Widodo (2009) applied Revealed Symmetric Comparative
Advantage in order to investigate the dynamic changes in comparative advantage of the ASEAN +3 (China,
Republic of Korea and Japan). The author find out the changes and concluded that the increase in overall
comparative advantage are encouraged by the higher increases in comparative advantage of groups of products
that had no or lower comparative advantage in the past, moreover the comparative advantage pattern of the
ASEAN is becoming similar with that of Japan. Le Phuong (2010) analysed comparative advantage of
Vietnam since its economic reform that began in 1986. For this analysis the author uses 1-digit level with ten
commodities and 3-digit level with 269 commodities and selected three representative years i.e. 1991, 1996 and
2005 in order to get overall picture of Vietnam’s comparative advantage structure. He finds out that in spite of
the fact that Vietnam’s comparative advantage has shifted from primary products to labour-intensive
manufacturing and technology-intensive manufacturing still the comparative advantage largely depends on
country’s endowments of labour and natural resources. The researcher further adds that exports based on such
existing comparative advantage do not deliver significant value-added earnings. It is recommended that
relevant policies should be implemented to move the economy and its export sector towards a desirable
comparative advantage sector. Minondo, A.(2011) analysed whether the products in which a country has
specialisation over other countries can explain its exports’ diversification level. The author calculated proximity
indexes by using 4-digit level data. RCA is also calculated in order to get countries’ diversification possibilities.
By using parametric and non-parametric techniques the author shows that the diversification possibilities index
is a strong predictor of countries actual diversification level, even if differences in GDP per capita across
countries can be controlled. It is argued that the products in which a country has comparative advantage play a
very important role in explaining the level of export diversification; therefore, export diversification might not
be an automatic outcome of the process of development. Shahab & Mahmood (2013) applied Revealed
Comparative Advantage Index inorder to analyse the trade specialization in leather products of selected Asian
countries with special focus on Pakistan leather industry. The researchers find out that Pakistan’s leather
industry has an increasing trend in comparative advantage as compared to that of China, India and Iran. The
study recommends that a Leather Board should be established in Pakistan as an independent body, funded by
the government. Besides this latest machineries and equipments should be imported and that should be free
from customs duty, sales tax and income tax, Value-added exports where no further value-added can be done
should be free from Export Development Surcharges in order to give boost to this major contributor of national
economy. Shahzad (2015) analysed the static and dynamic competitiveness of textiles and clothing sectors of
Pakistan, India and Bangladesh by applying Balassa’a Index. The study concludes that Pakistan has highest
RCA for textiles, Bangladesh is competitive in clothing whereas India has revealed comparative disadvantage
in textiles when competing with Pakistan and Bangladesh.
3. OBJECTIVES
1. To understand and analyse the performance and trend of T& C industry of India and Pakistan.
2. To analyse the competitiveness of T&C industry of India and Pakistan after the phase-out of MFA in World
T&C market.
4. PERIOD OF STUDY
The period of study is from 2006 to 2015 i.e. 10 Years. As MFA was phased-out in 2005 so period after the
phase-out of MFA is taken for the study.
5. DATA SOURCE AND METHODOLOGY
5.1. Data Source
This paper uses data on exports of textiles and clothing published by WTO. WTO generally sources product
data from UNSD Comtrade. So SITC product number of textiles and clothing are traced from the site of UN
Comtrade. In this paper 3-digit Standard International Trade Classification (SITC) has been taken into account.
According to UN Comtrade data base textiles fall under SITC 65, which includes textile yarn, fabrics and made-
up articles (further calssified in Table 1) and clothing falls under SITC 84 which includes articles of apparel and
clothing accessories (further classified in Table 2).
Table - 1
SITC Product Number Product Category
651 Textile yarn & thread.
652 Cotton fabrics, Woven ex. Narrow or spec. Fabrics
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653 Text fabrics woven ex narrow, spec. Not cotton

654 Tulle, lace, embroidery, ribbons, trimmings
655 Special textiles fabrics and related products
656 Made up articles, wholly or chiefly of text. Mat.
657 Floor coverings, tapestries, etc.
658 Made-up articles, wholly or chiefly of textile materials, nes.
659 Floor coverings, etc.
Source: WTO
Table - 2
SITC Product Number Product Category
841 Clothing except fur clothing
842 Not knitted or crocheted: women’s/girl’s coats, capes, jackets, suits, trousers,
shorts, shirts, dresses, and skirts.
843 Fur clothing and articles of artificial fur
844 Women’s, girls, infants outer wear, textile, not knitted or crocheted
845 Under garments of textile fabrics, not knitted or crocheted
846 Outer wear knitted or crocheted, not elastic nor rubberized under-garments,
knitted or crocheted
848 Articles of apparel, clothing accessories, non-textile, headgear.
Source: WTO
5.2. Methodology
Why Balassa’s Revealed Comparative Advantage Index?
Adam Smith (1776) stated that one country enjoys absolute advantage over the other if it can produce same
amount of goods with lesser resources (Siudek, T., & Zawojska, A. 2014). David Ricardo (1817) (Denisia, V.
2010) argued that international trade take place when countries are efficient to produce exported products.
Countries produce and export goods in which they have cost advantage and import those goods in which they
have cost disadvantage. Heckscher (1919) and later Ohlin (1933) pointed out that countries which are rich in
labour should export labour intensive goods and countries with rich capital base should export capital-intensive
goods (Leamer, E. E. 1995). Ricardian theory considers labour as the only factor for comparative advantage
where as H-O theory considers factor abundance for comparative advantage. Ricardian theory is based on
2x2x1 (2 countries. 2 commodities and 1 factor of production) where as H-O theory is based on 2x2x2 (2
countries, 2 commodities and 2 factors of production). Ricardian theory assumed that countries could have
comparative advantage over one another if they have differences in technology and labour cost wheras H-O
theory assumed that comparative advantage results due to capital and labour costs. Porter (1985) developed a
model of competition strategies possessed by the nations in order to produce high-quality products and to sell
them at high cost in market. Porter advocated three generic strategies i.e. Cost leadership, Differentiation and
Focus (Cost Focus and Differentiation Focus).
Revealed Comparative Advantage Index of Balassa (1965) and White (1987) and Vollrath (1987) explained the
concept of competitiveness (Seyoum, B. 2007). The RCA index was introduces by Bela Balassa and Clark
Noland (1965). It was assumed that H-O theory and Recardian theory are not as suitable as RCA index for
calculating comparative advantage (Balassa, Bela 1965). RCA index is defined as the ratio of two shares and it
is calculated by applying the following formula:
RCAij
Where, Xij= Export of product j by country i

Xit= Total exports from country i
Xwj= Total export of product j by rest of the world
Xwt= Total exports from world
A country is said to have comparative advantage over another country if RCA index is greater than unity (RCA
> 1) and if RCA index falls below unity (RCA< 1), it means the country is having revealed comparative
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disadvantage in the particular commodity (Yu, R., Cai, J., & Leung, P. 2009). In present study the RCA index
has been applied in two categories i.e. Textiles and Clothing.
India’s Export Performance of Textiles and Clothing
India’s export of textiles in 2008 increased to US$ 10372 million compared to US$ 8880 million in 2006. The
value of textiles export declined in 2009 and again improved to US$ 18339 million in 2014. Export value of
clothing increased to US$ 12005 million in 2009 from US$ 9564 million in 2006 and declined in 2010 and
2012. It again improved to US$ 18254 million in 2015 as compared to US$ 13928 million in 2012 (see Table
3).
Table – 3: India Textile & Clothing Export (US dollar at current prices (Millions) )
Year India’s Total India’s Textiles %age Growth India’s Clothing %age Growth
Export to the Export Export
World
2006 121808 8880 - 9564 -
2007 150159 9617 8.30 9930 3.83
2008 194828 10372 7.85 10968 10.45
2009 164909 9111 -12.16 12005 9.45
2010 226351 12833 40.85 11229 -6.46
2011 302905 15340 19.54 14672 30.66
2012 296828 15348 0.052 13928 -5.07
2013 314848 17417 13.48 15542 11.59
2014 322694 18339 5.29 17742 14.16
2015 267444 17289 -5.73 18254 2.89
Source: WTO
Pakistan’s Export Performance of Textiles and Clothing
Export value of textiles increased to US$ 9082 in 2011 against US$ 7469 million in 2006 and of clothing
increased to US$ 4550 as compared to US$ 3907 million in 2006. Textiles export declined in 2015 to US$ 8232
as compared to US$ 9341 million in 2013 but at the same time clothing export increased to US$ 5023 million in
2015 as compared to US$ 4214 million in 2012 (seeTable 4).
Table – 4: Pakistan Textile & Clothing Export (US dollar at current prices (Millions) )
Year Pakistan Total Pakistan Textiles %age Growth Pakistan Clothing %age
Exports to the Export Export Growth
World
2006 16930 7469 - 3907 -
2007 17838 7371 -1.31 3806 -2.59
2008 20323 7186 -2.50 3906 2.63
2009 17523 6510 -9.40 3357 -14.06
2010 21410 7848 20.55 3930 17.07
2011 25383 9082 15.72 4550 15.78
2012 24567 8705 -4.15 4214 -7.38
2013 25121 9341 7.31 4549 7.95
2014 24706 9077 -2.82 4991 9.72
2015 22089 8232 -9.31 5023 0.64
Source: WTO
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Figure 1: Growth of Textiles Export: Comparison of India and Pakistan
India’s textile export showed positive and negative trend from 2007 to 2015 with similar trend in Pakistan.
India’s textiles export dipped by a greater percentage in 2009 as compared to decline in Pakistan’s export. Both
countries showed highest growth trend in 2010 and 2011. After 2010 and 2011 India showed a positive growth
trend in textiles export whereas Pakistan showed a negative trend (see Figure 1).
Figure 2: Growth of Clothing Export: Comparison of India and Pakistan
India’s clothing export increased by 3.83 percent in 2007 whereas Pakistan’s export declined by -2.59 percent.
This positive and negative trend remained continued till 2015. India showed highest trend growth of 30.66
percent in 2011 almost double of Pakistan’s growth (see Figure 2).
Table – 5: World Total Textiles & Clothing Export (US dollar at current prices (Millions) )
Years World total exports Total Textiles Export by Rest of the Total Clothing Export by Rest of the
World World
2006 12131000 213576 314790

2007 14023000 232381 352711
2008 16160000 241397 371097
2009 12555000 202454 322877
2010 15301000 240104 359973
2011 18338000 278447 419060
2012 18496000 267690 417544
2013 18952000 284278 453369
2014 19005000 293687 477803
2015 16489000 273284 448129
Source: WTO
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Table – 6: Textiles (percentage share)

Years India Pakistan
As Share of Total As Share of Total As Share of Total As Share of Total
Domestic Exports Textiles Export Domestic Exports Clothing Export
by Rest of the by Rest of the
World World
2006 7.29 4.16 44.12 3.50
2007 6.40 4.14 41.32 3.17
2008 5.32 4.30 35.36 2.98
2009 5.52 4.50 37.15 3.22
2010 5.67 5.34 36.66 3.27
2011 5.06 5.51 35.78 3.26
2012 5.17 5.73 35.43 3.25
2013 5.53 6.13 37.18 3.29
2014 5.68 6.24 36.74 3.09
2015 6.46 6.33 37.27 3.01
Source: Author’s calculations on the basis of data given in Table 5).
The share of India’s textiles export in world’s total textiles export is about 6.33 percent while it is 3.01 percent
for Pakistan in the year 2015. This shows that India enjoys a greater share of textiles trade in world textiles
market (see Fig. 3). Textiles export share in India’s total export fell to 5.06 percent in 2011 from 7.29 percent in
2006. Pakistan’s share of textiles export in its total exports also fell from 44.12 percent in 2006 to 37.27 percent
in 2015. But still this percentage is greater than that of India because textile is the leading export commodity in
export basket of Pakistan (see Fig.4).
Table – 7: Clothing (percentage share)
Years India Pakistan
As Share of Total As Share of Total As Share of Total As Share of Total
Domestic Exports Textiles Export Domestic Exports Clothing Export
by Rest of the by Rest of the
World World
2006 7.85 3.04 23.08 1.24
2007 6.61 2.82 21.34 1.08
2008 5.63 2.96 19.22 1.05
2009 7.28 3.72 19.16 1.04
2010 4.96 3.12 18.36 1.09
2011 4.84 3.50 17.93 1.09
2012 4.69 3.34 17.15 1.01
2013 4.94 3.43 18.11 1.00
2014 5.49 3.71 20.20 1.04
2015 6.83 4.07 22.74 1.12
Source: Author’s calculation on the basis of data given in Table 5.
Figure 3: Textiles and Clothing Export as % of Total Textiles Export by Rest of the World
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Figure 4: Textiles and Clothing Exports as % of Total Exports
India’s share of clothing exports in total world clothing exports improved from 3.04 percent in 2006 to 4.07
percent in 2015 while Pakistan’s share decreased from 1.24 percent in 2006 to 1.12 percent in 2015. In clothing
also India enjoys greater share in world clothing export market (see Fig.3). India’s clothing exports account
about 6.83 percent of total domestic exports while Pakistan accounts 22.74 percent of total domestic exports in
2015. As clothing leads other commodities in total domestic export by Pakistan so it has greater share in
country’s export basket as compared to India (see Fig.4).
6. ANALYSIS AND INTERPRETATION
Table - 8 : RCA for India and Pakistan
Year India Pakistan
Textiles Clothing Textiles Clothing
2006 4.14 3.03 25.06 8.89
2007 3.86 2.63 24.94 8.48
2008 3.56 2.45 23.67 8.37
2009 3.43 2.83 23.04 7.45
2010 3.61 2.11 23.36 7.80
2011 3.34 2.12 23.56 7.84
2012 3.57 2.08 24.48 7.60
2013 3.25 2.06 24.79 7.57
2014 3.68 2.19 23.78 8.04
2015 3.90 2.51 22.49 8.37
Source: Author’s calculation.
The RCA values of India for both textiles and clothing decrease over the years. In 2006 the RCA for textiles
was 4.14 and fell to 3.25 (2013) lowest in ten years but in 2015 it improved to 3.90. For clothing the RCA was
3.03 in 2006 and fell to 2.06 in 2013 (lowest in ten years) but showed some improvement in 2014 and 2015.
The RCA for textiles is much better than that for clothing (see Table 8).
The values for Pakistan show a decline in RCA for textiles from 2006 (25.06) to 2015 (22.49), and for clothing
from 8.89 in 2006 to 8.37 in 2015, indicating a decline in the country’s comparative advantage in both these
sectors (see Table 8).
Pakistan has greater RCA for both textiles and clothing as compared to India. This shows that Pakistan has
competitive advantage in production of textiles as well as clothing over India (see Fig.5).
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Figure 5: RCA Comparison
Reasons for Low Textiles & Clothing Export Competitiveness for India in World T&C market
Indian T&C industry has been the largest employment generating industry but in recent years things have
changed. Now the textiles industry is on bumpy ride and feeling shocks over the past few years. Numbers of
textile firms have been shut down. Exports is continuously declining because of which there is no creation of
new jobs, infact the old workers are loosing their jobs. The reason for this decline is Indian textiles industry
itself. The sales and distribution channel of Indian textiles industry is very complex as it consists of atleast 15
intermediaries (Verma, 2002) which in turn increases the costs. There are other factors also like costs of
logistics, lack of proper electricity supply which is a part and parcel of textiles industry, low quality
rawmaterial. Apart from these factors there are some international factors that led to decline in Indian textiles
industry like the Trans-Pacific Partnership (TPP) trade deal between 12 specific countries. As India was not the
member of this trade deal so Indian textile industry faced ignorance on the part of exports. The reason is TPP
members used to import inputs from TPP members even if the cost of such inputs was least in Non-TPP
member countries. This led to diversion of trade from efficient producers to non-efficient producers. However,
this TPP was primarily to discourage the Chinese manufacturers of yarn and fabrics but it equally created a
comparative disadvantage for Indian T& C industry. The other factors that hamper the performance of Indian
T&C industry include export incentives, government decisions like curtailment in duty drawback rates,
withdrawal of interest rate subvention on export credit and increase in minimum support prices for cotton.
There is one another important factor that is affecting the Indian textiles industry is cost efficiency. In spite of
the fact that India has a rich and diversified textiles base, the cost-efficiency of Indian textiles industry is much
lower than China, Bangladesh and Vietnam.
Reasons for Low Textiles & Clothing Export Competitiveness for Pakistan in World T&C market
Pakistan’s T&C industry is the centrepiece of its economy as it contributes more than 60 percent of the
country’s export earnings. But for the last few years Pakistan’s textiles industry is loosing its competitiveness in
international market. There many factors that are hurdling the production and export performance of textiles
and clothing. According to experts and analysts the domestic reasons for disintegration of Pakistan T&C
industry are the high cost of doing business, increasing tax burden, expensive bank credits, shortage of energy
and power cuts, use of obsolete and outdated technology and methods of production. Thousands of factories
have shut down because of high cost of energy as the production of energy was severely hampered because of
low investment, inefficient power network and lack of enough revenue inorder to cover the costs. Their clients
are turning to Vietnam or Bangladesh or India. Apart from these factors Pakistan is plagued with political and
policy instability, apostasy, violence and bombing. Because of these factors players in international market are
diverting from Pakistan as they feel that if they purchase inputs from India or Vietnam or Bangladesh instead of
Pakistan, it will be safer for their people as these places are much safer than Pakistan (textileexcellence.com).
Lower proceeds from rawmaterial, low value-added products like cotton yarn and fabrics, depreciation of
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Pakistani currency that has raised the prices of imported inputs, high inflation rates, high cost of financing has
also effected seriously the export competitiveness of Pakistan T&C industry.
7. CONCLUSION
The study’s RCA analysis of textiles and clothing for India and Pakistan in world T&C market reveal that RCA
values for both these countries has been decreasing over the years but still Pakistan has a comparative
advantage in both textiles and clothing over India. However, for the last few years neither textiles nor clothing
showed any improvement and are thus categorised as threatened products. India’s weak RCA should be studied
very cautiously because no doubt that India has a weak RCA in both textiles and clothing corresponding to
Pakistan but at the same time India occupies a greater share of trade in textiles and clothing in world textiles
and clothing market (see Table 4 & 5). Moreover, the reason for high RCA for T&C of Pakistan is that the
economy of Pakistan is not very much diversified and largely depends on textiles constitutes nearly 57% of its
total domestic exports.
After the phase-out of MFA it was a common thought that amongst other developing countries India and
Pakistan will gain and will become the leading T & C exporters but because of their weaknesses the two could
not alleviate their status in T & C world. However, government of both these nations are trying their best with
the hope of rejuvenating their T& C industry. Indian government has been implementing various development
schemes and initiatives for overall growth and development of T&C industry such as Technology Upgradation
Fund Scheme (TUFS), Schemes for the development of Powerloom Sector, Schemes for Technical Textiles,
Integrated Processing Development Scheme (IPDS), National Handloom Development Programme (NHDP),
Comprehensive Handloom Cluster Development Scheme (CHCDS), Yarn Supply Scheme etc. Government of
India has also established various textiles technology parks under the Scheme for Integrated Textiles Park in
different cities with a view to provide state of the art facilities. Pakistan government has taken various steps to
improve the situation of T&C industry. In 2016, Trade Development Authority of Pakistan organised an
international exhibition for textile products in order to boost cotton exports. Government has taken various
other measures to boost country’s overall textiles export such as reduced electricity tariffs to reduce the cost of
doing business, cutting import duties on key cotton and fabric inputs, immediate payment of Exporters Refund
Claims, withdrawal from Gas Infrastructure Development Cess (GIDC), levelling of gas and electricity prices
with regional competitors, zero-rating sales tax policy, etc. (see www.just-style.com)
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IMPACT OF DEMONETIZATION ON INDIAN EXPORTS: A CASE STUDY OF HANDICRAFTS

INDUSTRY
Dr. S. Veeramani1, Anam2 and Sonakshi Singh3

1
M.Phil Scholar3, Department of Rural Management, Babasaheb Bhimrao Ambedkar University (A Central
ABSTRACT
Demonetization announcement on November 8, 2016, aimed to curb corruption, black money, terror financing.
Later it was said to make India a digital economy. Even after two years of Demonetization, still many
Industries are not able to cope up with the effects of demonization. Indian Handicrafts industry as its one of the
important sectors for the Indian economy with a large share in employment and exports is believed to be
impacted hugely by demonetization. As a cash-dependent, unorganized and labour-intensive sector,
demonetization has created huge working capital crunch to the industry which is estimated as one of the
important reasons for the sudden downfall in exports by about US$ 1363.03 Cr in the year 2017-18.
The present study aims to highlight the impact of demonetization on Indian Handicraft Industry and specifically
its exports. The authors analysed the Indian Handicrafts sector as one of the promising and productive sectors
in India economy through its high contribution in trade, throughout the last decade. The study highlights the
trends and issues concerned with the sector post-demonetization with the help of cases from different
handicrafts producing zones. The study is descriptive in nature and is based on the secondary data available
from various research reports of RBI & EPCH, etc., and other published and online work in the public domain.
There is a scope of qualitative analysis too based on the availability of the respondents.
Keywords: Demonetization, Exports, Handicrafts, Informal sector
INTRODUCTION
Government of India’s sudden move to demonetize Rs 500 and Rs 1,000 currency notes in 2016 has made the
country shocked. However, it is not new to the nation, it has been done earlier in the 1946 and 1948 by previous
governments but this time it has received criticism more than any earlier attempt. The main objective of
demonetization to combat corruption, black money, terrorist funding and to promote digital transactions in the
country. Not only India, but it has also been done by many countries in the past such as Germany, Pakistan,
Zimbabwe, South Africa, etc. and the results obtained are mixed. Some got successful in their attempt while
some economies faced several economic issues after hyperinflation, contraction in money supply and
sometimes severe downfall in the economic activity. In case of India, although demonetization has positively
impacted the digital transactions and since then the digital transactions has been doubled but almost 99.3% of
banned currency has returned failing the main aim of 2016 demonetization by Indian Government (RBI Annual
Report, August 2018). Many existing studies say that hardly 6% of India’s black market wealth is actually kept
in cash. There are certain pros and cons of demonetization while some studies finds a mixed response of
demonetization on Indian economy. On one hand, it has helped the Indian banks in increasing their deposits
base, one the other hand it has slowed down the growth of Industrial sector in India (Ashwani & Nataraj, 2018).
However, keeping its success and failure aside, current study focus is to access the impacts of demonetization
on macroeconomic indicators of which ‘Exports’ is one of the major one.
Exports are very crucial for any country as it helps to earn foreign exchange for the country. Many existing
studies have assessed the impact of demonetization on overall economic growth and exports but sector specific
studies are very less available especially on the sectors which are most cash dependant like Handicrafts. Indian
Handicrafts Industry is one of such sector which is most decentralized and unorganized at the same time the
most important source of foreign exchange for India. Prior to Demonetization also, the handicrafts industry was
suffering was from so many problems of which shortage of finance and lack of financial support is the major
problem for small artisans and businesses. With Demonetization, these issues have come up more severely and
have shown hard situations to the small and medium businesses.
Indian handicrafts industry is highly fragmented with more than seven million regional artisans and around
67,000 exporters/export houses promoting regional art and craftsmanship both in the domestic and global
markets. The handicrafts sector plays an immense role in economic development by earning huge foreign
exchange as well as creating employment for millions. Handicrafts is not merely an industry, it symbolizes the
culture, local skills, and artistry of a region. Handicraft items in India comprise of Art metalware, wood wares,
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hand-printed textiles and scarves, embroidered crocheted goods, shawls, zari goods, imitation jewelry items,
attars, and other miscellaneous handicraft items. As these items are highly labour intensive and more artistic in
nature, it mostly falls under the ambit of unorganized and cash dependant sector which is more sensitive to
initiatives like demonetization. With two years passed of demonetization, still many industries are not able to
cope with the effects of demonetization. Present study tried to analyse the impact of demonetization on Indian
Handicrafts Industry and more importantly on the exports of Handicrafts from India. As the sector is mainly
unorganized and labour intensive, it is more dependent on cash for their working capital requirements.
Handicrafts industry being of the highly fragmented sector with more than seven million regional artisans and
around 67,000 exporters/export houses promoting regional art and craftsmanship both in the domestic and
global markets. SMEs in the handicrafts sector got an immediate shock as they had no mechanisms of the
transaction except cash. There manufacturing and production has disturbed and ultimately exports. However,
there are big and medium size businesses which has not much effected but in some way or other the overall
impact on the industry is significant. Study will put light on the situation of the Industry, both pre and post
demonetization and will highlight the concerns and feedback of the industry.
LITERATURE REVIEW
Due to the short period, literature available in this regard is very less. Some available studies showcasing India
post Demonetization, indicated many short term losses for exports, labour and capital management in the
market. Unskilled labour has impacted badly and employment rate has fallen. Loss in production due to
liquidity crunch with negative impact on working capital of small and medium firms. Given the share of
informal workforce absorbed in industry, manufacturing & MSME were amongst the worst hit sectors from
Demonetization (Singh, 2018). Kumar & Bumra (2017) analyzed the impact of demonetization on various
prominent sectors of Indian economy such as automobile, pharmaceutical, agriculture and consumer market
sector. Comparing sectors performance pre and post demonetization, a crash crunch has been created in the
economy where in every sector was effected with evidenced downfall in sales and production activity.
Although, author indicated only short term implications for cash intensive sectors. Sonia & Girdhar (2017)
studied the impacts of demonetization on various key sectors of the economy and suggested that
demonetization has impacted every sector in different way. The small business and service industry faced major
problems in their day to day business life. Their sales have been slow down due to lack of currency in the
market as cash transactions play a very important role in the life of service industry. Datta & Bhattacharyya
(2016) highlighted the problems and prospects of Indian Handicraft Sector. Sector providing employment to
millions generates substantial foreign exchange, while preserving the country’s cultural heritage. However,
sector suffers for being unorganized, low capital, poor exposure to new technologies, absence of market
intelligence and poor institutional framework. Artisans are heavily dependent on the middlemen for raw
materials, finance and market for finished products.
Saqlain (2018) indicated the fall in exports, rise in cost of production and low productivity in Indian textile
industry. To see the impact of demonetization on demand, productivity, cash flow and digitization in Indian
Textile Industry, a detailed questionnaire has been designed, the responses are collected and analysed from the
top and middle level management around 300 respondents have been approached. Findings shows that demand
of textile products shows a decreasing trend due to reduced currency circulation in the textile market, this
resulted in inventory accumulation leading to decrease in overall textile productivity. The cash flow certainly
took a back-step n distorted the entire value chain from farmers to textile manufacturing companies. Shah &
Patel (2017) based on the primary data, interview schedule, and focus group discussion and observation
methods to see the problems faced by handicrafts artisans of Gujarat. Findings shows that despite of various
government and non-government efforts, the reality is not satisfactory. The handicraft artisans suffer a lot due
to being unorganized, poor exposure to new technologies, absence of market intelligence and a poor
institutional framework.
Karigoleshwar (2017) based of secondary data, highlighting the negative impacts of demonetisation on jobs
and the small and medium enterprises (SMEs) in the country. Author indicated downfall in the employment
rate, sales, and trader’s incomes as well as in the production. Mostly, MSMEs have lost their shelter and market
as the effect of demonetization. Ahmad Bhat and Yadav (2016) reflects Indian Handicrafts sector as one of
the promising and most productive sectors in Indian economy. With strong contribution of Handicrafts in
foreign inflows and its growth in the last 15 years, study shows that sector have huge potential for growth both
in the domestic and the foreign markets. More focused efforts are required on the part of government to make it
a more organised sector. Bano (2016) assessed the role of Handicrafts, especially the carpet industry of India in
the economic development of the country. Based on the secondary data, author finds that the Indian carpets are
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almost 100% export oriented in quality and providing direct employment to millions. Author suggest that use of
machines and introducing new technology to weavers, more connectivity of carpet producing regions and
exposure can take Indian carpet industry to the next level. With the unavailability of studies focusing on
Handicrafts sector and exports, current study aims to fulfil the gap by studying the trends of handicrafts export
from India and the possible impacts of Demonetization on exports. The paper seeks to highlight the importance
of Indian handicrafts industry with strong contribution in exports and employment opportunities in the country.
OBJECTIVES
To highlight the trends and contribution of handicrafts Industry in Exports.
To identify and highlight the problems faced by the handicraft sector in India.
To analyses the impact of demonetization on the exports of Handicraft products.
Study is descriptive in nature and is based on the secondary data available from various research reports of
Reserve Bank of India (RBI) and Handicrafts Export Promotion Council (EPCH) and other published and
online work in the public domain. There is scope of qualitative analysis too based on the availability of the
respondents.
INDIAN HANDICRAFTS INDUSTRY
There are about 36 million micro, small and medium enterprises (MSMEs) contributing around 40 % to India’s
exports and employment to over 80 million persons. Within the MSME sector, handlooms and handicrafts are
highly labour intensive sectors and more dependent on cash for their working capital requirements. The
Handicraft sector occupies a pivotal role in India’s economy as it contributes significantly to export earnings
and employment generation. Handicrafts sector was traditionally considered as a cottage industry dependent on
social, economic and regional factors. However, the status have changed now as the rich craft traditions of the
past. Many Indian Traditional Handicrafts continues to flourish due to their popularity in local as well foreign
markets. Indian made handicrafts like rich brocades and zari work, etc. have huge popularity in both domestic
and foreign markets. There is a huge domestic market for a utilitarian craft items such as bedcovers, tablemats,
garden pots, jute and coir items etc. in the international market. Apart from the textiles, Indian brass and
wooden items are equally popular in foreign markets of USA, Europe and UK. Many sectors of the handicrafts
industry have now become full scale large industries like carpet weaving, traditional textiles, gem cutting and
polishing, gems and jewellery, leather, jute products etc. are some industries, which are mounting with great
pace. Indian intricate design of carpet and Brassware has attracted the world markets. Indian handicrafts are
exported across geographies, with the top 10 destinations being the US, the UK, the UAE, Germany, France,
Latin American countries (LAC), Italy, the Netherlands, Canada and Australia.
PROBLEMS FACED BY THE INDIAN HANDICRAFT SECTOR
Low education - Mostly rural and tribal people are involved in this profession and their literacy percentage is
comparatively very low. This is the root of all problems faced by artisans of handicraft. In recent report of
DASRA (2013), it is clearly stated that nearly all problems faced by craftsman is outcome of low literacy level
in them. Mahesh Prasad. (2002), has also found that uneducated craftsman have suffered more of all things in
handicraft industry.
Lack of skilled labour - The development and popularity of handicraft industry in almost all the handicrafts
hubs is lack of skilled labour.
Lack of financial support - Scarcity of Working capital is one of the most important reasons behind the
suffering of Indian Handicrafts sector. Majority of the people engaged in this profession are facing lack of
capital and funding problems.
Lack of information - Poor exposure to new technologies is yet another major problem being faced by Indian
Handicraft sector. As most of the artisans are not much educated, they are not linked with the information
channel properly and remain unaware of the recent advancements and techniques in their field. Though
government has introduced some easy
loan plans and financial schemes for this group in its recent five year plan but because of improper information
channel and linkage they are unaware of these plans to avail them.
Lack of organized identity– Indian Handicrafts sector is highly fragmented and unorganized which is the main
reason for their ignorant and backwardness. It is true that Indian Handicrafts have been globalized today but not
artisans.
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Lack of knowledge about latest designs/current market demands – India is a land of multiple ethnicities and
cultures giving birth to 100’s of local handicrafts and artistry. Most of them are living in rural and semi-urban
areas where knowledge is not properly disseminated to these artisans to make their product competitive from
the latest machine made products produced on large scale in big industries. As machine made products are
cheap, identical and fast to be produced, they are posing serious threat to Indian Handicraft artisans.
Less information about exports – Even many sectors are having high contribution in exports such as textiles
and brassware, but still many of the artisans located in rural or remote areas, are not even know what exports is.
Even the product produced by them is fantastic in quality but they are not able to find the market for their
product. They generally have very less information about Market and Marketing.
Above mentioned are some major problems faced by the handicrafts sector. Unorganized image and lack of
financial support is one of the major concerns hampering the growth of the sector. There still may be many
places in India which has the potential to grow by showcasing their indigenous products. Such products may be
very attractive with high potential in the foreign markets but are not given an opportunity due to the lack of
knowledge and support to the small manufacturers. Arrangements for Finance for the business have always
been the major hurdle for small business. Due to lack of sufficient collateral, they are forced to take the loans
from the unorganized sector. Demonetization has created more problems for the business in terms of finance.
Businesses which are running on cash basis or which are usually dependent on the local unorganized money
lenders has left with no option other than to shut down their business. However, this was in case of very small
business, even medium level firms has also faced sever working capital crunches which has closed down their
production activities and therefore the overall sales and exports has been affected.
HANDICRAFTS EXPORTS FROM INDIA
As per the data available from Handicrafts Export Promotion Council (EPCH), Handicrafts export from India
has seen a continuous increasing trend since the past 7 years. Export has increased more than 3 times from Rs.
787.31 Cr in 2010-11 to 24329.36 Cr in the year 2016017 but has fallen suddenly by 1363.03 Cr in 2017-18.
Fig. 1 is showing that the Handicraft’s exports is continuously rising in the last 8 years and has shown a
decrease of ₹1363.03 Crores (5.59%) in the FY2018. This has not happened in the last many years,
demonetization is one of the major anticipated reason for this downfall.
During the period, the exports of Wood wares, Embroidered & Crochetted goods, Shawls as Art wares, Zari &
Zari goods and Agarbatties & Attars showed the increasing trends of 8.97%, 2.42%, 31.40%, 42.99% and
7.71% respectively. However, Art Metal wares, Hand
Printed Textiles, Imitation Jewellery and Misc. Handicrafts got decreased by 15.93%, 4.74%, 4.84% and
14.50% respectively. Both the Art ware and Textiles export has fallen during the year 2017-18, which has the
maximum share in Indian Handicrafts exports.
Figure 1: Exports of Handicrafts (in Crores)
Source: EPCH Trade Data, DGCI & S, Kolkata

Figure 2: Components of Handicrafts Exports
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Source: EPCH Trade Data, DGCI & S, Kolkata

IMPACT OF DEMONETIZATION ON EXPORTS
India's vibrant handicraft and artisan sector which provided employment to millions of people had hard hit by
the government’s decision on Demonetization. As, the work has still to pick up imposition of GST has made the
condition more worse by increasing the problem of working capital with the small and medium enterprises. The
contractual labour in the apparel, handicrafts and gems and jewellery sectors reportedly suffered as payments
from employers became constrained. The cash shortage also adversely affected informal sources of finance.
Below are some cases of short interviews conducted by different media groups and research organisations to
highlight the concerns and problems of industry after demonetization.
ASSOCHAM conducted a survey on December 19, 2016 on assessing the impact of demonetization in selected
industry and areas. Findings indicated a sharp decline in arrivals of raw material to cities like Agra, Kanpur and
Kolkata. In the view of constraints on availability of raw material as well as transportation and labour
bottlenecks, about 60 out of 100 respondents indicated that they were no longer taking export orders.
Surat Power looms – There are around 6.5 lakh power looms in Surat, employing about 7 lakh workers. With
400 textile processing units employing over 3 lakh workers, Surat produces 40 million meters of fabric every
day. As per the interviews conducted by around 95% of the wages to the textile workers are paid in cash. Due to
severe liquidity crisis after Demonetization, weaving and textile processing units drastically cut down
production by almost 70% which has negatively impacted their exports.
Tirupur textile industry (Tamil Nadu) - The story is the same across the country. Tirupur have 8,500 small
scale, medium and large firms with a turnover of over Rs 40,000 crore every year. These companies were
supplying to larger companies who in turn were exporting a large part of these textiles. Following
demonetisation, there are not even 500 companies functioning here with large numbers of the women workers
having been laid off. Many exporters in Tirupur are expecting their business revenues to fall by 30-40%, due to
the Demonetization which comes when global apparel consumption is facing a downtrend. With the severe cash
crunch, they have been unable to adequately source material, labour and capital to process and fulfil the orders.
Peetal Nagri (Moradabad) - Brassware export industry in Moradabad earns the city over $1 billion in annual
revenue. In fact, Moradabad is one of the largest handicrafts exporters in India. Workers in Peetal Nagri in
Moradabad pointed out that artisans and laborers who work in the brass industry continue to be hard hit.
Earnings have shrunk to less than half with many people having lost their jobs. The brassware industry with a
turnover of Rs 8,000 crore employing 3-4 lakh artisans and workers have seen the workforce come down
substantially as also have earnings. Spiraling prices of raw materials such as aluminum and copper sheets have
made things worse for the brassware industry. For the production, raw materials are obtained from scrap which
is totally cash-driven, Demonetization lead to prices rise of raw material with is either making prices of our
products uncompetitive in the foreign market or the manufacturers have to bear the losses. Rising raw material
prices are affecting the bottom line of exporters, as foreign buyers are not ready to accept higher prices. In this
situation, only the big and medium exporting firms was able to sustain and many small firms has shut down
their businesses and incurred losses. Not only in case of the new orders, the orders in hand with the exporters
has got delayed and cancelled due to unavailability of funds in hand.
Babugarh’s moodas and chairs - Babugarh in the heart of Ajmer which is home to over 1,100 families
complaining that note ban dealt them a body blow from which they have not recovered. Ramwati is a small
manufacturer and supplier, look what she says: "It's been one year since the note ban took place and the orders
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have still to pick up. The main problem is there is no money in the market. We buy our raw material on credit.
Once our chairs, moodas, chattais etc. are made, we sell the stuff to the wholesaler. In the past, the wholesaler
paid us for the entire consignment. Now they will pay us for every item sold. That means we are left to pay
interest on our credit amount and sometimes a payment can take up to three months to come in."
Handloom saris (West Bengal) - Workshops of Shantipuri taant saris employing over 30,000 weavers in
Phulia and Shantipur nosedived after Demonetization and weavers who used to be paid between Rs 250 to Rs
500 per day were forced to work for as little as Rs 25 per day. Sales have picked up marginally but they are
nowhere close to what they were prior to Demonetization.
The famous 120 leather factories supplying the distinctive leather work in the Shantiniketan region resulted in
over 1,000 artisans lose their jobs The trade was gasping for breath as demand had dipped since the second
week of November last year. Many small factories had been forced to lay off workers and most of those laid off
have not resumed their jobs since. There was no handloom and artisan sector which was not hit by
demonetisation.
Workers in the lak bangles industry complained against Demonetization and GST. As Noor Mohammed of
Jaipur who makes lak bangles said, “Demonetization brought our sales down by half. Now with GST, we are
being taxed 5% and that has worsened our plight."
Thousands of handloom weavers weaving the legendary Benarasi saris also complained how this "twin evil" has
affected them. Thread suppliers, wholesalers and even weavers are now being expected to pay GST on the saris.
This twin complaint against demonetization and GST resounds across all sectors.
FINDINGS & CONCLUSION
Indian Handicrafts Industry, especially in the rural India have been worst hit by demonetisation. Things,
however, are more complicated for the small exporters in labour-intensive sectors, where most of the
transactions happen in cash. Although the cash-crunch is not acute any more, the impact is continuing because
it is like a process. Many businesses are still down and is not the same as it is before the demonetization.
Japanese financial major Nomura, in a recent report, had said demonetization has hit export volumes much
more than imports, and that the cash crunch induced by demonetization has hurt cash-intensive export sectors
such as gems & jewellery and textiles. Major impacts of demonetization on Handicraft’s Industry
1. Demand drops, production costs soar
2. Unskilled labour have been badly affected (Worst-hit are the artisans who work on a contractual basis)
3. Affected informal sources of finance.
4. Risen Unemployment
5. Huge working capital crunch, Factories operating below capacity
6. Costs are up (Making Indian products competitive in the foreign market)
7. Downfall in exports
No doubt that demonetization was a great initiative by Government of India with clear cut objectives to curb
corruption and promote digital transactions. On the grass root level, Demonetization has said to negatively
impact the country’s export in the short term especially the informal sector. It can be said that it has
significantly impacted the exports of Indian Handicrafts which is one of the major source of livelihood and
foreign earnings for the country. All indicators exports, sales, traders’ incomes, production, and employment are
down. A study by the India Development Foundation showed that the slowdown had triggered gloomy forecasts
as businesses struggled to come to terms with the after-effects of the demonetization. Even now, no
organization has come up with a comprehensive survey on how adverse its impact has been on the Handicrafts
industry.
LIMITATIONS & FUTURE SCOPE
This study has the inherent limitations that adequate research has not being carried out on the phenomenon of
demonetization especially in case of Handicrafts sector. Hence there is no
Sufficient review of literature available for the inferences to be made through an exhaustive reference. Only
observational and exploratory study was done. And there is scope of qualitative analysis based on the
availability of the respondents.
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A COMPARATIVE STUDY ON DIFFERENT STYLES OF MANAGEMENT: A CASE OF INDIA

AND CHINA
Dr. Sunayana Kumar1, Rakhshanda Parveen2 and Anam Aslam3
Assistant Professor1 and PhD Scholar2,3, Centre for Management Studies, Jamia Millia Islamia, New Delhi
ABSTRACT
Even after the emergence of cross-border business world, the advent of “culture-free” business practices has
yet to be transpired that brings with itself the complexities are associated with distinct values and beliefs in
spite of the growing interdependence among countries. Both India and China are the countries with great
diversity with substantial regional, cultural and religious variations across the country. The existence of a
standard management practice that can be applied in any culture is still unsettled. The paper aimed to offer a
comparative approach to the management practices followed by Indian and Chinese Organizations. This paper
reviews the previous literature that has focused on comparing various issues related to business and
management in India and China. The findings indicated that though there are substantial differences in staffing,
leading and controlling activities of both the countries, planning and organizing activities offer a vague
variation. Moreover the reason for persistence in practices scaled using dimensions of hofstede’s model.
Finally the paper concludes with the acceptance that no ‘one’ management practice can be adopted across
every culture and country.
Keywords: Culture, India-China, Management, Management elements, Management practice.
1. INTRODUCTION
The Asia's economic giants- China and India- have always had an erratic history. They share a border, have
fought a bitter war and continue to compete for geopolitical supremacy in the region. Political ambitions and
distrust on either side have sometimes been at the cost of better economic sense (Bhatia, 2016). Despite these
incongruities, these countries have fascinated each other over the past two millennia with unique examples of
unbroken civilizations extant for over 3000 years, and with significant mutual influence in areas like religion
and ordinarily cultural symbols like art, literature etc (Subramanian, 2007, Anand, 2013).
Both share a past as two of the most prosperous nations on earth (Kalish, 2006). Long before the emergence of
Europe, China and India have in their name, a considerate amount of inventions and discoveries, and a higher
standard of living (Bhasin, 2007). However, in the early 19th century, both countries suffered a huge plunge
and were surpassed by Europe and the US. The situation further became worse, when in the mid 20th century;
both countries faced an extreme poverty. For China, fortune began to change when Deng Xiaoping came to
power in 1978. He brought about changes in market-oriented and economic policies in the country. For India,
the situation actuated as a setback for the financial crisis that was faced in early 1990s. The government started
taking gradual steps along a market-oriented path. The consequences of this remarkable upturn are profound
and far-reaching and are causing the world economies to relentlessly draw towards them (Quer et al, 2014).
A considerable interest in differing attitudes, behaviour, management style and values of managers has arising,
attributing to the rapid globalization of the world’s economy and cultural diversification (Hofstede, 2001.
Therefore by establishing relationships between these concepts and management practices and effectiveness,
one can deduce the impact of cultural variables on management practices and effectiveness (Anant, 1975).
A great attention has been given in literature regarding the management practices and styles of the international
companies, especially China. But the comparison between India and China is very limited and scarce.
Moreover, the comparisons have been made on the basis of economic growth, FDI and GDP (Bosworth &
Collins, 2008, Agrawal & Khan, 2011), quality practices (Ragunathan et al. 1997, Zhao et al, 1994, Rao,
1999), talent management (Cooke et al. 2013, Ariss et al., 2014).
When it comes to comparing the management styles, U.S. and Japan have received a lot of attention. There is an
abundance of literature on both U.S. and Japanese management since they present contrasting managerial
approaches. Like in a paper by Culpan & Kucukemiroglu (1993), the management styles of US and Japan is
compared in a conceptual model using different six managerial dimensions: supervisory style, decision-
making, communication pattern, control mechanism, interdepartmental relationships, and paternalistic
orientation. The findings indicated that there is a considerable amount of variations in the management styles of
the countries and within each dimensions also. In yet another paper by Weihrich, (1990), Chinese managerial
practices were identified and an analysis was made to know which of the two managerial approaches, i.e. U.S.
and Japan, would be appropriate to make Chinese businesses more effective and efficient. Some studies have
185
also analogized the culture of countries using Hofstede’s model like the one by Migliore, (2011). The inter-
relational aspects of personality traits has been assessed quantitatively by the author using five-factor model of
personality and Hofstede’s five dimensions of culture.
The comparison between India and China is multi-dimensional. Raghunathan et al. (1997) pointed out
significant differences among USA, India, and China with respect to quality management practices. Patrick et
al. (2003) in their paper compared the management style of marketing managers in Australia with their
counterparts in the People’s Republic of China (PRC). Managers in PRC scored higher than their counter parts
with respect to the dimensions like information utilization, complexity, group decision-making, risk acceptance
and technology orientation. In the paper by Quer et al (2014), a comparative approach to the reality of China
and India as regards business and strategic management were presented, analyzing the main similarities and
differences between the two Asian giants. The comparison was done on the basis of key factors for success, the
entry modes that can be used and the business opportunities offered.
A management style when applied in another culture loses its effectiveness. With the increasing trend of
globalization in most organizations, there is an admissible increase in the study of management practices in
different countries and how they lead to organizational efficiency. For the purpose of this study, the five
managerial functions (Planning, organizing, staffing, leading, and controlling) will serve as a framework for
comparing and analogizing the managerial approaches in these two countries. The managerial functions will
then be further elaborated and expanded to know the managerial activities.
3. OBJECTIVES
The main objective of this paper is to compare the management practices in India and China and to find out the
reason for the differences, if any, in their management. The objectives are framed as follows:
1. To study the management practices prevalent in Indian and Chinese organizations.
2. To analyze the similarities and differences between the management practice of both countries.
3. To know the reason behind the differences in the management practices.
The present study is based on secondary data only. The major sources of data are management books, articles,
journals, and different related research studies. The previous literature that has focused on comparing various
issues related to business and management in India and China has been reviewed and synthesized the literature
findings in relation to management practices and other spheres as an initial effort towards identifying the
differences and similarities between the two countries. Although various models for comparing management
practices have been proposed, the present study shall adopt the model used by Weihrich (1990), using the
elements of managerial functions.
5. MANAGEMENT PRACTICES IN INDIA AND CHINA
To understand the management practices prevalent in India and China, Weihrich model (1990) has been used.
The managerial elements involving planning, organizing, staffing, leading and controlling will serve as a
framework for the comparison of managerial activities in both countries.
In both Indian and Chinese organizations, planning has a short and long-term orientation based on the
circumstances. The decision making in Indian companies seems to be time-consuming, but when one is able to
adjust with these circumstances, a better understanding and smooth decision-making process are achieved
(Mark, 2012). Subordinates actively participate in planning, ideation, and related processes, but they look to
their leader to finalize and bring closure to the process (Laxman, 2015). Whereas in China, the managers had
their authority to make any decision in the organizations acknowledged by their employees but it is not
desirable of subordinate to disagree on manager’s idea and communicate directly (Khairullah & Khairullah
2013). Decision making is strongly centralized and hierarchical, where decision flow is from top to down
(Weihrich, 2000).
Majority of the Indian Companies follow a functional structure (PwC, 2013), rigidly organized and hierarchical
and they maintain a highly centralized power structure (Walker, 2010). The Chinese organization followed a
structure that is formal and bureaucratic. As the Chinese economy grows more diverse and new private and
foreign-run firms become more common, the organizational structure of all firms is likely to become more
flexible and decentralized (Walker, 2010). Moreover, there is a strong organizational culture in China
(Weihrich, 2000).
186
Sources of recruitment in Indian companies are campus recruitment, referrals, and consultancies with increasing
online employment agencies and social media hires (Dasgupta, 2018), whereas Chinese firms relied more
heavily on schools than on other firms as sources of new employees (Weihrich, 2000, Li et al. 2015). Indian
companies invest heavily in their employees, especially their new hires, because they see employees as key to
building the organizational capabilities that drive competitiveness (Peter et al., 2010) that applies not only to
their current jobs but is used to enhance employee capabilities to accomplish various tasks and to create a
flexible workforce (Erwee & Paelmke, 2008). In contrast, Chinese managers do not have a positive attitude to
train employees, the training system is defective and there is lack of a superior and tracking system which
causes training inefficiency (Sun, 2015). While promotions were supposed to be based on performance,
potential ability, and education, the reality was that family ties and good relations with top managers were
extremely important for advancement (Weihrich, 2000). In India, work experience, contribution, etc. of the
professionals and business managers have more avenue to success, ‘relations’ are not the only reason for
success (Capelli et al, 2013).
Indian managers and workers prefer a paternalistic style of leadership where managers assume social support
roles in addition to their work-related roles for their employees (Roopal & Sangya, 2012). The Chinese
leadership style is also predominantly paternalistic in nature where the leaders are less likely to give rationales
for decisions and are more inclined to issue directives known as the ‘directive’ leadership style (HayGroup,
2007). Indians are motivated by both individual and group achievements whereas employees in China are
motivated through the group rather than individual achievement (Walker, 2010). The Chinese leader sought to
avoid confrontation and come forward to resolve the conflict and establish peace among his subordinates
(Weihrich, 2000 & Rahul, 2011).
The Indian managers set the well-specified targets and control the performance to maintain the efficiency and
competitiveness. Indian system is based on individual targets because they prefer to be evaluated to be more on
qualitative aspects of their work (Shrivastava & Shrivastava, 2012). With respect to China, the group leader is
expected to exercise control over the group and the group assumed responsibility for pursuing and achieving
group goals and objectives (Weihrich, 2000).
6. COMPARISON IN MANAGEMENT PRACTICES OF INDIA AND CHINA
With the help of Weihrich model, various managerial practices that are prevalent in India and China have been
analyzed. Every activity has various sub-dimensions, which is used to draft the following figure that compares
the managerial activities in both countries.
Figure-1: Comparison of Management Practices

187
7. PROBABLE REASONS FOR DIFFERENCES IN MANAGEMENT PRACTICES

Management practices vary considerably across countries and across firms. While practices of some countries
are considered better than another, the question arises, why one would not just simply adopt the ‘better’
management practices for their own country. The probable reason may be the difference between their cultures
(Hofstede, 2001) or due to environmental constraints (Farmer & Richman, 1965). For the purpose of current
study Hofstede’s dimensions are used. The comparison of both the countries is presented below based on their
overall score in each dimension.
Figure-2: Comparison of countries based on Hofstede’s dimensions (HofstedeInsights)

, It can be seen that the power distance score is higher for both the countries. It indicates a high level of
inequality and wealth distribution within the society. But the society accepts it as a cultural norm. Real power is
centralized and communication is top- down in directive style (Juhasz, 2014). The individualism score is
higher for India which depicts that the people here deal favourably with those they know and trust, and the
opinion of close ones including workgroup, neighbours influence the actions of individuals (Thakur, 2010),
whereas in China, people place group interest prior to their own interest. In-group considerations affect hiring
and promotions with closer in-groups (such as family) are getting preferential treatment. Personal relationships
prevail over task and company (Stone, 2012). Both India and China are considered a masculine society as can
be seen in the figure 2, meaning they are very driven by successful, competition, and achievements. Long
working hours, pays promotion, etc are considered as a measure of success (MarketMeChina, 2014). In India,
there is acceptance of imperfection; nothing has to be perfect nor has to go exactly as planned. India is
traditionally a patient country where tolerance for the unexpected is high (Juhasz, 2014). Chinese people need a
structure and a plan and would prefer stability to adventure. Chinese people don’t like taking risks, which is
why it is so important to build Xin (trust) with them (Stone, 2012). Long-term orientation score of Indian
managers is higher than Chinese managers. The culture is more persistent. It is expected that the Indian
businessperson will provide detailed business plans because of their need for Long-Term Orientations (Juhasz,
2012). Owing to the high score for Chinese managers, they will dedicate whatever time is required to achieve
their goals. This is seen in the very time consuming Chinese negotiation process (Stone, 2012).
China is still more or less a communist country. This means that all the enterprises there are run by the state.
State-run enterprises are usually not efficient and definitely not innovative. On the other hand, the Indian
industry is based on innovative enterprises. Given the competitive nature of the world economy, the Indian
industry stands a better chance at success in the future (Management study guide, 2016). Relationship
building is a very important factor in India, especially at the professional level. In India trend of giving ideal
deals to a known person is followed. Therefore, more you maintain the cordial and friendly relations more it is
useful whereas Chinese follow very formal relationships in business (Business maps of India, 2010).
8. CONCLUSION
Even after the emergence of cross-border business world, the advent of “culture-free” business practices has yet
to be transpired that brings with itself the complexities are associated with distinct values and beliefs in spite of
the growing interdependence among countries. In fact, the variation in management practices is one of the main
variables for the large differences in productivity across firms and countries. Both India and China are the
countries with great diversity with substantial regional, cultural and religious variations across the country. It
should be impossible to generalize about the society, organizations, and leaders in both countries and also the
management practices in the country.
188
Both these management cultures are in a time of transition—on a local level, cultural values and norms continue
to exert a strong influence, while on an international level, the influences of globalization, technology, and
Western management practices have increased over the past decades. While China and India are striving to have
an exposure and experience of western management practices, the countries around the world, on the other
hand, are seeking market penetration and business growth in these countries. Regardless of the pace of change,
it is important to appreciate the traditional cultural values such as the concept of hierarchy, the nature of social
and community networks, the implication of continuity and stability, and prevalence for flexibility and
ambiguity, continue to impact managerial practice and remain influential features of the cross-cultural
management landscape.
From the present study, it is evident that the major difference between the countries lies in the areas of staffing,
leading and controlling whereas the planning and organizing activities offer vague variations. With their own
management practices and styles, we can say that both the countries are taking crucial ladder towards the
escalation to reach pinnacles in their own way.
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EXAMPLES OF REFERENCES
All references must be arranged first alphabetically and then it may be further sorted
chronologically also.
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 Multiple author journal article:
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of a Union Commitment Scale. Journal of Applied Psychology, 12(1), 129-136.
Liu, W.B, Wongcha A, & Peng, K.C. (2012), “Adopting Super-Efficiency And Tobit Model
On Analyzing the Efficiency of Teacher’s Colleges In Thailand”, International Journal on
New Trends In Education and Their Implications, Vol.3.3, 108 – 114.
 Text Book:
Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2007). Designing and Managing the
Supply Chain: Concepts, Strategies and Case Studies (3rd ed.). New York: McGraw-Hill.
S. Neelamegham," Marketing in India, Cases and Reading, Vikas Publishing House Pvt. Ltd,
III Edition, 2000.
 Edited book having one editor:
Raine, A. (Ed.). (2006). Crime and schizophrenia: Causes and cures. New York: Nova
Science.
 Edited book having more than one editor:
Greenspan, E. L., & Rosenberg, M. (Eds.). (2009). Martin’s annual criminal code:Student
edition 2010. Aurora, ON: Canada Law Book.
 Chapter in edited book having one editor:

Bessley, M., & Wilson, P. (1984). Public policy and small firms in Britain. In Levicki, C.
(Ed.), Small Business Theory and Policy (pp. 111–126). London: Croom Helm.
 Chapter in edited book having more than one editor:

Young, M. E., & Wasserman, E. A. (2005). Theories of learning. In K. Lamberts, & R. L.
Goldstone (Eds.), Handbook of cognition (pp. 161-182). Thousand Oaks, CA: Sage.
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as shown:
Sillick, T. J., & Schutte, N. S. (2006). Emotional intelligence and self-esteem mediate between
perceived early parental love and adult happiness. E-Journal of Applied Psychology, 2(2), 38-
48. Retrieved from http://ojs.lib.swin.edu.au/index.php/ejap
 Unpublished dissertation/ paper:

Uddin, K. (2000). A Study of Corporate Governance in a Developing Country: A Case of
Bangladesh (Unpublished Dissertation). Lingnan University, Hong Kong.
 Article in newspaper:
Yunus, M. (2005, March 23). Micro Credit and Poverty Alleviation in Bangladesh. The
Bangladesh Observer, p. 9.
 Article in magazine:
Holloway, M. (2005, August 6). When extinct isn't. Scientific American, 293, 22-23.
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August 10, 2005, from http://www.centralbankofindia.co.in/ home/index1.htm, viewed on
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under consideration to be published anywhere else if selected for publication in the journal
of Indian Academicians and Researchers Association.
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UGC

University Grants Commission

Volume 6, Issue 1 (V)

Chief Patron Mr. Zahirul Alam Ahmed

Dr. Alka Agarwal Dr. Archana A. Ghatule

Prof. (Dr.) Sudhansu Ranjan Mohapatra Prof.(Dr.) Sharad Kumar Goel

Dr. P. Malyadri Prof. (Dr.) Monoj Kumar Chowdhury

Prof.(Dr.) Shareef Hoque Prof. (Dr.) Baljeet Singh Hothi

Prof.(Dr.) Michael J. Riordan Prof. (Dr.) Badiuddin Ahmed

Prof.(Dr.) James Steve Dr. Anindita Sharma

Prof.(Dr.) Chris Wilson Prof. (Dr.) Jose Vargas Hernandez

Prof. (Dr.) Amer A. Taqa Prof. (Dr.) Himanshu Pandey

Dr. Nurul Fadly Habidin Prof. (Dr.) Agbo Johnson Madaki

Dr. Neetu Singh Prof. (Dr.) D. Durga Bhavani

Prof. (Dr.) Alireza Heidari Prof.(Dr.) Robert Allen

Prof. (Dr.) Badar Alam Iqbal Prof. (Dr.) S. Nallusamy

Dr. Dhananjay Prabhakar Awasarikar Dr. Sarmistha Sarma

Dr. Mohammad Younis Dr. Pranjal Sharma

Dr. Kavita Gidwani Dr. Lalata K Pani

Dr. Vijit Chaturvedi Dr. Sunita Dwivedi

Dr. Marwan Mustafa Shammot Dr. R. Navaneeth Krishnan

Dr. Juhab Hussain Dr. Namita Dixit

Dr. V. Tulasi Das Mr. Sukhvinder Singh

Dr. Urmila Yadav Dr. Nidhi Agrawal

Nivedita Srivastava and Tanuj Nandan

ASSESSING PREDICTIVE POWER OF MACROECONOMIC VARIABLES FOR STOCK 11 – 12

Dr. Taufeeque Ahmad Siddiqui and Yusuf Abdullah

BILATERAL TRADE BETWEEN INDIA- EU: WITH SPECIAL REFERENCE TO GARMENT 13 – 22

DETERMINING THE OUTCOME OF NEWS ON THE STOCK MARKETS OF EMERGING 23 – 27

Dr. Taufeeque Ahmad Siddiqui and Mazia Fatima Khan

E-COMMERCE AND THE GROWTH OF GLOBAL RETAIL BUSINESS - A CASE STUDY OF 28 – 36

EFFECTIVE DECISION MAKING USING ADVANCEMENTS IN BUSINESS ANALYTICS 37 – 40

K. Subhash and E. N. Vihari

FACTORS AFFECTING FEMALE EXPATRIATES: A REVIEW OF LITERATURE 41 – 47

Dr. Sunayana Kumar and Nadia Ashraf Khan

FINANCIAL INCLUSION THROUGH BUSINESS CORRESPONDENT MODEL- 48 – 52

Dr. Amal Kumar Agarwala and Lonibha Deka

IMPACT OF CAPITAL STRUCTURE ON PROFITABILITY AND MARKET VALUE: STUDY 53 – 57

Dr. Priti Sharma

TRENDS AND PATTERNS OF INDIAN OUTWARD FOREIGN DIRECT INVESTMENT 58 – 62

Dr. Veeramani, Mariam Jamaleh and Sonakshi Singh

Dr. Taufeeque Ahmad Siddiqui and Kashif Iqbal Siddiqui

DETERMINANTS OF BANK PROFITABILITY: AN EMPIRICAL STUDY FROM INDIA 68 – 82

MODELLING VOLATILITY OF SELECT TELECOM COMPANIES OF CNX 500 83 – 89

Dr. Taufeeque Ahmad Siddiqui and Zahoor Ahmad Mir

RELATIONSHIP BETWEEN COMMODITIES & STOCK MARKETS IN INDIA – AN 90 – 95

Rajesh R and Dr. A. Satya Nandini

Dr. Yasmeen Rizvi and Raksha Garg

Fahima Sherwani and Dr. Saiyed Wajid A

THE IMPACT OF DEMONETIZATION ON CONSUMERS PURCHASE ON RETAIL STORE 119 – 126

Jyotsna and Prof. N. U. K Sherwani

IMPACT OF INFORMATION &COMMUNICATION TECHNOLOGY ON CUSTOMER 143 – 148

Dr. S. Veeramani, Syed Shaamikh Ahsan and Sonakshi Singh

INFLUENCE OF CONSUMERS’ CHARACTERISTICS ON IMPULSE BUYING TENDENCY 149 – 159

Dr. Saiyed Wajid Ali and Swati Sudan

Dr. S Z Amani and Nisha Dhanraj Dewani

Dr. Sabiha Khatoon

Dr. S. Veeramani, Anam and Sonakshi Singh

A COMPARATIVE STUDY ON DIFFERENT STYLES OF MANAGEMENT: A CASE OF INDIA 185 - 190