Management Journal 2011

BSSS Journal of Management, Issue-2, Vol.
-2 (2011)
Profitability Analysis of Oil Companies of India: A Comparative Study of IOCL, BPCL, HPCL
Dr. Vivek Sharma
Director, C. Rajagopalachari Institute of Management, Barkatullah University, Bhopal
EXECUTIVE SUMMARY An attempt has been made to measure the profitability scenario of oil companies of India; A comparative study has been done regarding IOCL, BPCL and HPCL. The ratio analysis, correlation and regression analysis model has been used to analyze the data and to test the profitability of the companies Key Words: Profitability, Financial Ratios, Oil Companies. INTRODUCTION The primary objective of a business undertaking is to earn profit. Profit earning is considered essential for the business. In other words of Lord Keynes, Profit is the engine that drives the business enterprise. A business needs profit not for its existence but also for expansion and diversification.1 Profitability analysis comprises the study of sales, analysis of cost of goods sold, analysis of gross margin on sales, analysis of operating expenses, analysis of operating profit and analysis of profit in relation to sales and capital .2. Profitability also indicates public acceptance of the product or services rendered by the enterprise and shows the combined effects of liquidity, assets management and debt management on operating result. Further the analysis of the relationship is also important from an other angle, i.e. profitability increases on average, with the size of the firm. This will suggest that profitability is not constrained by size; in fact, in case it is a positive inducement to further growth 3. OBJECTIVES OF THE STUDY: 1. To analyze the profitability of the companies. 2. To assess the regression and correlation coefficient between important financial ratios.
BSSS Journal of Management, Issue-2, Vol.-2 (2011)
METHODOLOGY OF THE STUDY: The study is mainly based on secondary data. Annual reports of last five years have been used extensively. The data from these reports have been analyzed using appropriate financial and statistical tools with a view to evaluate the performance of the companies. Some of the tools used are ratio analysis, correlation coefficient, correlation matrix and multiple correlation and regression. Company profile: The downstream sector companies of the exclusive refining companies as well as the integrated companies responsible for the refining and marketing. The downstream public sector refining companies comprises of 19 companies, three of which are (integrated refining and marketing) companies are IOCL, BPCL & HPCL. (a) Indian Oil Corporation Limited: IOCL is the giant of Indias hydrocarbons industry. Its refining and retail operations are the focus of IOCLs business, although it maintains highly diversified commercial operations including significant upstream Exploration and Production and Petrochemicals and Fertilizer business. In the downstream sector IOCL has over 50% market share in marketing and retail. IOCL operates 10 refineries across India with a combined capacity of about 1.2 million bbl/d. (b) Bharat Petroleum Corporation Limited: BPCL is Indias second largest OMC by sales, marginally larger than Hindustan Petroleum Corporation. BPCL operates a retail network of over 8 000 outlets. BPCL maintains three refineries: Mumbai refinery; Numarlingarh refinery; and Kochi refinery. (c) Hindustan Petroleum Corporation Limited: HPCL is the smallest of Indias three key OMCs. HPCL has a slightly greater auto fuels retail presence than BPCL also with over 8000 retail outlets. HPCLs refining capacity is significantly less than both IOCL and BPCL. It operates two refineries one located in Mumbai and one at Visakhapattanam on the East Coast. ANALYSIS OF DATA: Table No.1 In Table no.1 profitability of the oil companies are judged with the help some important ratios of profitability which are Gross Profit Ratio (GPR) which reveals gross income of the company after direct expense but before deducting indirect expenses, Net Profit Ratio (NPR) represents income after all direct as well as indirect expense, Return on Investment (ROI) expose the operational efficiency of the business as well as point out profitability condition of the
company. Therefore these three ratios are computed in order to examine the overall profitability of the business. IOCL: As per profitability ratios of IOCL are analyzed, it reveals that GPR shows average of 5.11 of the last five years profit with standard deviations of 1.25 and coefficient of variances are 24.45%. The net profit ratio also does not shows a good position in the whole study period it indicates average of 4.02, standard deviations of 1.18 and coefficient of variances are 29.35% and finally ROI shows average of 5.77, standard deviation of 2.10 and coefficient of variances are 36.40%, which represents that the profitability condition is not good and the company has to improve it to get better result in future. BPCL: The condition of profitability ratios of BPCL are more terrible as IOCL as per the study period it can be said that the company shows an average of GPR 3.08, with standard deviation of .92 and coefficient of variances are 29.78%. NPR discloses an average profit of 2.21 and coefficient of variance is 41.45%.and the average of ROI is 3.14, standard deviation is 1.87 and coefficient of variance are 59.60%. This reflects unsatisfactory condition of the company. HPCL: The profitability ratios of HPCL also dose not donates a fine condition of the company the GPR ratios indicates an average of 2.78, standard deviation of .83 and coefficient of variance are 29.86%, and the average of NPR is 1.96, standard deviation is .83 and coefficient of variance are 42.14%, ROI shows a average of 3.08, standard deviation of 1.66 and coefficient of variance are 53.90%, which replicate inadequate profitability position of the company. Table No. 2 In Table no 2 the simple correlation coefficient analysis are done between some selected ratios and Return on Investment (ROI). The ratios used for the analysis are Working Capital Ratio (WCR), Acid Test Ratio (ATR), Current Assets to Total Assets Ratio (CTTR), and Fixed Assets to Total Assets Ratio (FTTR), Total Assets Turnover Ratio (TATR), and Capital Employed Turnover Ratio (CETR). Theses ratio helps us to measure the overall performance and to judge profitability of the companies. IOCL: It can be seen from Table No. 2 that the correlation coefficient between ROI and WCR is 0.84 which indicates high degree of positive correlation between two variables. The t value is more
than the critical value hence it is significant at 5% level of significance, secondly when correlation coefficient between ATR and ROI are analyzed it can be revealed that it is 0.63 which indicated moderate correlation between the two variable but the t value is less than the critical value which expose insignificant at 5%level of significance, the correlation coefficient between CTTR and ROI is .65 and it is also insignificant at 5% level of significance, the correlation coefficient between FTTR and ROI it is -0.06 which is also found insignificant at 5% level if significance, the correlation coefficient between TATR and ROI is -0.44 and it is also insignificant at 5% level of significance and lastly the correlation between CETR and ROI is -0.26 and it was also found to be insignificant at 5%. BPCL: As the correlation coefficient between WCR and ROI are analyzed it is .14 and the t value is insignificant at 5% level of significance, and the correlation coefficient of ATR and ROI is .32 which is also insignificant at 5% level of significance, the correlation coefficient between CTTR and ROI is 0.21 which is again found insignificant at 5%level of significance, when the correlation coefficient between FTTR and ROI are examine it is -0.09 which shows negative association between two variable hence it is also insignificant at the level of significance, the correlation between TATR and ROI is 0.30 and it is also insignificant at 5% level of significance, the correlation coefficient between CETR and ROI is 0.34 and it also insignificant at 5% level of significance. HPCL: The correlation coefficient between ROI and WCR is -0.12 and the t value is insignificant at 5% level of significance, in case of the correlation between ATR and ROI is -0.30 and the t value is insignificant at 5% level of significance, the correlation coefficient between ROI and CTTR is -0.14 and the t value is insignificant at the level of significance, in case of the correlation between FTTR and ROI it is 0.72 and again the t value is insignificant at the level of significance, correlation coefficient between TATR and ROI is -0.02 and the t value is insignificant at the level of significance, and the correlation between CETR and ROI is -0.15 and the t value is insignificant at the level of significance. *(Critical vale at 0.05 percent level of significance at degree of freedom 3 is 2.353) Table No. 3 In Table No.3 correlation matrix has been calculated for the purpose of selection of variables in this analysis, the correlation matrix represents the correlation coefficient between the explanatory variable.
IOCL: The table shows that there is very high degree of correlation between WCR and CTTR is 0.731 and the relationship between CTTR and ATR is 0.723 it reveals that there is positive relationship between CTTR and ATR. Therefore CTTR, WCR and ATR have not been taken into account for the calculation of Multiple Correlation and Multiple Regression BPCL: In BPCL the high degree of correlation can be seen between WCR and CTTR 0.965 and the correlation between WCR and FTTR is 0.741, which represents high correlation between these variables. As a result WCR, FTTR and CTTR are not taken into consideration for the calculation of Multiple Correlation and Multiple Regression Analysis. HPCL: In HPCL the higher correlation can be seen between WCR and CTTR which is 0.927 and the correlation between CTTR and ATR is 0.656 which is shows that these variables have high correlation. Thus, WCR, CTTR and ATR are not taken for the calculation of Multiple Regression and Multiple Correlation. Table No. 4 The Table exhibiting the relationship between the dependent variable and ROI and all the independent variable taken together and the impact of these independent variable on the profitability IOCL: When FTTR increased by one unit, the ROI decreased by 2.980 which was insignificant at 0.05 percent level. For one unit increased in TATR the profitability of the company decreased to -49.479 which is not satisfying the critical value. Moreover when CETR increased by one unit the ROI of the company increased to 36.121 which is significant at 005 level of significance BPCL: The Table of Multiple Regression and Correlation reveals that when one unit of TATR is increased the ROI is decreased to -0.516 which is not satisfying the 0.05 level of significance but when one unit increased to ATR it increased to 8.076 which is significant at 0.05 percent of significance but when one unit is increased to CETR it decreased to 1.816 which is insignificant at 0.05level of significance.
HPCL: As HPCL when one unit is increased to FTTR it hike up to 148.654 which is significant at 0.05 percent level while when one unit is increased to TATR it decline to 8.605 which is significant at 0.05 percent level of significance however when one unit is add up in CETR it fall down to -9.483 which is not significant 0.005 percent level of significance. *(Critical vale at 0.05 percent level of significance at degree of freedom 3 is 3.183) CONCLUSION From the above analysis it can be concluded that the profitability of oil corporations are not adequate during the period of study, the profitability ratios calculated shows stumpy position in all the three companies and the correlation coefficient between ROI and other variable also shows weak position during the study period and lastly the Multiple correlation and regression table also disclosed both the positive and negative association. The slope of ROI with the other independent variable in IOCL shows insignificant on TATR and FTTR but it is significant in case of CETR. On the other hand BPCL shows insignificant relationship ROI and TATR and CETR but it is significant in case of ATR. As well as in HPCL shows significant relationship between ROI and FTTR and TATR but it is negatively associated in case of CETR. Therefore it can be concluded that all three companies need to recuperate its management to develop its profitability.
TABLE - 1 Important Profitability Ratios Company Year 2006 2007 2008 2009 2010 Mean Standard Deviation Coefficient of Variances Indian Oil Corporation GPR NPR ROI (%) (%) (%) 4.67 3.56 5.88 6.08 4.94 7.71 5.24 4.15 6.12 3.22 2.25 2.24 6.35 5.20 6.90 5.11 4.02 5.77 1.25 1.18 2.10 24.45 29.35 36.40 Bharat Petroleum Corporation GPR NPR ROI (%) (%) (%) 1.64 .74 1.19 4.02 3.18 5.77 3.42 2.52 4.10 2.78 2.04 1.62 3.52 2.58 3.01 3.08 2.21 3.14 0.92 0.917 1.87 29.78 41.45 59.6 Hindustan Petroleum Corporation GPR NPR ROI (%) (%) (%) 1.51 .62 1.85 3.29 2.57 5.55 2.57 1.82 3.09 2.86 2.12 1.30 3.69 2.69 3.63 2.78 1.96 3.08 0.83 0.83 1.66 29.86 42.14 53.90
Source: Annual Report of the Companies Note- GPR-Gross Profit Ratio NPR-Net Profit Ratio TABLE- 2 Simple Correlation Analysis between Selected Performance Indicators and Return on Investment Company Years 2006 2007 2008 2009 2010 Correlation Coefficient (x) t value of r Indian Oil Corporation WCR ATR CTTR 1.37 1.32 1.25 0.95 1.20 0.84 2.68 0.36 0.39 0.41 0.34 0.36 0.63 1.41 0.46 0.43 0.49 0.38 0.45 0.65 1.48 ROI- Return on Investment
FTTR 0.38 0.37 0.34 0.38 0.40 -0.06 -0.18
TATR 2.2 2.38 2.2 2.42 1.90 -0.44 -0.85
CETR 3.34 3.61 3.33 3.52 2.93 -0.26 0.47
ROI (%) 5.88 7.71 6.12 2.24 6.90
Company Years 2006 2007 2008 2009 2010 Correlation Coefficient (x) t value of r
Hindustan Petroleum Corporation WCR ATR CTTR FTTR TATR 1.12 0.77 1.00 0.64 0.86 -0.12 -0.21 0.25 0.19 0.35 0.25 0.30 -0.30 -0.54 0.44 0.36 0.46 0.34 0.39 -0.14 -0.24 0.39 0.41 0.37 0.35 0.37 0.72 1.80 3.12 3.07 2.72 2.81 2.24 -0.02 -0.34
CETR 4.6 4.5 3.88 3.75 3.30 0.15 0.26
ROI (%) 1.85 5.55 3.09 1.30 3.63
Source: Annual Report of the Companies Note- WCR- Working Capital ratio CTTR- Current Assets to Total Assets ratio CETR- Capital Employed Turnover Ratio ATR- Acid test Ratio TATR- Total Assets Turnover Ratio ROI- Return on Investment
TABLE- 3 CORRELATION MATRIX Indian Oil Corporation Limited
WCR ATR CTTR FTTR TATR CETR ROI
WCR 1.000 0.553 0.731 -0.186 -0.262 -0.080 0.840
Pearson Correlation Matrix ATR CTTR FTTR TATR 1.000 0.723 -0.798 -0.009 0.125 0.628
CETR
ROI
1.000 -0.458 -0.542 -0.425 0.651
1.000 -0.400 -0.450 -0.059
1.000 0.980 -0.444
1.000 -0.263
1.000
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Bharat Petroleum Corporation Limited Pearson Correlation Matrix ATR CTTR FTTR TATR 1.000 0.733 -0.147 -0.463 -0.070 0.319
WCR ATR CTTR FTTR TATR CETR ROI
WCR 1.000 0.541 0.965 0.741 -0.038 0.367 0.136
CETR
ROI
1.000 0.563 -0.112 0.331 0.211
1.000 0.441 0.606 -0.089
1.000 0.895 0.168
1.000 0.344
1.000
BPCL
Hindustan Petroleum Corporation Limited Pearson Correlation Matrix WCR ATR CTTR WCR 1.000 ATR 0.392 1.000 CTTR 0.927 0.656 1.000 FTTR 0.307 -0.569 0.103 TATR 0.174 -0.608 0.029 CETR 0.364 -0.594 0.170 ROI -0.119 -0.300 -0.135
FTTR
TATR
CETR
ROI
1.000 0.540 0.743 0.722
1.000 0.952 -0.023
1.000 0.154
1.000
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Source: Annual Report of the Companies Note: Statistical calculation have been done through STSTAT
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TABLE -4 Multiple Correlations and Multiple Regression Analysis Indian Oil Corporation Regression Coefficient B = (X'X)-1X'Y Coefficient Standar Std. Tolerance t d Error Coeffic ient -6.363 12.997 0.000 . -0.490 2.980 -49.479 36.121 21.052 10.194 8.224 0.031 -4.841 4.497 0.752 0.036 0.035 0.142 -4.854 4.392
Effect CONST ANT FTTR TATR CETR
p-Value 0.710 0.910 0.129 0.143
Bharat Oil Corporation Regression Coefficient B = (X'X)-1X'Y Coefficie Standard Std. Tolerance t nt Error Coefficient 55.409 0.000 . -0.100 -0.516 8.076 1.816 37.263 50.296 17.020 -0.062 0.320 0.422 0.039 0.193 0.049 -0.014 0.161 0.107
p-Value 0.937 0.991 0.899 0.932
Hindustan Petroleum Corporation Regression Coefficient B = (X'X)-1X'Y Coefficie Standard Std. Tolerance t nt Error Coefficient 12.039 0.000 . -3.251 148.654 8.605 -9.483 40.384 5.701 4.652 2.036 1.819 -3.090 0.151 0.032 0.020 3.681 1.509 -2.039
p-Value 0.190 0.169 0.373 0.290
Source: Annual Report of the Companies Note: Statistical calculation have been done through STSTAT
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REFERENCES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Gupta S.P2 Management Accounting, Sahitya Bhawan Publication, pp-560. (2004) Islam Rafiqul Mahammad, Profitability of fertilizer industry in Bangladesh, The management Accountant, May 2000 Khan M.Y. & Jain P.K., Financial Management, Tata Mc Grew-Hill Publishing Company Limited New Delhi., (2007). Kothari C.R., Research Methodology, New Age International (P) Ltd. Publisher, (2008). Mallick K. Amit, Working Capital Management: A case study of Hindustan Lever Ltd., Finance India, September1999. Rajeswari N., Liquidity management of TamilNadu Cement Corporation Ltd Alangulam-A case study, The Management accountant, May (2000). Reddy V.Y. and Patkar B.S., Working Capital Management in factoring: A Comparative study of SBI and Canbank Factors, The Management accountant, May, 2004 Sahu R.K., A simplified model for liquidity analysis of paper companies, The Management accountant, November, (2002). Sharma D.D. Research Methodology, Kalyani Publisher, (2003). Sharma R.K. and Gupta Shashi K 1, Financial Management, Kalyani Publisher, (2008). Sur Debasish, Inter- Company profitability analysis of Indian general insurance industry, The management Accountant, July, 1999. Sur Dejasis and Rej Debasish, Profitability analysis of Indian food products industry: a case study of Cadbury India Ltd., The management Accountant, November 2001 Vijayakumar A and Kadirelu. 3, Profitability and size of Firm in Indian minerals and metals industry-an empirical evidence, The management Accountant, November, 2003.
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Micro Finance: A Tool for Economic Empowerment of Women in Kerala

Dr. A.V. Hemalatha Associate Professor in Commerce
Pazhassi Raja N.S.S.College, Mattanur, KERALA
EXECUTIVE SUMMARY The development pattern of the present economic scenario emphasised the relevance of micro finance as a tool of poverty alleviation, employment generation and women empowerment. Micro finance expedites finance to the poor and neglected section of population who were outside the reach of formal financial institutions. The post nationalisation era witnessed a great expansion in the flow of credit to the rural sector. Surprisingly, the benefit of such increased flow by passed the weaker section of the rural community. Micro finance innovations have opened doors to the neglected sector of the economy that were outside the reach of financial services previously. With the provision of credit to women, a system has been developed in rural area where they could access money for their immediate and urgent consumption needs and also capital for production requirements. Formation of groups, named as Self Help Groups enables women to come out of their traditional bondage and interact with similar class of people. Participation in the group activities helps them to improve their skill and competence to take up productive ventures, enhancing self confidence and self-reliance, leading to economic empowerment. In Kerala, women are better positioned in terms of literacy and human development index, compared to other Indian states. The vast reservoir of untapped female potential can contribute towards the prosperity of the state, provided adequate credit and support system is ensured. The innovative credit delivery system emerged in the country during 90s, through group formation following the axiom of self help and mutual help, is found to be a powerful tool to mitigate the problems arising out of the deplorable situation of poor women. In this paper, an attempt is made to analyse the extent to which the women members of Self Help Groups achieved economic empowerment compared to non members with similar socio economic status. Key Words: Micro Finance, Economic & Women Empowerment, Self Help Groups INTRODUCTION The development pattern of the present economic scenario emphasised the relevance of micro finance as a tool of poverty alleviation, employment generation and women empowerment. Micro finance expedites finance to the poor and neglected section of population who were outside the reach of formal financial institutions. The consumption and production needs of the
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poor can be fulfilled by the provision of micro finance. The approach gained momentum since its inception as it emerged from a crucial situation where the rural institutional finance system failed to discharge the expected benefits to the poor. The post nationalisation era witnessed a great expansion in the flow of credit to the rural sector. Surprisingly, the benefit of such increased flow by passed the weaker section of the rural community. The establishment of Regional Rural Banks in 1975 was specifically meant for meeting the credit requirements of the poor. The efforts of the formal banking system that penetrated to rural areas, have improved substantially over the last few decades, but they could not take into their fold a major set of rural poor. Thus, an unfinished agenda existed in terms of access and sustainability for the poor. Micro finance innovations have opened doors to the neglected sector of the economy that were outside the reach of financial services previously. When banks lent to the rich, micro banking pioneers lent to the poor; where banks lent to men, they lent to women; when banks made large loans, they made small loans; where banks required collateral, their loans were collateral free; where banks required endless paper work, their loans were illiterate friendly. 1 A relief from the traditional banking formalities and a sincere and persistent approach of the micro lending system, have attracted many rural masses especially women to this form of finance. With the provision of credit to women, a system has been developed in rural area where they could access money for their immediate and urgent consumption needs and also capital for production requirements. Formation of groups, named as Self Help Groups enables women to come out of their traditional bondage and interact with similar class of people. Participation in the group activities helps them to improve their skill and competence to take up productive ventures, enhancing self confidence and self-reliance. Such an attempt could contribute to the development of rural economy where 72.27 percentage of population of the country is concentrated (2001 census report) Micro finance has been identified as an effective tool in empowering women. Empowerment entails a social process that signifies the participation of both male and female in the development process of the economy. History reveals that there are women who could demonstrate high feats and bring glory in their lives as well as to the nation. However a small section of women could make it to the highest positions and majority of women who reside in rural areas are destined to be poor and continue to be in a state of vulnerability and deprivation in many parts of the country. Bringing women in to the mainstream development process is possible by creating awareness, educating them, giving proper training and extending financial support. The process assumes significance in Kerala state which has the unique sex ratio of 1058:1000. Female population as per 2001 Census was 163.72lakh (51.4%) out of 318.41 lakh population, of which 74 per cent are in rural areas. Their work participation rate accounts for 15.8 per cent against all India rates
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of 22.3 per cent.2 Women in Kerala are better positioned in terms of literacy and human development index compared to other Indian states. The vast reservoir of untapped female potential can contribute towards the prosperity of the state provided adequate credit and support system is ensured. The innovative credit delivery system emerged in the country during 90s, through group formation following the axiom of self help and mutual help is found to be a powerful tool to mitigate the problems arising out of the deplorable situation of poor women. Women Empowerment - Meaning and Definition The Oxford English dictionary gives two meanings to the word empowerment, as to invest legally or formally with or authority, to authorize or licence, and to improve or bestow power to an end or for a purpose3. It literally means becoming powerful. The most conspicuous feature of the term empowerment is that it contains within it the word power. Power is the control over resources and control of ideology. Thus the process of gaining control over self, over ideology and the resources which determine power may be termed as empowerment. 4 The word gets its importance when used in relation to those who belong to the backward, inferior and deprived section of the population. Women constitute a category that suffers from various ill-treatments at different places in the society, and need empowerment. They are at a menace in a male dominated community due to lower access to credit and material resources and limited job opportunities which prevents them from active participation in development initiatives. Empowerment strategy needs to be adopted for enhancing the position of such oppressed class by targeting self reliance, strength and control. An active multidimensional process, which involves awareness building, capacity building, and control over resources, can be interpreted as empowerment process. The present study concentrates this aspect of empowerment. Economic Empowerment Economic empowerment is a situation where women achieve a position of self reliance with respect to income earning and satisfaction of consumption needs. Economic independence is an essential factor in determining the status and position of women in the family and in the society. For economic independence, women should be able to engage in some productive activities and should earn financial autonomy. The extent of access to and control over the income so generated forms the essence of economic empowerment. Involvement in income generating activities with the competence acquired by women through group activities could help to improve the economic base of women.
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Self Help Groups Self help groups are informal organisations formed voluntarily by poor people at the grassroots level for the purpose of reaping economic benefits out of mutual help, solidarity and joint responsibility. Savings and credit is the basis of the SHG concept. It is based on the philosophy of peoples participation in the strategy and execution of all schemes and activities meant for them. Members of the SHGs are with homogeneous backgrounds who join together for addressing their common problems. Collection of thrift on a regular basis from members is pooled and is used to make small interest bearing loans to the members. Just as small drops of water make an ocean, small savings pooled by women make a strong foundation on which the sustainable development structure can be constructed. Once they start performing in a mature financial manner, banks are directed to grant loans to SHGs without any collateral in certain multiples of their accumulated savings. The amount can be used by the group either for on lending to members or for undertaking income generating activities. The groups provide a forum for collective learning and development of attributes like democratic culture, friendly dealings, financial discipline, entrepreneurial ability, communication skills and organizing ability. SHG concept affords a gender sensitive, socially empowering, economically spirited and psychologically favourable approach, on the economically weaker and deprived masses and works as a resource provider rather than as a resource mobilizer. The strategy thus assists and supports the members to identify and use opportunities for empowerment both in private and public life. OBJECTIVES AND METHODOLOGY The study is carried out with the objective of analysing the extent to which the women members of Self Help Groups achieved economic empowerment compared to non members. Members of SHGs throughout the state of Kerala and non members within the surroundings of each SHG units constitute the population of the study. Since the study is sample based one and to give representation to the whole state, six districts are selected for the study. Multi stage random sampling method is adopted for selection of the sample. For this purpose, the state is divided into three parts such as Southern, Central and Northern region and two districts are selected from each region. Six districts selected are, Thiruvananthapuram and Alapuzha from Southern region, Idukki and Trissur from Central region and Wayanad and Kannur from Northern region. For making comparative analysis 40 non members with similar socio-economic status as that of members are selected from each of the selected districts forming 240 non members in aggregate.
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Primary data are collected from the respondents by using a well structured questionnaire and the collected data are processed using statistical devices like averages and chi square test. Secondary data are collected from the records of NABARD and from published books and journals. Measuring Economic Empowerment of Respondents The extent of economic empowerment achieved by women on account of their participation as a member in SHG is examined by taking a sample of 600 members selected on random basis, from 6 districts of the state. Besides, a peer group consisting of 240 non-members with similar socio-economic status as that of members of SHGs is taken on purposive sampling basis from the study area for comparative assessment. In order to measure the extent of economic empowerment an analysis of four variables identified for the purpose is made. The intention is to assess the comparative advantage in the degree of empowerment enjoyed by the members of SHG over non members. Amount of income, amount of savings, access to credit and control over resources are identified as the variables for measuring economic empowerment of the respondents. Monthly Family Income of Respondents Level of income is a prime determinant of status in society and living standards of people. Among the sample identified for the study, number of respondents having regular employment and regular income is less. Table 6.35 reveals that the level of income shows a better position for members than for non members. Income is a prime factor that decides the empowerment process of women and hence there is a need for orienting them about the significance of taking up micro enterprises for generating sustainable income. Chi square value is calculated taking into account the combined effect of level of income and the opinion of respondents about the change in standard of living and the amount spent for consumption requirements. Since the 'p' (=0.0000) value is less than 0.05 significant variation exists in the level of income of members and non members in all regions.
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TABLE 1.1 Distribution of Sample Based on Monthly Family Income of Respondents North MembersNon Members Income (Rs.) Central MembersNon Members South MembersNon Members Members Total MembersNon 60 (25) 92 (38.3) 68 (28.3) 20 (8.3) 0 (0) 0 (0) 240 (100)
Below 1000 1001-2000 2001-3000 3001-4000 4001-5000 Above 5000 Total Chi square value p-value
112 (56) 55 (27.5) 21 (10.5) 7 (3.5) 4 (2) 1 (0.5) 200 (100)
34 (42.5) 35 (43.8) 8 (10) 3 (3.8) 0 (0) 0 (0) 80 (100)
87 (43.5) 66 (33) 21 (10.5) 11 (5.5) 4 (2) 11 (5.5) 200 (100)
4 (5) 40 (50) 30 (37.5) 6 (7.5) 0 (0) 0 (0) 80 (100)
94 (47) 59 (29.5) 19 (9.5) 8 (4) 13 (6.5) 7 (3.5) 200 (100)
22 (27.5) 17 (21.3) 30 (37.5) 11 (13.8) 0 (0) 0 (0) 80 (100)
293 (48.8) 180 (30) 61 (10.2) 26 (4.3) 21 (3.5) 19 (3.2) 600 (100)
8.715ns 0.120999
59.67** 0.0000
48.283** 0.0000
84.697** 0.0000
Source: Survey data Values in parenthesis denote percentages Annual Savings of Respondents Savings represent the postponed consumption. It offers a security for the savers against unexpected and undue eventualities in future. The main idea behind the introduction of SHG system is to encourage thrift among the poor women.
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TABLE 1.2 Distribution of Sample based on Annual Savings of Respondents North MembersNon Members Savings Central MembersNon Members Members South MembersNon Members Total MembersNon
No savings Below 1000 1001-2000 2001-3000 3001-4000 4001-5000 Above 5000 Total Chi-square p-value
0 3 (0.00) (3.75) 49 27 (24.50) (33.75) 64 24 (32.00) (30.00) 48 20 (24.00) (25.00) 13 6 (6.50) (7.50) 9 0 (4.50) (0.00) 17 0 (8.50) (0.00) 200 80 (100) (100) 19.8818 .002913
0 0 (0.00) (0.00) 38 15 (19.00) (18.75) 42 18 (21.00) (22.50) 61 34 (30.50) (42.50) 25 13 (12.50) (16.25) 16 0 (8.00) (0.00) 18 0 (9.00) (0.00) 200 80 (100) (100) 16.6793 .005158
0 2 (0.00) (2.50) 46 9 (23.00) (11.25) 63 33 (31.50) (41.25) 33 29 (16.50) (36.25) 20 7 (10.00) (8.75) 10 0 (5.00) (0.00) 28 0 (14.00) (0.00) 200 80 (100) (100) 35.9595 .000003
0 5 (0.00) (2.08) 133 83 (22.17) (34.58) 169 75 (28.17) (31.25) 142 51 (23.67) (21.25) 58 26 (9.67) (10.83) 35 0 (5.83) (0.00) 63 0 (10.50) (0.00) 600 240 (100) (100) 60.1873 .000000
Source: Survey data Values in parentheses denote percentages The potency of the SHG system in inculcating saving habit among members is reflected in the data revealed in the Table. However the system could not bring about a high level of savings or investment for women. Hence further efforts are needed to improve the level of savings by members by increasing their income and fine tuning thrift habit. Chi square value is calculated considering the combined effect of level of savings and the opinion collected from the respondents about increase in saving habit. Since the 'p' value (=0.00000) is less than 0.05, the conclusion is that there is significant variation between the savings pattern of the respondents.
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Access to Credit Loan is raised by members and non members from various sources. Depending on the urgency of the requirements different sources are opted by them. SHG system ensures easy and timely collateral free loan to poor women at a fair rate of interest. Mainly the consumption needs of women can be satisfied with the loan from the group. Members get loans based on the availability of group fund and by considering the urgency of needs. TABLE 1.3 Distribution of sample based on Access to Credit North MembersNon Members Source Central MembersNon Members Members South MembersNon Members Total MembersNon 74 (30.8) 26 (10.8) 40 (16.7) 100 (41.7) 240 (100)
Bank Friends/ Relatives Money lenders Self Groups No loan Total help
52 (26.0) 5 (2.5) 3 (1.5) 140 (70) 0 (0) 200 (100)
30 (37.5) 12 (15.0) 14 (17.5) 24 (30) 80 (100)
64 (32.0) 6 (3.0) 4 (2.0) 126 (63) 0 (0) 200 (100)
25 (31.3) 6 (7.5) 15 (18.7) 34 (42.5) 80 (100)
44 (22.0) 1 (0.5) 2 (1.0) 153 (76.5) 0 (0) 200 (100)
19 (23.8) 8 (10.0) 11 (13.7) 42 (52.5) 80 (100)
160 (26.7) 12 (2.0) 9 (1.5) 419 (69.8) 0 (0) 600 (100)
Source: Survey data Values in parentheses denote percentages It is clear from the Table that members avail loan from various sources, but a major portion is from SHG. The habit of availing loan is rarely found among non members. Majority of the non members (41.7%) have no access to loan, while there is no member included under this category. The analysis disclosed that loan accessibility is better in the case of members than non members. As members get hassle free loan from SHG they are more likely to meet their personal requirements by availing loan from the group rather than depending on others.
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Control over Resources Women usually have little control over the use of funds in a male dominated family. Many of their personal requirements remain unfulfilled. The inherent nature of women showing love and affection to family members induces them to sacrifice their personal needs. The condition is somewhat better when women have own income and contribute towards family income. To assess the extent of control over resources, two statements showing economic independence and freedom to use credit are used for collecting the opinion from the respondents. TABLE 1.4 Distribution of Sample Based on Economic Independence North MembersNon Members Response Central MembersNon Members Members South MembersNon Members
9 (1.50) 79 (13.17) 61 (10.17) 290 (48.33) 161 (26.83) 600 (100)
Total Non Members

18 (7.50) 147 (61.25) 0 (0.00) 74 (30.83) 1 (0.42) 240 (100)
Highly Disagree Disagree Neither agree nor disagree Agree Highly agree Total Chi-square:
3 (1.50) 39 (19.50) 21 (10.50) 85 (42.50) 52 (26.00) 200 (100)
7 (8.75) 50 (62.50) 0 (0.00) 23 (28.75) 0 (0.00) 80 (100)
6 (3.00) 23 (11.50) 24 (12.00) 92 (46.00) 55 (27.50) 200 (100)
6 (7.50) 49 (61.25) 0 (0.00) 24 (30.00) 1 (1.25) 80 (100)
0 5 (0.00) (6.25) 17 48 (8.50) (60.00) 16 0 (8.00) (0.00) 113 27 (56.50) (33.75) 54 0 (27.00) (0.00) 200 80 (100) (100)
73.6514 p=.000000
90.5199 p=.000000
111.701 p=.000000
265.059 p=.000000
Source: Survey data Values in parentheses denote percentages Significant difference appears in the opinion of members and non members in the matter of economic independence as the 'p' value (=0.000000) is less than 0.05. It is identified that membership in SHGs helps women in improving the financial status, though it leaves scope for further improvements. In fact members are far ahead in economic independence compared to non members.
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Freedom to Utilise Credit Mere accessibility to credit will not benefit the poor unless authorized with the freedom to use the funds raised by them. During field survey some of the respondents expressed their inability to utilise the funds raised by them. Rather the decision rests with their husbands or other male members of the family. TABLE 1.5 Distribution of Sample Based on Freedom to Use Credit North MembersNon Members Response Central MembersNon Members Members South MembersNon Members Total MembersNon
11 (4.58) 143 (59.58) 0 (0.00) 84 (35.00) 2 (0.83) 240 (100)
Highly Disagree Disagree Neither agree nor disagree Agree Highly agree Total Chi-square:
1 (0.50) 17 (8.50) 23 (11.50) 95 (47.50) 64 (32.00) 200 (100)
4 (5.00) 52 (65.00) 0 (0.00) 24 (30.00) 0 (0.00) 80 (100)
0 (0.00) 9 (4.50) 18 (9.000 106 (53.00) 67 (33.50) 200 (100)
3 (3.75) 47 (58.75) 0 (0.00) 28 (35.00) 2 (2.50) 80 (100)
0 (0.00) 9 (4.50) 11 (5.50) 107 (53.50) 73 (36.50) 200 (100)
4 (5.00) 44 (55.00) 0 (0.00) 32 (40.00) 0 (0.00) 80 (100)
1 (0.17) 35 (5.83) 52 (8.67) 308 (51.33) 204 (34.00) 600 (100)
119.421 P=.000000
124.940 p=.000000
122.687 p=.000000
364.625 p=.000000
Source: Survey data Values in parentheses denote percentages A significant variation exists in the opinion of members and non members as the 'p' value (=0.0000) is less than 0.05. It is identified that if women could bring income for the family, their freedom to spend and the possibility to influence the decision to spend income is slightly better, the study identified. Combined Effect of Variables on Economic Empowerment
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Economic empowerment denotes a position of achieving self reliance, satisfaction and independence in respect of income, savings and credit. Four variables namely, level of income, level of savings, access to credit and control over resources are identified to measure economic empowerment. The combined effect of all the four variables is assessed by calculating the combined mean and standard deviation. TABLE 1.6 Economic Empowerment of Respondents Region North Central South Total Member Mean 19.47 19.95 19.95 19.79 SD 1.93 1.76 2.03 1.92 Non-member Mean SD 15.21 2.07 15.75 2.15 15.79 2.16 15.58 2.14 F 265.83 286.74 231.47 770.94 p 0.0000 0.0000 0.0000 0.0000
Source: Survey data A comparison of the positions of members and non members of SHGs considering the influence of the variables are reflected in Table 6.40. Members achieved a higher position of economic empowerment over non members. They show a better position with a mean value of 19.79 and standard deviation 1.92. The level of significance is measured by using F test. As the 'p' value (=0.0000) is less than 0.05, there appears a significant variation in the level of empowerment achieved by members of SHG compared to non members. Degree of Empowerment An analysis of the variables selected for the study revealed a significant difference in the level of empowerment achieved by the members of SHG compared to non members in the study area. An insight into the empowerment aspects of women points to a need for measuring the degree of empowerment achieved by them. Degree of empowerment acquired by women in terms of economic, political and social empowerment is measured by making use of a grading table wherein perception up to Mean Standard Deviation of the aggregate mean score has been rated as low level of empowerment, score between Mean + Standard Deviation and Mean Standard Deviation has been rated as average level of empowerment and the score above Mean + Standard Deviation as high level of empowerment.
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TABLE 1.7 Degree of Economic Empowerment Category Member Non Member Total Low 1.33 53.33 16.19 Average 78.33 46.67 69.29 High 20.33 0.00 14.52 Total 100.00 100.00 100.00
Pearson Chi-square: 359.917, df=2, p=0.00000 Source: Survey data The analysis reveals that, out of the total members 20.33 per cent achieved a higher level of economic empowerment, while no one acquired high level of economic empowerment under the category of non members. Medium level of empowerment is achieved by 78.33 per cent of members and 46.67 per cent of non members. Respondents lying in the low level of economic empowerment are 1.33 per cent of members and 53.33 per cent of non members. The result of chi square test shows the 'p' value (=0.0000) less than 0.05 exhibiting significant variation in the degree of economic empowerment between members and non members. Members show a better position in the degree of economic empowerment compared to non members. However members showing average level of empowerment should be motivated to aspire for a high degree of empowerment. Considering the situation of non members who lag behind in the level of empowerment, efforts should be put on place to convince them about the need and importance of group work. CONCLUSION Micro finance through Self Help groups appear to be an effective tool in empowering women in the state of Kerala, by inculcating saving habit, maintaining good household relationship, creating self confidence and improving their status in the society. Economic independence is the key for social and cultural upliftment of women. Being rated as an effective intervention to address the problems related to rural women, and poor households, the system has a place in the society. An intervention at the appropriate stage is needed to disseminate the benefits of SHG among all poor women for motivating them to take membership in SHGs and ultimately the beneficiary of group approach.
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REFERENCES 1. 2. 3. 4. 5. 6. 7. Sam Daley-Harris, State of the Micro credit Summit Campaign Report 2004, p.5. State Focus Paper., Kerala, National Bank for Agriculture and Rural Development, 2008-09, p. 235. Singh, U.B. (2007). Empowerment of Women in urban administration, Lalneihzovi (ed) Womens development in India, New Delhi: Mittal Publications, p.137. Srilatha Batliwala, (1993). Empowerment of Women in South Asia, Concepts and Practices, Second draft, pp.7-8. Thorat, Y.S.P. (2005). Micro finance in India, Perspectives and Challenges , Special report, Asia Pacific Rural Finance, p. 33. Tripathy, K.K. (2006). Micro-credit Intervention and Poverty Alleviation , Kurukshetra, V.54, No. 11, p. 6. United Nations Development Programme (2001). Gender in Development programme, Learning and Information Pack, Gender Analysis, pp. 44-45.
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Volunteer Work An Essential Ingredient of All Round Education

Fr. Dr. Joseph P.P.
Principal, BSSS College, Bhopal
Dr. Smitha Pillai

Asst. Professor, BSSS College, Bhopal
EXECUTIVE SUMMARY Higher education institutions (HEIs) and national bodies are increasingly monitoring the satisfaction of their students with their educational experiences as a part of Quality Education. Quantitative satisfaction surveys are often used, where HEI students rate the questionnaire items using Likert scale formats to express their perceived satisfaction. This paper describes the impact of the college social outreach experiences on the subsequent development of attitudes toward volunteering as well as behavioral intention to volunteer and satisfaction with the volunteer experience. Volunteer function inventory (Clary, Snyder and Ridge, 1992) as well as a number of self administered questions was used to measure the behavioral intention of the students to volunteering services and their satisfaction level. Also an effort has been done to measure the effectiveness of volunteer work on all round education. Key Words: Volunteer Work, Volunteer Function Inventory INTRODUCTION The word quality can be described in terms of five different approaches that are used in higher education. These are: Exception (High Standards), Consistency (Zero defects), Meeting the stated purposes, Value for money and Transformation of the participant (the value-added factor).It also refers to the four pillars of education: learning to know, learning to do, learning to live together and with others, and learning to be (Delors, 1996). One of the prime goals of quality education is to build knowledge, life skills, perspectives, attitudes and values of the students to transform the society into a more productive, sustainable one. Quality education attempts to uphold and convey the ideals of a sustainable world. It takes into consideration the social, economic, and environmental contexts of the country and helps shape the curriculum or programme to reflect their respective unique conditions. Quality education therefore must be locally relevant and culturally appropriate. Enhanced quality of education also helps in setting the goals for formulating national planning through practical application of knowledge for solving the everyday problems of life. What is most important to ensure quality education is to set a long term national vision. Such vision provides the philosophy and principles that sets the outline of the plans, objectives and principles of an institution.
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BSSS emphasis Leave a legacy of learning... Education in BSSS is an extremely moving experience. (Opinion survey 2009) It allows you a unique insight into local cultures and the chance to give a profound gift to those less fortunate that can drastically alter their future. We have many projects planning to undertake in the coming years. All the departments are compulsorily taking care of at least one such project. Our mission on the project Teaching and community development not only educates and support vulnerable children but also uplifts the community by providing needed assistance to the underfunded and understaffed education system in the local town of Bhopal. Also we have projects like teaching and HIV/ AIDS Counselors Training, Geriatrics etc. undertaken by the Department of Social Work. Under the same Department we have Project funded by International Funding Agency Global Fund to Fight against HIV/AIDS, Tuberculosis and Malaria GFATM R-7 focusing on HIV/AIDS Counselors in MPSACs & CGSACs. REVIEW OF LITERATURE Volunteering as one of these modes of engagement is supposedly inclusive, integrating, and open to the general public (WHO, 2002). According to the recent empirical literature on factors influencing volunteering, gender and the level of education are one of the most consistent predictors for volunteer engagement (Wilson 2000: 219). Thus, people with higher education are more likely to volunteer, and men are more likely to volunteer than women (Wilson 2000: 219; Tang 2008; Wahrendorf/Siegrist 2008:68; Khnemund/Schupp 2008: 156). In order to disentangle the effect of gender, level of education and other factors like employment status, the marital status or the number of children, the paper aims to investigate the determinants of volunteering. The benefits of volunteering were clear in Gallacher et al.s (2007) study: the learners were observed to develop increased self-confidence and to achieve measurable success in learning outcomes (p. 514). When provided with opportunities to contribute to and engage with society, is advantaged people are able to feel more confident about their ability to reengage with mainstream society and achieve a greater level of social inclusion. So, as we have seen, disaffiliation and social contributions are linked; as one increases the other decreases (Lafuente & Lane, 1995). Howard et al. (2003) reported that in 2002, three hundred teacher education students, placed with over 140 agencies, each completed 80 hours of community work within the outreach program, totaling 24,000 hours of volunteer work. This fact points to the substantial impact that can be made when community engagement is carried out on the foundation of genuine, mutually beneficial partnerships.
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OBJECTIVES This paper attempts to: 1. Looks at volunteer work as an essential component of Social Outreach Programs. 2. Identify the need for one of the major responsibilities of educational institutions - to bring up a student community that is socially sensitive, conscientious and responsible. 3. Highlight the importance of providing opportunities for volunteer work to students. 4. Measure the satisfaction level of the student volunteers. Research Queries The core research questions thus read as follows: Which motivational factor influence volunteering of male and female students from different educational background (Schooling)? How much are the student volunteers satisfied with their present experience of social out reach program? Will these volunteering services contribute to the development of our nation? Can Social Service help to make our dream nation with oneness?
METHODOLOGY Instrumentation The instrument incorporated questions that addressed the ten dimensions which consist of forty four reasons that one might have for volunteering and participants were asked to indicate, on the five point scale, the extent to which they agree or disagree with each reason as it applies to them. For each individual the scores are calculated that correspond to the ten different motivations to volunteer that are assessed by this inventory. The highest score reflects the motivation of greatest importance to the participant while the lowest score reflects the motivation of least concern. Through the scale scores the volunteer in charge can easily identify and rank order what are the most important motivation for that particular volunteer. Analysis of these discussions provided rich descriptions of student interests and concerns towards volunteering. Demographics of participants: Of the 50 participants (Random Sampling) 29 were male and 21 were female. The participants ranged from 18-22 years. While over half of the students had 20 credit hours or more (62%), the
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study involved students from each academic classification (freshmen through seniors). Only a few students (27%) had participated in at least one volunteer activity prior to this project. The participants include students from Commerce, Management, Computers and Bachelor of Arts. Data Analysis Total Va Rn Si Rp Rc Se So Cd Un Pr 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 1238 1234 894 403 632 1113 929 843 1191 900 No of questions answered 5 5 4 2 4 5 5 4 5 5 Average Score 247.6 246.8 223.5 201.5 158 222.6 185.8 210.75 238.2 180
Descriptive Statistics Minimum Maximum Value Recognition Social Interaction Reciprocity Reactivity Self Esteem Social Career Development Understanding Protective 23 24 15 6 10 20 15 14 22 15 25 25 19 10 19 25 24 20 25 24 Mea n 24.76 24.68 17.88 8.06 12.64 22.26 18.58 Std. Deviation Variance .476 .471 .872 .867 1.509 1.139 2.081 .227 .222 .761 .751 2.276 1.298 4.330 1.837 .436 2.571
16.86 1.355 23.82 .661 18.00 1.604
31
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Multiple Correlation Analysis Table reactivity values recognition Social Interaction reciprocity reactivity -.293(*) -.051 -.018 .110 1 self esteem .080 -.108 -.050 -.016 -.028 social .020 .047 -.298(*) -.020 -.023 Protective -.374(**) .081 -.029 -.044 .574(**)
* Correlation is significant at the 0.05 level (2-tailed). ** Correlation is significant at the 0.01 level (2-tailed). RESULTS AND DISCUSSIONS From the statistical analysis it has been found that Values (Va) scored high (1238) with a mean score of 247.6 as compared to other dimensions of motivation. Values describes the situation where a volunteer is motivated by the prospect of being able to act on firmly held beliefs that it is important for one to help others. High scores on this scale suggest that a volunteer is motivated to help others just for the sake of helping. Recognition (Rn) has identified as the second motivator for the students to volunteer their services which describes a situation where a volunteer enjoys the recognition that volunteering gives them. They enjoy their skills and contributions being recognized, and this is what motivates them to volunteer. High scores indicate a strong desire for formal recognition for their work, whereas low scores indicate a lesser level of interest in formal recognition for their volunteering work. A total score of 894 with a mean score 223.5 for the motivational factor social interaction (Si) describes that the volunteers particularly enjoys the social atmosphere of volunteering. They enjoy the opportunity to build social networks and interact with other people. High scores indicate a strong desire to meet new people and make friends through volunteering. It has been found from the total score of Self Esteem (Se) (1113) that they seek to improve their own selfesteem or feelings of self-worth through their volunteering. The high scores indicate that the volunteers are motivated by the prospect of feeling better about themselves through volunteering. The mean score for self esteem stood at 222.6. The result further explains that the volunteers have a strong desire to learn from their volunteering experiences. Also it shows the volunteers interest in improving their understanding
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of themselves, or the people they are assisting and or/ the organization for which they are a volunteer. The total score of understanding (Un) is 1191 with a mean score of 238.2. Career development(Cd) as a motivational dimension showed a total score of 843 with mean score 210.75 which further describes that majority of the volunteers have a strong desire to gain experience valuable for future employment prospects and to make connections. It further describes the situation where they are motivated to volunteer by the prospect of gaining experience and skills in the field that may eventually be beneficial in assisting them to find employment. A mean score of 201.5 for Reciprocity (Rp) describes that the volunteers enjoy volunteering and view it as a very equal exchange. The volunteer has a strong understanding of the higher good. High scores on this scale indicate that the volunteer is motivated by the prospect that their volunteering work will bring about good things later on. Low scores indicate that the prospect of their volunteering work bringing about good things later on is not as important to them. Social (So) Describes a situation where a volunteer seeks to conform to normative influences of significant others (e.g. friends or family). High scores (185.8) on this scale indicate that the volunteer may be volunteering because they have many friends or family members who also volunteer, and they wish to follow suit. Reactivity(Re) scored less(mean score 158 only) which clarifies that our volunteers volunteer not because they need to heal or address their own past issues but with motive of being able to act on firmly held beliefs that it is important for one to help others. Thus there found a little need for the volunteers to address their past issues through volunteering. A low mean score on protective also clearly states that they are not using volunteering as a means to avoid feelings negatively towards themselves. The multiple correlation analysis shows a very significant negative correlation between the motivational dimensions Values and Reactivity (-0.293), Social interaction and Social (0.298) at 5% significance level. The motivational factor values scored very high where as reactivity scored very less stating they do not have any motto of healing their own past issues through volunteering. Instead they volunteer because of the reason that they are motivated by the prospect of being able to act on firmly held beliefs that it is important for one to help others. Values and Protective shows a very significant negative correlation when we consider the score obtained for the volunteers of BSSS ie. -0.374 at 1% significance level where as reactivity and protective shows a moderate significant positive correlation between the two.
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Linear Regression Result Dependent Satisfactio n Method linear R-square .500 d.f 48 F 38.080 Sig F .000 b0 3.005 b1 0.926
(Dependent variable Satisfaction and Independent variable Gender) Simple regression output shows that there is a significant linear relationship between male and females on volunteer satisfaction. The R Square value for the linear equation indicates that gender explains 50% of the satisfaction score. Under Significance of F, the .ooo for linear equation indicates that the trend is statistically significant (p<.001). Levenes test for equality of variances indicates variance for male and female differ significantly from each other (p=0.035<.05). But the independent sample t-test analysis indicates 29 males have a mean score of 24.76 on value option and the 21 females had the same mean score i.e. 24.76. So we can state that mean scores didnt differ significantly at the p<0.05. Coefficient alpha was used to determine the reliability of the instrument (0.76). The reliability coefficients of 0.70 or higher are acceptable for research purpose. CONCLUSION AND IMPLICATIONS This study found that the students of BSSS volunteer because of altruistic or humanitarian motives. In an effort to keep our volunteers satisfied and to increase retention, we are continually trying to find symbolic rewards that increase volunteer commitment and have a favorable impact of performance. Our symbolic reward includes prizes, certificates (mentions the hours contributed for volunteering), appreciation and meetings to encourage. This study found that the young volunteers are motivated by the feature Values, which are prospect of being able to act on firmly held beliefs that it is important for one to help others. They have the vision of dream nation with oneness which is a beautiful sign of success and development of our nation. From the study it is very much evident that even when westernization crept into our culture still we uphold our moral values. Friends, India today have a mission of transforming itself into a developed nation with value system. This is a great challenge. This can be achieved through our youth power. Youth has got the power of ideas, ambition, enthusiasm and ability. This resource of the youth is an important building block for transforming India into a developed nation. Dr. A.P.J Abdul Kalam. If our Higher education can develop, retain and promote this culture the great vision of our former President, Dr A.P.J Abdul Kalam can be fulfilled easily. Higher education must keep
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Service learning and Community Development as an integral part of our course curriculum, allowing students to apply what they learn in class to the real world. Quality parameters must be defined properly and each and every educational institution should be asked to operate accordingly. On the basis of fulfillment of quality parameters (QP) the quality index (QI) should be calculated. QI = No of QP Fulfilled / Total No. of QP Though critics raise issue on compulsory implementation of the volunteer programs in universities, it is necessary to bring a student community who can understand the importance of social harmony and oneness so that we can bring up the same dream nation of our former president Dr. A.P.J. Abdul Kalam. REFERENCES 1. 2. 3. 4. 5. 6. 7. 8. Baum, F., Modra, C., Bush R., Cox, E., Cooke, R., & Potter, R. (1999). Volunteering and social capital: An Adelaide study. Australian Journal on Volunteering, 4, 13-22 Blanchard, A., Rostant, J. & Finn, L. (1995). Involving Curtin in a volunteer community service program: A report on a quality initiatives project. Perth: Curtin University of Chapman Chapman, J.G., & Morley, R. (1999). Collegiate service-learning: volunteerism and satisfaction with volunteer service. Journal of Prevention and Intervention in the Community. 18, 19-33. Cheang, M., & Braun, K. (2001). Senior volunteers as assets: A statewide survey. 11, Hawaii: Center on Aging, Office of Public Health Studies, School of Medicine, University of Hawaii. Clary, E.G., & Snyder, M. (1990). A functional analysis of volunteers motivations. Paper presented at the meeting of the Spring Research Forum, Boston. Clary, E.G., & Snyder, M. (1991). A functional analysis of altruism and prosocial behavior: The case of volunteerism. Review of Personality and Social Psychology, 12, 119-148. Clary, E. G., & Snyder, M. (2000). Why do people volunteer? Understanding volunteer motivations. The Not-for-Profit CEO Monthly Letter, 7, 3 5
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Comparative Analysis of Shareholders Economic Value - with Special Reference to HSBC and Barclays Plc.
Dr. Vivek Khare
Associate Professor, Leeds Met India &
Mr. Vivek Verma

Asst. Professor, Oriental College of Management, Bhopal
EXECUTIVE SUMMARY This paper analyses shareholders economic value creation using two major banks; HSBC and Barclays plc of UK within a five-year period (2003-2007). We use both internal and external information such as auditors annual financial reports, designed control variables, stock market data, etc to analyze business activities and practices of the banks and how they influence shareholders value on the stock market. We applied both the innovative (EVA) and traditional accounting (ROA and ROE) methods to measure their respective performances, regress it against stock market returns and other control values to understand their explanatory power especially to shareholders economic value. Our empirical results were mix: Though both innovative and traditional accounting methods do explain the variations of the stock returns for both HSBC and Barclays, the information content of EVA per equity is superior to the variations of Barclays stock market returns whiles return on asset (ROA) provides more explanation power to variations in the stock market returns for HSBC.At the comparative level both banks are creating values but Barclays provides higher average EVA per equity compare to HSBC. However Barclays operates under higher internal volatility which affects it performances measurements including stock market reactions and returns hence HSBC prove to be superior when shareholders measure them on risk-adjusted level. Key Words : - Share Holders Value, Economic Profit, Risk Adjusted Return on Capital INTRODUCTION Banks play an important role in the economy for two reasons: they provide a major source of financial intermediation and their checkable deposit liabilities represent the bulk of the nations money stock. Evaluating their overall performance and monitoring their financial condition is important to depositors, owners, potential investors, managers and of course, regulators. Presently, financial ratios are often used to measure the overall soundness of a bank and the quality of its management. Bank regulators for example use financial ratios to help evaluate a banks performance. Evaluating the economic performance of banks, however, is a complicated process. Often a number of criteria such as profits, liquidity, asset quality, attitude toward risk, and management strategies must be considered. The changing nature of the banking industry
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has made such evaluations even more difficult, increasing the need for more flexible alternative forms of financial analysis. Statement of the Problem This research work will seek to investigate shareholder value creation by the banking industry. Thus it searches for correlation between EVA which is a measure of shareholders value and stock prices on the financial market. Also various control variables that influence EVA will be evaluated. Last but not the least information content of traditional accounting performance will be investigated in relation to that of EVA. OBJECTIVES OF THE STUDY The study will also seek to find out the following: 1. The understand value creation methods in the banking industry and factors that affects them in the UK. 2. The examine the economic structure of the banking industry in the UK 3. To examine in detail the effect of the values creational activities of the retail banking in its financial performances (historical data, 2003-2007) and the shareholders value in the case of Barclays Plc, and HSBC. SCOPE AND LIMITATIONS Investigating shareholders value creation in general can be studied from different perspectives. When studied from the shareholders perspective, the research is mostly based on the information collected from the shareholders. When it is the stock market perspective, the information used in the study is collected mainly from the stock market. If the study is based on the company perspective then the information used will mainly be collected from the company. Nonetheless each perspective is worthy of investigation. However due to the time limit and the scope of the problem we are obliged to make some limitations. Our study was limited to 2 banks that we believe information on can easily obtained and be used to better answer the research topic. Also those banks in our study are large, listed and a major players of UK market. Thus we believe that the conclusions from this study will provide an estimate on total reflection of shareholders value creation. We also acknowledge mathematical approximation and statistical errors imputed during the course our calculations and simulations. Many factors can affect shareholders value such as the environment surrounding the firm, weaker business climate, political situation, and currency fluctuations. Our study will not focus on those factors though background information partially covers some practices of the industry.
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Banking Industry, the Overview A bank is a generally describes as a financial institution that acts as a payment agent for customers, and borrows and lends money. Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to High Net Worth Individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profitmaking, private enterprises. However, some are owned by government, or are non-profits. Central banks are normally government owned banks, often charged with quasi regulatory responsibilities, e.g. supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as Lender of last resort in event of crisis. Creating Shareholder Value What is Shareholder Value? This is the value of the company (firm) minus the future claims (debt). This value can be calculated as the Net Present Value (NPV) of all future cash flows plus the value of the non operating asset of the company. Thus Shareholder Value = = Corporate Value (firm value) Future Claims (Debt) (NPV of all future free cash flows + value of non operating assets) Future Claims (Debt)
What is Value Creation? According to Copeland et al (2000) value is created in the real market by earning a return on the investment greater than the opportunity cost of capital. Thus the more you invest at a return above the cost of capital the more value you create. This implies that growth creates more value as long as the return on the capital exceeds the cost of capital. They go on to mention that one should select the strategies that maximize the present value of expected cash flows or economic profits. The returns that shareholders earn depend primarily on changes in the expectations more than actual performance of the company. Dalborg (1999) pointed out that value is created when the returns to shareholder, in dividend and share-price increases, exceed the risk adjusted rate of return required in the stock market (the cost of equity). He said that the total shareholder return must be higher than the cost of equity to truly create value. Hogan et al (1999) state that in a competitive environment,
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shareholders value is created when a company invests in projects that earn a return in excess of the cost of capital. Facts about Shareholder Value Creation Shareholder value creation is seen as vital in many organizations. Before stating describing different ways to create shareholder value, it is important to first capture the following ideas about shareholder value creation. Knight (1997) said that higher profitability does not guarantee value creation for shareholders in a company. That is because creating value for shareholder operates under three rules, which are the slippery slope of value creation: the first rule is that the level of profitability has nothing to do with value creation. When it comes to creating value for shareholders, companies that are very profitable have no advantage over companies that are less profitable. Second rule, all management teams start on a level playing field for creating value. Last rule is that different companies face different challenges in creating value. Companies are handicapped based on the results to date. Clarke (2000) added that what it is important is that a company adhering to shareholder value principles concentrates on cash flow rather than profits. Concerning creating shareholder value in the future, it is becoming increasingly more difficult to create value in the future since investors will realize no matter how good is getting in creating value and they will price the stock accordingly. By increasing the stock price, investors are giving managers credits for performance to date, but they are also increasing the degree of difficulty in creating future value. What have you done for me lately? is what the shareholders are asking. Companies face challenges in creating shareholder value such as increased complexity, greater uncertainty and risk, time compression, conflicting priorities. Managers are being required to make the complex simple, to reduce uncertainty and risk, to speed decisions making and to balance conflicting priorities. Companies have been trying to face these considerable challenges through different ways such as capturing the business strategy in performance measures, paying management for value creating performance and focusing managers on the business strategy (Knight, 1998). Shareholder value analysis (SVA) The shareholder value analysis (SVA) approach was developed by Alfred Rappaport in the 1980s. It can be used to estimate the value of the shareholders stake in a company or business unit, and can also be used as the basis for formulating and evaluating strategic decisions. The value of the operations of a business is determined by discounting expected future operating free cash flows at an appropriate cost of capital. In order to find shareholder value, the value of marketable securities and other investments must be added to, and the value of debt must be subtracted from, the business valuation. Free cash flow reflects the cash flow from the operations of a business for a period i.e. before taking into account any financing-related cash flows, such as those relating to share or debt issues, dividend and interest payments, etc.
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Economic Profit (EP) Economic profit describes the surplus earned by a business in a period after the deduction of all expenses, including the cost of using investors capital in the business. It is the difference between the return on capital and the cost of capital and can be calculated in two ways, as shown below: EP = Invested capital x (return on capital WACC) EP = Operating profits after tax less capital charge Performance and Efficiency Measures in Banking Industry The ultimate goal and mission of a firm is to create value for its shareholders. These value creation objectives can be measured in two ways: the economic performance which describes or measures the internal value creation through increasing business economic profitability and finding profitable growth opportunity through strategic allocating of resource for a competitive advantage. The other way of measuring value creation performance is evaluating the market performance of the firms stock. This external method of shareholders return is the difference between the market value at the beginning of the shareholders period to the end also known as the capital gain plus the dividends paid out during this time horizon in question. Two important innovative performance metric has been considered to have informative content that shareholders and management can apply to analyze how firm the shareholders value maximize; The Risk-Adjusted Return on Capital (RAROC) and the Economic-Added- Value (EVA). The use of economic profit metrics ensure that management consider banking business lines cost of equity in their decision making process and allocate equity capital profitably and in direction of shareholders interest whilst their managerial incentive are also monitored based on shareholders wealth maximization. A banking firm will earn economic profit if the bank total earning exceeds the opportunity cost of equity employed. Considering the accounting or traditional method of measuring performance a firm will be profitable in its business yet economically unprofitable because its profit can not cover the cost of capital employed in that business period. In a firm where management interest is not in line with the shareholders interest (agency cost) then managers will maximize the profitability of the firm instead of maximization of shareholders value. In Ralph C. Kimball (1998) literature, he explains that management investing additional cost of equity capital if there is positive marginal contribution to earnings. On the other hand management who focus on maximizing shareholders value will use additional unit of equity capital employed only until it generate marginal contribution which is equal to the opportunity cost of equity and the average return on equity capital is equal or exceed the
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opportunity cost of the capital employed. EVA application is also dominating by securities analysts compare with the use of the dividend discount approach which models firm value by considering the fact that firm is for ongoing wealth creation rather than just for wealth distribution (Herzberg, 1998, p. 45). Firms which focus on only the traditional accounting method of evaluating business or investment by selecting the highest return on equity (ROE) might under-invest and grow slowly, however shareholders value is maximized in banks can concentrate on maximizing the difference between the ROE and the opportunity cost of equity capital hence generate growth base on economics profitability. Mathematically, EVA is expressed as: EVA= adjusted Earning- C*K Capital Allocation and Banking Performance Allocation of capital means assigning a notional amount of capital to each business unit, requiring that they remunerate this capital adequately so as to meet the expectation of shareholders. They also advance that the capital allocation provide a strong foundation for effective system of measuring risk-adjusted performance to enable the firm determine which business unit are creating shareholders wealth and which units are using scarce resourcing inefficiently. There are two important critical factors in capital allocating processing: the level of risk of the business line and the scale of the operation. The capital allocation method (internal beta, standalone risk, marginal capital, etc) applies to the business lines will also have effect on the EVA reported on each business unit, the measure of the precise economics contribution and the incremental risk (volatility of economic earnings) of the bank. However due to the discrepancy between the actual capital of the banking firm and the sum of the market-bases capital allocation it is difficult to evaluate the management of the business line. Stock Market Value and Banking Operation Performance Due to the inefficiency of the market structure it is very important to measure the stock market performance of a firm and its correlation with the firm operational performances. A financial market is describe as efficient if all publicly available information is fully reflected in the stock prices so that there are no abnormal profits. Two types of the financial market efficiency have been established as the allocation efficiency and the operational efficiency. The allocation (which are weak, semi strong and strong) efficiency describes that the securities prices are such that they equalize the risk-adjusted rates of return across all securities. This implies that securities with the same level of risk will offer the same expected return. Again all market participant benefit under the allocation efficiency since there is an optimal allocation of savings for productive investment.
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METHODOLOGY
Calculation of Economic-Value-Added (Eva) for Banks Value creation of shareholders using the Economic Value Added (EVA) method expresses the surplus value created by a company within a given period. This can also be explained as the firms profit net of the cost of all capital. The EVA is computed as a companys net operating profit after taxes (NOPAT) minus the of equity capital employed by the company. The cost of equity capital employed is the product of the expected return of shareholders fund and the equity capital of the bank (as reported on the balance sheet). The EVA is express as: EVA = Net Operating Profit After Taxes (% Cost of Equity Capital x Equity) A negative EVA value expresses that the company is not adding value but rather they are diminishing shareholders value whilst positive EVA signal creation of value as they added extra value to shareholders initial investment. Calculation of NOPAT The calculation of NOPAT (Net Operating Profit After-Tax) should reflect the economics realities of the bank at the period of EVA evaluation. The use of traditional accounting principles (GAAP) distort the true profit of the firm and therefore need to be modified to obtain estimate economic profit. To obtain appropriate NOPAT reflecting the economic realities of a given period, various studies has establish more than 160 accounting adjustment on GAAP financial data. On realities all these adjustment can not be made on a single company. Calculation of cost of Equity Shareholders in invest their fund today expecting a return in the future. This return is the cost of equity they are expecting from the company. In monetary terms the cost of equity capital employed is the product of the %cost of equity and the shareholders capital used. This can be expressed as: Kt = R*Ct-1 Where Kt, is the cost of equity capital employed in monetary terms R, is the % cost of equity or the expected return on equity
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Ct-1, is the total equity capital employed at the beginning of the year. ROE: Return on equity (ROE) for each banking firm is calculated as a ratio of net income to end-year-period equity and earning. ROE is an alternative measure of profitability used by banks to understand how management business activities have utilized shareholders equity as scarce resources available to them. Risk adjusted ROE is calculated as the ratio of average ROE to the volatility (annual standard deviation) of ROE will explain the ROE obtain per each risk taken to use shareholders fund. Calculation of Stock Market Performance Measurement To have a comparative data with the information content obtained from the EVA and the traditional it is important that we calculate the following stock market performance measures: RS: This denotes the stock market return which includes the respective annual dividend paid and the capital gain/loss. The % stock market return is calculated as: RS= (D + g)/PO Where D and g are the annual dividend paid and capital gain respectively and PO is the initial stock price. The capital gain/loss, g is obtained by using monthly stock prices of each bank to calculate monthly gain/loss and then sum all the 12 months gain/loss to obtain the annual gain/loss as follows: Rs= [(Pt+1-Pt)/Pt] *100 RA= Rs/N 2= (Ri, s - RA) 2/ N RARi, s =RA/ Where Pt is the price of stock at the beginning of the week and Pt+1 is the stock price at the end of the week. In the UK the financial year ends in 31st December. Practically investors will only take informed decision after they have critically analyzed (both quantitatively and qualitatively) the financial report published by the company. Analysis of Barclays plc Modern bank focus on two important areas to generate revenue: provision of loans to customers for interest rate charged and providing other services such as exchange rate, money transfer etc for commission and fees and other non-interest income. Over the five-year period (2003-2007) under discussion Barclays show some signs of decreasing their revenue from interest income as a percentage of total equity at the end of each period. A record of 40.09% in 2003 to 29.591% in
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2007, though there was a rise to 40.76 folds for 100 folds of equity recorded at end of 2004. However revenue generated from commission, fees and other no interest income seems to continuing gaining momentum. This can be explained from measuring efficiency of banking as percentage of non- interest income to the sum of interest and non-interest income and also from the ratio of non-interest income to interest income. In 2007 Barclays recorded great performance of generating net non- interest income (NIN) of 80.21units for every 100 units of interest income (IN) recorded compared to 64.55, 70.65 and 78.50 in 2002, 2005 and 2006 respectively whiles the efficiency (EFF) measures 39.23, 41.50, 41.40, 43.98 and 44.51% from 2003-2007 respectively. This efficiency was however supported by management struggling to stabilize its operating expense as a percentage of shareholders equity from 44.0% in 2003 to 40.64% in 2007 though it emerge both upward and downward trend between 2003 and 2006. On the basis of this data Barclays seems to continuing charting economies of scope and product diversification and possibly trying to practice cost leadership as is gradually moving away from traditional loan services as mostly the major way of banks revenue generation to more fees and non-income revenue collection as it continues reducing it cost of operating. With respect to it capital base, Barclays shows a downward trend on its equity fraction in total assets from the period under discussion. On the profitability indices for Barclays both the ROA and ROE continues to experience unstabilized upward trend of ROE. The bank recorded 17.02% in 2007 after generating all highest of 20.05% in 2006 compare to 17.48, 19.86 and 18.65% in 2003, 2004 and 2005 respectively whiles ROA generated within the period was around 0.65, 0.67, 0.53, 0.54 and 0.46% from 2003 and 2007 respectively. On average the bank produced ROE of 18.61% with 95% statistical assurance that this average is between 17.42 and 19.89%. However since investors are concern with the risk involve in using their fund, Barclays has been measured to provide shareholders an average of 13.65 units of ROE for a unit of risk taken within this 5year period. Since ROA and ROA do not provide any clear information on how shareholders value is maximized it is very important to find an alternative performance metrics. Kimball, (1998) said a firm that uses a performance metric based on ROE will tend to underinvest and grow more slowly than it should. He explains further that a business unit whos ROE are in excess of riskadjusted hurdle rate tends to maximized shareholders return. This implies that maximizing EVA mean investing in project until the last project provide ROE equals to the opportunity cost of capital employed. Again we applied the performance metric on Barclays and its respective annual EVA measured. We experienced a consistent increase of EVA value across the period. This indicates that Barclays is added value to shareholders fund in across the period. However we measured the value created to each shareholders equity capital used and obtained a downward trend (except 2003 which obtained the highest of 25.09%) in percentage though there exit value creation.
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EVA per equity capital of 21.14, 21.49, 25.09, 18.73 and 17.79% were recorded from 2003 to 2005 respectively. On average Barclays generated 20.45% of EVA per equity capital, dispersed between 17.87% and 23.82% statistically significant at 0.05. Finding the risk-EVA per equity capital trade-off for investors we obtained risk adjusted EVA per equity capital of approximately 7.33. This implies that on average every unit of equity capital received by Barclays form shareholders, 7.33 units of economic value is created for taking a unit of risk annually. Analysis Of HSBC The bank efficiency measured continuous to increase progressive from 2003 to 2007 recording 20.87, 29.67, 31.57, 33.26 and 36.79% respectively. Again the bank ratio of non interest income to interest income also prove to be increasing from throughout the five-year period recording 40.61, 42.20, 46.135, 49.82 and 58.21% respectively whiles net interest income to equity capital also decreases continuously throughout the period from 35.37% in 2003 to 31.90, 30.0, and 27.91% in 2005, 2006 and 2007 respectively. These increases indicate HSBC effort of generating more revenue from fees and commission thus diversifying its revenue base whiles reducing it major dependant on interest-based revenue such as loans etc. On the performance indicator the banks ROE and ROA seems to wave within a short wavelength of 14.75 to17.23% with a mean of 15.77% for ROE and between 1.15 and 0.95% with mean of 1.042% for ROA. The ROE adjusted for its risk is also recorded as 17.77%. We calculated the economic value created by the bank to understand how shareholders fund has been used and experienced that the bank seems to maintain a stabilized value creation per equity from 2005 to 2007 (19.75%,19.08%, and 19.30% respectively) whiles there was a decline from 19.28% to 13.97% between 2003 and 2004. This performance provides annual EVA per equity (EVA/E) mean of 18.30% with 95% confident assurance that this mean will fall between 15.74% and 20.81%. This implies that shareholders of HSBC have to absorb 1unit of risk to obtain 7.548 units of value created (EVA) for every unit (1) of equity capital given to the bank. It is very important that we investigate whether these effort by the banks provide their owners any extra gains on the stock market. This implies that there is a need to analyzed the market performance and check whether shareholders reaction on the market also reflect their companies activities and effort to generate economic profit and growth for their fund. The stock market performance for HSBC experienced it all time low of annual average return of 1.32% in 2007 compare to 2.52% and 10.12% in 2006 and 2004 respectively within the period under discussion. It recorded about 20.00% and 25.14% in 2005 and 2003 respectively. However totals market risk continues to increase to 18.30% in 2007 though there was a decline in market risk to 12.96 % in 2004 compare to 16.04% in 2003. This behavior of HSBC market volatility compounded with its continuous level of association with the market portfolio (FTSE100) seems to increase both the systematic (market) and unsystematic (specific) risk
46
especially from 2003 to 2007. However the specific risk explains in level of internal diversification. On average HSBC stock was able to generate annual return of 11.83% for its shareholders within the five year period under investigation. On the basis on shareholders riskreturn trade-off, the market generated on average of 83.19% returns for every risk that shareholders take. In totality HSBC outperformed on average both the government bond in excess of 49.15% and the marker portfolio, FTSE100 excess of 42.83% for a given risk (RAR) taken by shareholders. Comparative Analysis Both the Barclays plc and HSBC have their parent banks in UK and with their respective subsidiaries spread globally. The two banks continue to dominate in UK high streets with intense competition. Our empirical result shows that both banks continue to decrease their operating expenses and increasing their non interest income indicating their ability to take cost advantage and diversification or product mix to increase revenue base for profit maximization and shareholders value creation. However HSBC seems to dominate in cost leadership practices relative to Barclays as it is measured as a ratio of operating expense to total shareholders equity (OEXP/TSE), thus we recorded 26.43, 27.92, 30.05, 26.88 and 28.83% for HSBC compared with Barclays with 44.03, 50.92, 43.09, 46.27, and 40.64% from 2003 to 2007 respectively. On the other hand Barclays seems to provide evidence of generating more net income from both non interest income for every interest income they generate (NIN/IN) and more interest income to equity capital (IN/TSE) relative to HSBC. Due to high volatility of Barclays income generation relative to HSBC, their risk adjusted interest and non interest income is dominated by that of HSBC (check Value-Creation2). This high volatility continues to embed in their performances relative to HSBC which seems to have control on their revenue base activities resulting to some extend a smooth or slight wavy income across the period. Considering both the accounting (ROE) and innovative (EVA) performance measurements Barclays provided average values of 18.61 and 20.80% respectively which outperformed HSBC with average values 15.77% for ROE and 18.30% EVA/E. Contrary to these performance average values above, the risk-adjusted ROE and EVA per equity give 13.65 and 7.33units for every unit of risk taken by Barclays respectively. HSBC again outperformed Barclays by providing adjusted ROE of 17.30units and EVA/E of 7.55 units for every unit of risk taken by HSBC. On the stock market, shareholders seem to recognize each banks volatility of their business operations and reward accordingly as the price movement for Barclays provide higher deviation compare to HSBC. On average the volatility of both companies were increasing throughout the five-year period. Barclays produce an annual average return of 7.28% with volatility of 25.56% compare to HSBC with annual average return of 11.83% with volatility of 14.22%. This provides an annual average risk-adjusted return of 83.19% for HSBC and 28.50% for Barclays.
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The low level of specific risk for HSBC relative to Barclays clearly establishes how HSBC is internally diversified compare to Barclay. It would not be surprised to establish that the correlation between the average annual market returns of the two banks is 0.754 as they are very competitive industrial rivals, hence 56.86% of Barclays returns variation is explain by HSBC. The performance measurements (ROA, ROE and EVA/E) of both banks show some evidence of correlation with the stock market value creation. However the economic added value (EVA) has superior relationship with the market returns (stock market value creation) whiles HSBC association with the stock market return is dominated by its ROA. CONCLUSION The aim of this paper is to investigate shareholders economic value creation in two UK established international banks; the HBSC Group and Barclays plc and make comparative analysis. Our method of investigation is focus on applying both the traditional accounting method and the innovation (Economic Value Added (EVA)) to establish the one which provide superior explanation to the value created for the shareholders on the stock market. We also design control variables and decompose the EVA into its independent variable to understand how they influence performance of the banks and hence their value creation activities. We chose five-year (2003- 2007) data from each bank including their financial statements and stock market prices movement data for this empirical study. Our results suggest that the EVA per equity provide a superior information content of the stock market returns of Barclays relative to all the performance indicators applied. Upon decomposing the EVA to its independent variable we experienced at all independent variable have do explain the information content of EVA for Barclays but the capital charged(C-C) have the highest explanatory content. On the other hand HSBC shareholder value created on the stock market could be explain very well by the their ROA compare to other performance metrics applied whiles EVA variations could be well explained by provision for losses. Our analysis establish that on average Barclays seems to perform better on their business and value creation activities when measured simply without considering the level of volatility in their chosen value creation activities. Interestingly shareholders do measure the two companies based on their risk-return trade-off. This affect shareholders reaction on the stock market and hence HSBC performed superior in shareholders value creation on the stock market compare to Barclays. Our final conclusion is that management should to examine more closely which components of performance metrics contribute to, or subtract from information content of shareholders value creation (Biddles et al., 1997) and more importantly, research should be undertaken in this area to establish clearly the method of performance measurements that undoubtedly have superior information content to shareholders economic value creation.
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REFERENCES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Andrea Resti and Andrea Sironi (1997), Risk Management and shareholders value in banking: From Risk Measurement Models to Capital Allocation Policies. Annual reports Bain, JS (1951) Relation of profit rate to industry concentration: American manufacturing, 1936-1940, Quarterly Journal of Economics. Barclays Banks Annual Reports, 2003 - 2007 Berger, A N and Hannan, TH (1989) The price-concentration relationship in banking, Review of Economics and Statistics, 71, 291-9. Biddle G., Seow G. (1991), The estimation and determinants of association between returns and earnings: evidence from cross-industry comparisons, Journal of Accounting, Auditing and Finance, 6, 183-232 Business Performance, New York, USA: The Free Press A Division of Simon and Schuster I NC. Clarke, Peter (2000) Shareholder value, Dublin. Ireland: Accountancy European Banking: efficiency, Technology and Growth: by John a. Goddard, Philip Molyneux, and John O.s. Wilson, 2001. Forestieri G. (2000), Corporate & Investment Banking, EGEA, Milano. HSBC Group Annual Reports, 2003 - 2007 Knight James A. (1998) value based management developing a systematic approach to creating shareholder value, New York, USA: Mc Graw-Hill companies. Mahmood Hussian Shah et al, (2007) A Survey of Critical Success Factors in eBanking: an organizational perspective. Riahi-Belkaeoui, A., 1993, The Information Content of Value Added, Earnings, and Cash Flow: US Evidence, The International Journal of Accounting, 28, 1: 140-146. Riahi-Belkaeoui, A., 1993, The Information Content of Value Added, Earnings, and Cash Flow: US Evidence, The International Journal of Accounting, 28, 1: 140-146. Stern, J.M., Stewart, G.B., & Chew, D.H., 1995, The EVA Financial Management System, Journal of Applied Corporate Finance, 8, 2: 32-46.
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Financial Sector Reforms in India: An Overview

Prof. Sunita Anand
Asst. Professor, BSSS College, Bhopal
INTRODUCTION The scenario of financial sector in Indian Economy revolves around the Reserve Bank of India, having the entire responsibility to protect it and promote it. The banking system in India is developed and organized and therefore has become a solid vehicle to meet challenges of economic development. India's banking system remains healthy, well-capitalized, resilient and profitable. Besides, there is non-banking sector which provides long-term, medium term and short term finance to industrial sector. Interestingly the unorganized sector provides the business, credit at higher rate of interest. It survives due to its informality i.e. odd working hours, high interest rates, high risk and no tangible security. The reforms have not been in a position to curb the unorganized financial sector. OBJECTIVES 1. 2. 3. 4. 5. To find out core issues for next generation financial reforms. To know the various risk factors in the present financial environment. To assess the benefit of innovation. To find financial disturbances on the whole. To analyze the credit flow of scheduled commercial banks.
METHODOLOGY The facts & figures of the credit flow have been obtained from the various publications of Reserve Bank of India. For comparison of the credit flow, two financial years, namely 2008-09 & 2009-10 are compared by making use of tables, graphs, ranks, percentages.
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The Core Issues for next generation financial reforms1. Inclusive growth or broad-based decentralized growth in real sector.
The unorganized sector holds the key to broad-based decentralized growth. The recent report on the sector spells out that micro-enterprises with an investment below Rs. 0.5 million constitute 94% of small enterprises of the country. They provide industrial production. Some 40% of exports are contributed by this sector. Despite occupying this central position these enterprises receive only 2% of net bank credit. If more credit is injected into this sector, it may lead to higher production promote up gradation of technology, improvement of market efficiency. This is evident from the following chart which shows the deployment of gross bank credit to major sectors. Table - 1 Amount in Rupees (crores) Variation Sector Feb 27, 2009 Feb 26, 2010 Agriculture and allied industries 21.2% 24.4% Industry Personal loans Services Priority sector others
1
28.1% 6.6% 18.7% 18.9% 6.5% 100%
20.1% 4.7% 15% 22.2% 13.6% 100%
27-F eb-09
30 20 10 0
Source- Central Statistical Organization
ic u In lt.. d Pe u . rs str on y Se al.. Pr rv . io i c ri e s ty . O .. th er s
27-Feb-09
gr
51
2 6 -F eb-1 0
40 20
ul In tu. Pe du . rs str on y al Se ... Pr rv io i c e ri ty s S. O .. th er s
26-Feb-10
The above data are provisional and relate to select banks. Data also include the effects of merger of Bharat Overseas Bank with Indian Overseas Bank. American express Bank with Standard chartered Bank and State Bank of Sourashtra with State Bank of India. The Industry mentioned above includes following. Table - 2 Subdivision of Industry Credit Types of Industry Feb 27, 2009 Food processing 14% Textiles 12.5% Paper and paper product 21% Petroleum, Coal, nuclear fuels 64.7% Chemicals and Chemical products 22.4% Rubber, Plastic & their Products 21.3% Iron and Steel 34.5% Other metals & metal products 25.6% Engineering 28% Vehicles, parts and transport equipments 24.6% Gems and Jewellery 10.6% Construction 52.1% Infrastructure 34.4% Average of industry credit (shown in table-1) 28.1%
2
gr
ic
Feb 26, 2010 12.3% 12.7% 12.9% -9.8% 18.6% 22.9% 23.9% 13.7 27.1% 16.2% 10.6% 38.1% 52.3% 20.1%
The above data figures only 2% of credit obtained by small enterprises.

2
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At present there is no decentralized growth in real sector. The following figures of gross domestic product by subsectors of real sector show their contribution in 2008-09 and 2009-10 Gross Domestic Product by sub sector. Gross Domestic Product by Sub sectors of Real Sector Table - 3 Sector 2008-09 Agriculture and allied services Mining and quarrying Manufacturing Electricity, gas & water supply Construction Trade, hotels, transport and communication Financing, insurance, real estate Community, social and personal services
3
2009-10 -0.2% 8.7% 8.9% 8.2% 6.5% 8.3% 9.9% 8.2%
1.6% 1.6% 3.2% 3.9% 5.9% 7.6% 10.1% 13.9%
2008 -09
15 10 5 0
ic
1.6
ul ...
1.6
...
3.2
3.9
t..
5.9
7.6
10.1
13.9
.. nc in C om
ci
st ru
uf
in g
e,
tr i
M an
ad
El
2008-09
Fi na
ec
on
gr
in
Tr
u. ..
...
...
...
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There is a decline in the GDP by agriculture & allied services, financing & insurance, community social & personal services. These sectors not only need finance but also technical up gradation.
2.
The second core issue is the institutional infrastructure of finance, micro finance can play an important role in the inclusive growth.
It is a sort of supplementary credit delivery system which is cost effective and user friendly. This is through cooperative credit through regional rural banks and self help groups. The main aim of financial sector reforms should be to capture 40% of adult population of our country with low income group who do not have collateral security to receive financial assistance. Though agriculture is central to India's economic development, future agricultural growth needs to be water-centric. The water shed development, rain water harvesting, rain water conservation, renovation of traditional water bodies, development of canals and promotion of drip and sprinkler irrigation system needs top priority. The finance should be routed to reach the rural borrowers either directly or indirectly through self help groups, micro finance institutions, NGO's, farmers clubs, panchayats.
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Apart from this there is another heterogeneous bunch of projects for rural development such as animal husbandry, horticulture, fisheries, development of wastelands and forests, soil conservation drainage, and flood control, compost preparation, food processing, storage and marketing. The banks and other rural lending institution must have a more diversified credit policy to support above projects. This means new banking culture having appropriate procedures and practices, project identification, appraisal and monitoring. Thus building a pyramid of rural lending institution with multichannel credit delivery is the next generation financial reform.
3.
The third core issue is the inequitable interest rate structure
The financial sector and banking sector reforms of 1990's resulted in inequitable interest rate structure. Small borrowers paid 12% interest rate while highly rated corporate borrowed at 6% from bank. This was somewhat modified by the government by providing interest rate subvention. The farmers got short-term crop loan since 2008-09 up to Rs. 3 lacs at 7% interest. On the other hand the banks reduced the deposit rates and interest rates on savings during last few years. This eventually resulted in shrinking overall savings. In India, investment as a % of GDP increased from 25% in 2002-03 to 38% in 2007-08. Out of this 13% increase, 10% points were financed through higher household, public sector and corporate savings. Despite the global financial mess, India had emerged as a high saving economy. If banks try to reduce the interest rates there will be an adverse effect on savings.
Risk Factors in present financial environment- Banks face multifarious risks from internal and external factors. 1. 2. 3. 4. 5. 6. 7. 8. Credit Risk - The possibility that counterparty might default Interest rate risk - It represents a potential reduction in earnings and capital erosion resulting from adverse movements in market rates of interest. Liquidity risk - It is possible to have liquidity with higher rebates Operational risk - A loss due to human error, fraud or lack of internal control. Settlement Risk - The market and credit risk due to settlement period. Legal risk - Associated with legal status of a contract. Risk due to differences in systems - A firm as a market segment may have a different system than other market segments. Maturity mismatch - This occurs when assets and liabilities are priced on the same basis but mismatched in time.
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Benefits of innovation - There is greater freedom in capital market now. Derivatives, securitization, options and other new products and services in financial sector are the new innovations. The developments of these have given following benefits to the commercial banks. 1. 2. 3. 4. 5. 6. Profit earnings Operational freedom Improvement in the capacity of financial markets to manage risk. Better risk management leads to the improved allocation of resources particularly capital Derivatives facilitate investment, they increase asset substitutability, both domestically and internationally Derivatives improve liquidity in individual markets and try to diffuse disturbances
The Financial Disturbances

Over the years improvements have taken place in Indian financial landscape but there are some macro-economic disturbances. These disturbances adversely affect the responses of capital markets. 1. The fiscal and monetary policies if unstable or unsustainable result in unstable exchange rates. Therefore continuous evolution of these policies is needed. 2. If price are set based on recent trends, instead of economic forces, the financial markets get destabilize. Therefore prices should be set by economy forces. 3. There is a weakness in payment and settlement system. There is a need to have a speedy recovery and strong legal environment to support this. Analysis of Bank Credit to Major Sectors Based on the figures as per table - 1 which displays the variation in deployment of bank credit (Feb 27-2009 = Period one, Feb 26-2010 = Period two) The ranks are as followsRanking Table-1 Sectors Agriculture industries Industry personal loans Services Priority sector others Period 1 allied 2 1 5 4 3 6 Period 2 1 3 6 4 2 5
and
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Though the graph shows that agriculture is ranked 1st during period -2 (i.e. Feb 26-2010) and priority sector is ranked 2nd during this period, the total amount of bank credit mismatches with the Gross Domestic Product contribution by agriculture during the same period, which is -0.2%.
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CONCLUSION The above shows that there is lack of enough financial assistance to the agriculture and allied industries from the organized sector. The financial sector reforms need to advance towards better control over unorganized sector. it should have new instruments to mobilize and channelize finance in rural sector in order to bring competitiveness as per International standards. REFERENCE Reference are from Reserve Bank Journals and from the books Policy changes through Budgets and Financial sector Reforms, Great challenges and Task ahead authored by Prof. Sunita Anand (Edition - 2010 Published by Himalaya Publication, Mumbai).
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Financial Performance Appraisal of Service Sector - A Case Study of IDBI Bank Ltd.
Dr. Santosh Gupta
Prof., Institute for Excellence in Higher Education, Bhopal
Mr. Amit Kr Nag

Asst. Prof., BSSS College
Mr. Binoy Arickal

Asst. Prof., BSSS College
EXECUTIVE SUMMARY Financial performance appraisal refers to an assessment of the viability, stability and profitability of a business or project. It is performed by professionals who prepare reports using ratios that make use of information taken from financial statements and other reports. These reports are usually presented to top management as one of their bases in making business decisions; financial appraisals differ from economic appraisals in the scope of their investigation, the range of impacts analyzed and the methodology used. A financial appraisal essentially views investment decisions from the perspective of the organization undertaking the investment. It therefore measures only the direct effects on the cash flow of the organization of an investment, decision. By contrast, an economic appraisal considers not only the impact of a project on the organization sponsoring the project, but also considers the external benefits and costs of the project for other government agencies, private sector enterprises and individualsregardless of whether or not such impacts are matched by monetary payments. Financial appraisals also differ from economic appraisals in that: market prices and valuations are used in. assessing benefits and costs, instead of measures such as willingness to pay and opportunity cost; the discount rate used represents the weighted average cost of debt and equity capital, rather than the estimated social opportunity cost of capital; and The discount rate and the cash flows to which it is applied are usually specified on a nominal basis as the cost of debt and cost of equity are observed only in nominal terms. Key Words : Financial Performance, Liquidity, Capital Adequacy Ratio
INTRODUCTION
Financial performance appraisal refers to an assessment of the viability, stability and profitability of a business or project. A financial appraisal essentially views investment decisions from the perspective of the organization undertaking the investment. It therefore measures only the direct effects on the cash flow of the organization of an investment, decision. Financial appraisals also differ from economic appraisals in that: market prices and valuations
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are used in. assessing benefits and costs, instead of measures such as willingness to pay and opportunity cost. IDBI Bank has witnessed a steady but modest growth in business volumes during the last few years. This has been deliberate keeping in mind the changed agenda, which is being pursued at the bank and focus on achieving qualitative shift towards better quality portfolio. The Bank has implemented a host of initiatives during the year under review. It recognizes that leadership position will be built by people, processes and technology. It has brought in the best of management talent from foreign and private sector banks across various functionalities. It has significantly increased investments in revamping the technology platform. It has moved up the Credit Risk Profile and tightened Credit and Risk Management Processes. The focus in future will increasingly be on attaining a dominate position in retail banking and to consolidate, with some repositioning, the strengths already built in corporate banking. The emphasis will be on lowering the cost of deposits, improving fee based income, improving operations efficiency and managing cost. It has been a phase where the thrust has been on rebuilding the organization with right foundations. Highlights of the Financial Performance of IDBI Bank Some of the important highlights of the financial performance of the Bank during the last few years are as follows: The Banks net total customer risk assets, including bonds and other credit substitutes, increased by 13% from Rs. 2.772 crores to Rs. 3,136 crores during the year ended March 31, 2009. Capital Adequacy Ratio (CAR) as on 31-3-2009 stood at 11.72%, well above the regulatory requirement of 9%. The Bank showed a marginal growth of 3.5% in total deposits at Rs. 3,567 crores, as it consciously brought down level of expensive bulk deposits. Its low cost deposits as percentage of total deposits increased from 17% to 23% during the year. The total net income of the Bank increased by 17% to Rs. 171 crores on the basis of steady growth in customer risk assets and significant rise of 26% in other incomes from Rs. 55.1 crores to Rs. 69.6 crores. The net profit for the year at Rs. 19.4 crores, however, has been affected by sharp increase of Rs. 39.9 crores (63%) in operating expenses due to investments in building blocks and aggressive provisioning loan losses.
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The Directors of the Bank recommended a dividend of 7% for the year ended March 31, 2009 (previous year 12%). Dividend will be paid to those shareholders whose names appear on the register of Member of the Bank as on specified date. Financial Highlights of IDBI Bank Ltd (Rs. In crores) PARTICULARS Total Income Total Expenses Share Capital Reserves & Surplus Deposits Advances Total Assets Investments Dividend EPS (Rs.) Book Value (Rs.) Capital Adequacy Branches (Nos.) Employees (Nos.) 2004-05 49.93 41.29 100.00 4.62 505.25 495.42 790.32 195.81 0.37 10.46 17.90 7 181 2005-06 166.88 138.15 100.00 24.67 1845.53 843.05 2201.53 847.64 2.01 12.47 9.82 17 331 2006-07 323.89 285.15 140.00 77.22 2751.28 1.74.44 3419.22 1617.06 9% 2.20 15.52 11.26 26 419 2007-08 478.92 395.28 140.00 119.56 3448.17 1604.64 4516.08 2123.92 12% 4.36 18.54 11.80 39 547 2008-09 608.67 540.06 140.00 128.12 3567.50 1724.99 4918.66 2524.60 7% 1.38 19.15 11.72 53 773
Brief History and Business of the Bank As part of financial sector reforms in January 1993, RBI enabled setting up of New Private Banks and granted Licenses selectively for establishing such banks. The Industrial Development Bank of India (IDBI), a leading financial institution of the country, made an application and obtained approval for setting up a new private sector bank in terms of the guidelines announced by RBI. The strategy and business plan of IDBI Bank was made in consultation with M/S KPMG Peat Marwick, world-renowned consultants. The bank was incorporated on September 15, 1994 and received its certificate of commencement of business on December 2, 1994. The bank was grated a in principle by RBI to carry on banking business in India vide its letter no. BP 1793/21. 01.063-94 dated February 11, 1994. Subsequently, IDBI Bank has been granted license No. BL(BPL)2801/dated 28 th September 1995 by RBI to carry on banking business in India, pursuant to section 22(1) of the Banking Regulation Act, 1949 vide its letter No. DBOD (BPL) 286/22.03.056/95-96 dated 28 th September, 1995.
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The Bank was included in the Second Schedule to the RBI Act 1934 as a Schedule Commercial Bank vide GOI Gazette Notification dated 2 nd January 1996. As on March 31, 2009 the bank had a total deposits of Rs. 3567.50 crore and advances of Rs. 1724.99 crore. It earned a net profit of Rs. 19.36 crore during the financial year 2008-09. The bank has a network of 53 branches. 7 more branches are proposed to be opened during the year 2009-10 in various parts of the country. Since inception, operations of the bank have witnessed a sustained growth pattern. The Bank has maintained an uninterrupted track record of profitability since inception. With focus on excellence of service, professional competence, state of the art technology, utilization of the groups synergy and backing of its financially strong promoters, the bank is poised to become a front-rank banking force in India. During the period 2004-05 to 2008-09, the banks financial results reveal a significant growth pattern as detailed below: Net Profit has increased from Rs. 3.67 crores to Rs. 19.36 crores. Book Value per share has increased from Rs. 10.46 to Rs. 19.15 per equity share. EPS has gone up from Rs 0.37 to Rs 1.38.
OBJECTIVES The basic objectives of the research under study are as follows : 1. 2. 3. 4. 5. 6. 7. 8. To study the overall financial position of the Bank. To know about the HRD policy adopted by the bank. To understand the overall performance of the Bank through financial ratio analysis. To measure the liquidity position and factors responsible for causing liquidity/unliquidity in the bank. To find out the profitability position of the bank of the given level of investment and turnover. To analyze the adequacy of the capital, based on the level of activity by the bank. To identify the financial strengths and weaknesses of the bank so as to suggest improvements for the future. To create a vibrant financial services bank that delivers superior performance and value to its shareholders.
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HYPOTHESIS: In order to achieve that objectives, the following hypothesis are framed for testing : 1. 2. 3. 4. 5. The liquidity position of the Bank is very sound. The earning potential of the bank is strong. Banks total Capital Adequacy Ratio(CAR) stands healthy. The financial information found out by financial indicators is very helpful. The financial indicators are helpful in improving the financial performance of the bank and they are very effective in indicating the financial performance of the bank.
RESEARCH METHODOLOGY
To achieve the required objectives, information is collected through primary data like observation, direct interview, personnel interview, group discussion & secondary data like budget, statistical report, annual report, financial statement, balance sheet, profit & loss account and their schedules. All the information, which is collected through annual report and interview to the employees of the concern, is relevant to the objectives so that the objectives can be easily fulfilled. The information thus obtained was analyzed, interpreted and tabulated. RESEARCH DESIGN: Research Design is a catalogue of the various phases and facts relating to the formulation of a research effort. It is the arrangement of conditions for the collection and analyses of data in a manner that aims to bring relevance to the research purpose with economy in procedure. Thus, a research design is the specification of methods and procedures for acquiring the information needed. The topic of my research work is The Financial Performance of IDBI Bank Ltd. In our research work, we have taken the help of various financial indicators to measure the banks performance for the last five years. For purpose, figures are taken from the banks annual report which contains Annual Balance Sheet, Profit & Loss Account and Cash Flow Statement. The collected data has been processed by constructing tables, with the required information for the calculation of ratios. In order to avoid computational errors the data was processed through electronic data processing. This has helped to contain manual errors. It has also been carefully examined to avoid personal bias while interpreting the ratios.
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LIMITATIONS: Limitations are always a part of any kind of research work, As the report is mainly based on secondary data, proper care must be taken in knowing the limitations of the required study. Moreover, the financial performance of the Bank is shown just for the last five years, ending 2009. Hence, any uneven trend before or beyond the set period will be the limitations of the study. As the report is produced within a short period of time, much more could not be devoted to analyze the final points. Though proper care has been taken to avoid personal bias, there is a possibility of bias due to the continuous involvement of the researcher in the study. Thus, we have tried to collect data, analyze it & interpret it to the best of our knowledge and ability. FINDINGS IDBI Bank has witnessed a steady but modest growth in business volumes during the past few years. The Bank has implemented a host of initiatives during this period. It recognizes that people, processes and technology will build leadership position. It has brought in best of management talent from foreign and private sector banks across various functionalities. It has significantly increased investments in revamping the technology platform. It has moved the credit risk profile and tightened credit and risk management processes. The bank of focusing on attaining a dominant position in retail banking and to consolidate, with some repositioning, the strengths already built in corporate banking. The emphasis will be on lowering the cost of deposits, improving fee-based income, improving operations efficiency and managing cost. Viewed in the backdrop of the macro economic outlook and general outlook for banks, IDBI Bank has made commendable progress during the last few years, consistently turning out performances, which are far superior to the overall Banking industry performance parameters. Capital Adequacy of the Bank: IDBI Bank has maintained a comfortable Capital Adequacy Ratio since inception, the CAR of the Bank (including Tier I and Tier II Capital) which stood at 17.9% as on March 31, 2005 reached 9.82% as on March 31, 2006 consequent to increased leading operations during this period. After this period, this ratio kept on increasing and stood at 11.72% as on March 31, 2009, which was well above the regulatory requirement of 9%. The impact of raising a further Rs. 25 crores as Tier II capital during the year was offset by growth in risk weighted assets.
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Profitability Position: The Total Net Income of the Bank increased by 17% from Rs. 146 crores in the year 2000 Rs. 171 crores in 2009. This figure was just Rs. 30 crores in the year 2005. The Net Profit as on March 31, 2009 was just Rs. 19.4 crores as compared to Rs. 61 crores as on March 31, 2008. This has been impacted by sharp increase of Rs. 40 crores (63%) in operating Expenses due to investments in building blocks and by aggressive loan loss provisioning. Despite this, the Bank is making fill effort in increasing its profitability position day by day. Thus, it can be concluded that the earning position of the IDBI Bank is strong. Liquidity Position: The Liquid Assets of the Bank as on March 31, 2009 stood at Rs. 1,122.62 crores as compared to last years figure, which was Rs. 924.5 crores. This shows that there is an increase of 21.4% in this respect. The Bank has been maintaining its Statutory Liquidity Ratio (SLR) well above the regulatory requ7irement of 25% each year. This was 28.7% in the year 2006 and has moved up to 34.41% in the year 2009. On the other hand, the Bank is maintaining proper balances with the RBI as its reserves. The Cash Reserve Ratio of the Bank was 8.14% in the year 2009. This ratio was 14.09% as on March 31, 2005 and after that it has been decreasing further every year. But the Bank has maintained this ratio far above the minimum requirement of 3% of the NDTL each year. The balances kept with RBI by the Bank amounted to Rs. 265.5 crores in the year 2009, which was Rs. 189.3 crores in the year 2006. This shows that the Bank is having a very sound liquidity position. Non-Performing Assets: The Bank has made fill provisioning for NPAs as per the prudential norms of Reserve Bank of India including in respect of NPAs with outstanding of less than Rs. 25,000 per borrower. As at 31st March 2006, NPAs were just 0.32% highlighting the prudent lending practices that it has successfully followed. The Bank has always maintained this ratio below the maximum level of 5%. Retail Banking: The retail Depository Participant (DP) business continued to grow with more than 69,000 customers registered as on March 31, 2009. The Bank has taken various steps to focus on building retail assets. It was introduced new retail loan products such as housing loans, car loans educational loans and loans against housing, which are available across all branches of the Bank. As on March 31, 2009, The total retail loan portfolio was Rs. 148 crores as against Rs. 102 crores as on March 31, 2000, i.e. a growth of 44%. During the year 2009, the Bank has implemented a well defined extension strategy to substantially increase its customer touch points in selected geographic areas. The numbers of Branches have increased from 7 spread over 4 cities to 53 covering 39 cities, i.e. from 2005 to 2009. The Bank consciously adopted footprints in non-metro cities to establish market share leadership in such cities, on a pan-India basis. The ATM network has also beefed up, with the number of ATMs increasing from 47 to 77 as on March 31, 2009. The number of retail accounts grew from approximate 1.61 lakhs to 2.7 lakhs during the year 2009. Moreover, it would facilitate greater focus on delivering truly superior level of service to the customers.
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Corporate Banking: Wholesale banking remains the predominant business for the Bank. It continues to provide a range of products and services to Corporate and Institutional customers. The strategy for the business this year has been to complement existing focus on small and medium (SME) segment with foray into the large corporate as well. The overall growth in the customer risk assets have been modest, reflecting the Banks strategy of pruning high risk exposure and focusing in higher quality customer assets. The Banks net total customer risk assets, including bonds and other credit substitutes, increased by 13% from Rs. 2,772 crores to Rs. 3,3136 crore during the year 2008-09. The Bank has instituted stringent credit review mechanisms to assess and proactively manage portfolio credit risk. Deposits of the Bank: The Bank showed a marginal growth of 3.5% in Total Deposits to Rs. 3,567 crores in the year 2009, as it consciously brought down level of expensive bulk deposits. In the year 2005, the deposits of the Bank were just Rs. 505 crores. After that, there has been a tremendous increase in the deposits held by the Bank. Its low cost deposits increased from 17% to 23% during the year 2009. Saving deposits in particular registered an impressive growth of 89% from Rs. 173 crores to Rs. 237 crores, driven by new value added products and service initiatives. Advances of the Bank: The Bank showed a marginal growth of 7.5% in Total Advances to Rs. 1.725 crores in the year 2009. Advances made to Priority Sector during this period were 378 crores which showed an increase of 11.3%. The Bank is making all efforts to step up its coverage to this sector without diluting its risk acceptance criteria. The total advances made by the Bank in the year 2005 were just Rs. 495 crores, which shows that there is a tremendous increase in the advances made by the Bank during the last five years. The objective of the Bank is to focus on strategic portfolio management to retain a balanced and well distributed lending base without undue concentration on any single industry segment. Technology: Major investments are being made by the Bank to revamp the entire technology platform, which will allow it to build competitive advantage and grow its business substantially in the near future. It is in the process of migrating to new state-of-the-art core operating system and introducing many new business applications, including for cash management, trade finance, retail lending, tele-banking, internet banking, etc., to support its new products and services, achieve operational efficiency by cutting cost and reducing risk, and build capability for effective MIS. The Bank has incurred on expenditure of Rs. 12 Lakhs towards comprehensive Y2K certification of its hardware and software. Dividend Policy: The Directors of the Bank recommended a dividend of 7% for the year ended March 31, 2009. Earlier, This percentage was 12% and 9%, i.e. in the year 2009 and 2008. Dividend is paid to those shareholders whose names appear on the Register of Member of the Bank as on the prescribed date. To align the interest of employees of the Bank with that of the shareholders, as also to attract and retain top talent, the shareholders, at the Annual General Meeting held on 29th May, 2009, approved the issuance of 1.4 crore equity options to employees
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and directors of the Bank, convertible into Equity Shares of the aggregate nominal face value of Rs. 14 crores. Human Resources: During the year, 2009, the Bank took various Human Resource initiatives to enhance the quality of human capital. In line with new business strategy, the Bank has undergone through a major restructuring of the organizations. It has moved away from branch structure and restructured itself along functional lines with separate dedicated tams focusing on product development and on managing relationships and sales distribution. The staff in the Bank has increased from 181 in March 2005 to 773 as of March 2009, mainly to support growth in the distribution network, launch of new products and services and other business growth. SUGGESTIONS AND CONCLUSION The following suggestions are offered after analyzing various facts and figures and subsequent findings: A key to success will be strategy on branch expansion. The aim of the Bank should be to shift its strategic focus away from the metros to the urban locations. This will be rewarded with greater market share at the cost of PSU banks. Expansion of ATM network alone has not met with success. A branch plus ATM strategy has worked best so far. So the Bank should make the efforts in this regard. Those banks who over provide will inspire higher investor confidence and will reap the benefits in their capital raising forays. IDBI Bank should also adopt this policy. During the year 2009, there was a decline in the amount of advances made to priority sector. The Bank is required to make all efforts to step up its coverage to this sector without diluting its risk acceptance criteria. The Bank is required to derive a high component of income through value addition and superior service, particularly non fund based products and services and other fee-based income. The challenges facing the Bank are massive but not insurmountable. Every challenge can be looked at as giving an opportunity. To overcome these challenges the Bank will need to took into the following mentioned points. 1. 2. 3. 4. 5. 6. 7. Specialize and effectively address needs of well-defined target segments. Adopt aggressive marketing strategies. Develop excellent risk assessment capabilities. Control the level of Non Performing Assets. Critically monitor operating expenses. Device and exploit new sources of funds. Maximize earnings from Priority Sector through a well-defined strategy.
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8. 9. 10.
Tap traditional sources in most cost efficient manner. Have access to expertise, recruit talented people and address staff concerns to minimize attrition. Have ability to measure and manage risk.
After analyzing and interpreting the data and the different ratios calculated it is clear that the Bank has maintained a comfortable capital adequacy ratio, which is far above the regulatory requirement of 9%. The impact of raising a further Rs. 25 crores as Tier II capital during the year was offset by growth in risk weighted assets on the other side. Hence, the hypothesis Banks total CAR stands healthy holds good. The Bank has registered an excellent record of growth with Total income increasing by 17% on the back of steady growth in customer risk assets and significant rise of 26% in Other income in the year 2008-09. The Net Profit for the year at Rs. 19.4 crores however has been impacted by sharp increase of 63% in operating expenses. Hence, the hypothesis Earning Potential of the Bank is strong also holds good. The Bank has been maintaining its Statutory Liquidity Ratio (SLR) well above the regulatory requirement of 25% each year. This ratio was 28.7% in the year 2006 and has moved up to 34.41% in the year 2009. On the other hand, the Bank is maintaining proper balances with the RBI as its cash reserves. The Cash Reserve Ratio of the Bank was 8.14% in the year 2009. The Bank has maintained this ratio far above the minimum requirement of 3% of the NDTL each year. This shows that the Bank is having a very sound liquidity position. The Bank has one of the lowest NPA levels in the industry. So far the Bank has maintained this ratio at the lowest possible level (i.e. below the maximum level of 5%). This highlights the prudent lending practice followed by the Bank. Advances made to Priority Sector during this period were 378 crores which showed an increase of 11.3%. The Bank is making all efforts to step up its coverage to this sector without diluting its risk acceptance criteria. The Bank has implemented a host of initiatives during the year under review. It recognizes that leadership position will be built by people, processes and technology. It has brought in the best of management talent from foreign and private sector banks across various functionalities. IDBI Bank is a progressive, technology driven, professionally managed entity well geared to meet competition from existing as well as new banks effectively. BIBLIOGRAPHY
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1. 2. 3 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22.
Agarwal, N.P.: Analysis of financial Statement, New Delhi: National publishing House,1981 Amey Lieyed, R and Egginton, Doz A: Management Accounting A Conceptual Approach, Long man Group Ltd., 1985. Anthony, Robert, N: Management Accounting Text and Cases, Homewood: Illinois: Richard; D Irwin Inc., 1984. Benjamin, Graham and Mc Glovick, Charles: The Interpret axiom of Financial Statement: New York: Harperd Row 1974. Balty J.: Management Accounting: London: Mc Donald and Evans Ltd.1975. Duck, R.E.W and Jervis, F.R.J: Management Accounting: London George G.Harvop and Company Ltd. 1994. Gupta, R.L. & Radhaswami: Advanced Accountancy, Vol I: New Delhi: Sultan Chand &Sons 1985. Gupta S.P: Statistical Method: New Delhi: Sultan Chand & Sons, 1994. Guthmann, H.G: Analysis of Financial Statement: New Delhi: Prentice hall of India Private Ltd.,1986. Grewal. T.S, Grewal .G.S and Grewal .H.S: Analysis of Financial Statement: New Delhi: Sultan Chand & Sons.1999. Pandey I.M.: Financial Management: New Delhi: Vikas Publishing House Pvt. Ltd..1983. Prasanna , Chandra : Financial Management Theory and practice: New Delhi: Tata Hill Publishing Co.1994. Ralneam, C: Diary Development (Demand and Supply Aspect): Allahabad: Chag Publication.1986. Roger Leory Miller: Economics Today: Harper and Row 1989. Sharma .R.K and Gupta S.K.: Management Accounting Principles and Practice: Ludhiana: Kalyani Publishers, 2003. Shrinivasan: Management Accounting: New Delhi Sterling Publication Pvt. Ltd., 1986. Tracy. A. John: Fundamental of Management Accounting: New York: Santa Barbara, John Wiley & Sons.1986. Kothari C.R, research methodology methods & techniques, Vishwa Prakashan Delhi 1990. Jack P.J, Handbook of training Evaluating & measurement methods, K.Page Houstan, Tenas 1990 Mamoria C.B, Personnel Management Himalaya Publishing House, Bombay, 1993. Taylor, B. and G. Lippitt, Management development and training hand book, Mc Graw Hill London, 1983 Virmani B.R. and P. Seth, Evaluating Management training and development, Vision Books, New Delhi 1986. COMMON-SIZE BALANCE SHEET
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CAPITAL & LIABILTIES Capital Reserves & Surplus Employees stock options (Grants) O/S Deposits Borrowings Other Li8abilities & provisions Total Liabilities : ASSETS Fixed Assets Investments Cash & Balances RBI Balances with Banks and money at call & short notice Advances Other Assets Total Assets
31st March 2005 12.55 0.59 63.93 19.67 3.16 100.00 31st March 2005 2.49 24.77 4.48 3.03
31st March 2006 4.55 1.12 83.83 7.30 3.20 100.00 31st March 2006 2.88 38.50 15.13 3.41
31st March 2007 4.09 2.26 80.46 10.52 2.67 100.00 31St March 2007 2.25 47.29 7.47 9.35
31st March 2008 3.10 2.65 76.35 12.76 5.14 100.00 31st March 2008 2.25 47.29 8.75 4.18
31st March 2009 2.85 2.60 00.00007 72.53 15.92993 6.09 100.00 31st March 2009 2.35 51.33 5.42 2.53
62.69 2.54 100
38.29 1.79 100
31.42 2.22 100
35.53 2.42 100
35.07 3.30 100
FINANCIAL INDICATORS OF IDBI BANK LTD.

31st March 2005 31st March 2006 31st March 2007 31st March 2008 31st March 2009
Ratios Based On Norms Capital Adequacy Ratio Non Performing Assets Priority Sector Advances Statutory Liquidity Ratio Cash Reserve Ratio Credit Deposit Ratio
17.90% 1% 4.3% 3.5%
9.82% 0.32% 21% 28.70% 14.09% 16.08%
11.26% 1.28% 24% 26.91% 10.82% 14.16%
11.80% 1.95% 21.20% 32.15% 9.25% 23.50%
11.72% 5.24% 21.9% 34.41% 8.14% 7.22%
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Profitability Ratios Return on Assets Return on Net Worth Yield on Advances Yield on Investments Yield on Balances with RBI Cost pf Deposits Earning per share
0.46% 3.5% 5.80% 5.90% 10.14%
0.91% 16.08% 10.50% 6.80% 0.50%
0.90% 14.16% 12.50% 8.90% 6.70%
1.35% 23.50% 10.80% 11.10% 3.70%
0.39% 7.22% 12% 12.50% 5.50%
3.2% 0.37 Lakhs Net Profit per Employee 2.02Lakhs Net Employee per Branch 52.4Lakhs Gross Profit per 4.8 Lakhs Employee Gr5oss Profit per Branch 124 Lakhs
4.4 % 7.2% 7.9% 11.2% 2.01 Lakhs 2.20 Lakhs 4.36 Lakhs 1.4 Lakhs 6.06 Lakhs 7.4 Lakhs 11.2 Lakhs 2.5 Lakhs 118 Lakhs 118 Lakhs 156 Lakhs 36.5 Lakhs 8.68 Lakhs 9.2 Lakhs 15.3 Lakhs 8.9 Lakhs 168 Lakhs 148 Lakhs 215 Lakhs 130 Lakhs
Key Ratios based on AWF Interest Income/AWF 14.93% 12.06% 11.45% 11.25% Interest Expenses/AWF 6.68% 8.45% 8.96% 8.83% Interest Spread/AWF 8.25% 3.61% 2.49% 2.42% Non Interest 2.05% 1.43% 1.12% 1.46% Income/AWF Operating 7.37% 2.71% 1.95% 1.66% Expenses/AWF Net Profit/AWF 1.25% 1.62% 1.19% 1.62% Gross Profit/AWF 2.93% 2.32% 1.49% 2.22% Source : Compiled from Annual Reports of IDBI Bank Ltd.
10.89% 8.84% 2.05% 1.41% 2.07% 0.39% 1.39%
Talent Management: Individual - Teamwork Arrangements as the Major Drivers of Enrichment

*Ms. Geetu Chaudhary, Asst. Professor, BSSS, Bhopal Dr. Shalini. S Associate Professor
Unitedworld School of Business, Ahmedabad, Gujarat
EXECUTIVE SUMMARY
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Economic recession, a downturn phase of business cycle has undoubtedly been a topic of debate ever since its first witness in U.S. The respond, resilience and revival strategies have been and are being pondered upon in the form of mental constructs and empirical researches to it in all the functional areas of management of the organizations. The recession has forced organizations to take a close look at the workforce, identifying the real talent and developing the talent as leaders. The team-based learning and development at work becomes a focal point with the rising chances for the employees to go for Job hopping and a challenge for the employers to retain them on the way. Thus, this component of talent management has been taken as the main research objective. An online survey done, with the responses getting measured on the basis of 5-point Likert scale ranging from 1 ( strongly disagree) to 5 (strongly Agree), along with the Statistical calculations to Analysis Individual- Team work arrangements as the major drivers of enrichment and its association with job satisfaction and low turnover intentions. Key Words: Talent Management, Instrumental Path, Affective Path. INTRODUCTION Economic recession, a downturn phase of business cycle has undoubtedly been a topic of debate ever since its first witness in U.S. and then spreading to other parts of the world, impacting the economies of the world though not in the same magnitude. The multi-dimensional aspects of the repercussions have been realized with the same perspective but differing in approach. Human eye has widened its focus, seeking for lessons to be learnt and opportunities to be searched for during the timely wait for picking up of the sagging economies and gathering of momentum. The respond, resilience and revival strategies have been and are being pondered upon in the form of mental constructs and empirical researches to it in all functional areas of management of the organizations. The recession has forced organizations to take a close look at the workforce, identifying the real talent and developing the talent as leaders. A recession is the right time to wisely invest in the development of talent, both in terms of skill sets and in the form of future leaders. The focus has to be on how much the organizations are investing in their employees and what skill sets they will need to grow their businesses in the future. Developing talent creates a particular set of strategic and organizational challenges. Talent management itself is defined as the process of managing the development and deployment of employees from recruitment to retirement. It has evolved into a crucial strategic initiative. Global organizations are meeting the demands of todays economy by taking a more sophisticated approach to their talent management programs, says a report released by Ernst & Young.
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The economies have begun to pick up and if we take our country, the GDP forecasts are been reported at an optimistic level of 8.5% per annum, Thus, for an organization the team-based learning and development at work becomes a focal point with the rising chances for the employees to go for Job hopping and a challenge for the employers to retain them on the way. This component of talent management aroused an interest to study it by taking an analytical study of Individual- Team work arrangements as the major drivers of enrichment as a research objective dealt in Sections. REVIEW OF LITERATURE Individual- Team enrichment can be defined as the extent to which experience in one role improves the quality of learning and development in the other role. Experiences in one role can produce positive experiences and outcomes in the other role. It represents a transfer of positive experiences from one role to the other role. Marks (1977) have argued that participation in some roles creates energy that can be used to enhance experiences in other roles. Sieber (1974) has proposed that resources acquired in one role as a by-product of social relationships (e.g., recommendations to third parties, connections, inside tips) may be reinvested in other roles. Also, as individuals accumulate a variety of roles, their personalities may be enhanced as they learn to be tolerant of discrepant views and flexible in adjusting to the demands of diverse role senders; they may then benefit from their expanded personalities in all roles (Sieber, 1974). A study by Bellevue Universitys Human Capital Lab found that collaboration at Boys Town is in direct contrast with the work of other nonprofit organizations where stovepipes or silos are created due to the departmentalization of organizational knowledge. Although these segments develop specialized knowledge in service-specific departments, its done at the expense of holistically understanding the overall organizational processes and services. Motivation to share tacit knowledge is seen at Boys Town because its employees gain personal satisfaction in knowing that knowledge sharing helps Boys Town achieve its mission of helping children and families. Encouraging people to explore other ways of doing things even if it means learning from mistakes creates a culture supportive of knowledge-sharing methods. OBJECTIVES 1. 2. To examine the theoretical value of Individual-Team work arrangements, through two paths to enrichment: an instrumental path and an affective path. To measure the benefits of the team work arrangements and its association with job satisfaction and low turnover intentions.
HYPOTHESIS
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1. Involvement in team work helps the employees understand different viewpoints. 2. Involvement in team work puts employees in a good mood. 3. Involvement in team work helps employee to feel personally fulfilled. METHODOLOGY An online survey conducted to get the response of the respondents with a use of the measure of 5-point Likert-type scale ranging from 1 (strongly disagree) to 5 (strongly Agree). Statistical tools like Arithmetic Mean, Standard Deviations and t- test has been used.
SECTION - I
It examines the theoretical value of Individual-Team work arrangements, through two paths to enrichment: an instrumental path and an affective path. The theoretical study of individual-team work enrichment focuses on cross-role relationships and gains. Experiences in Role A (Individual or Team work) can improve the quality of life in Role B (Individual or Team work) through high performance and positive affect. The resources generated in Role A can promote high performance and positive affect in Role B, moderated by the salience of Role B, the perceived relevance of the resource to Role B. A resource is an asset that may be drawn on when needed to solve a problem or cope with a challenging situation. The generation of resources is a crucial driver of the enrichment process (Friedman & Greenhaus, 2000; Greenhaus & Parasuraman, 1999; Grzywacz, 2002), and it is likely that role characteristics and personal characteristics determine the extent to which role participation produces resources. The acquisition of one resource can trigger the acquisition of other resources due to interdependencies through instrumental path, because the application of a resource has a direct instrumental effect on performance in another role. Second, a resource generated in Role A can promote positive affect within Role A, which, in turn, produces high performance and positive affect in Role B. Because this process operates through positive this mechanism is referred to as the affective path (Hanson et al., 2003). The Instrumental Path to Individual- Team work Enrichment In this path, different types of resources are directly transferred from Role A to Role B, improving performance in the latter role. The literature suggests that skills and perspectives are
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transferred from one role to another (Crouter, 1984b; Kanter, 1977; Piotrkowski, Rapoport, & Rapoport, 1987; Repetti, 1987), either directly or mediated by general knowledge structures (Edwards & Rothbard, 2000). The Affective Path to Individual- Team Work Enrichment When individuals receive extensive resources from a role, their positive affect in that role is increased, which, in turn, facilitates their functioning in the other role. The affective path to enrichment can be taken from two aspects: (1) the effect of resources on positive affect in a role and (2) the effect of positive affect in a role on functioning in the other role. There are two ways in which resources generated in Role A can produce positive affect in Role A. First, some of the resources in the model can have direct effects on positive affect in Role A. For example, psychological resources such as self-esteem, optimism, hope, and hardiness derived from a role can trigger a positive mood, positive emotions, or satisfaction with that role (Isen & Baron, 1991). Additionally, the accumulation of social resources at work is associated with positive feelings about ones career (Seibert, Kraimer, & Liden, 2001), as is the degree of flexibility and support in the workplace (Friedman & Greenhaus, 2000). Financial rewards from work are related to positive feelings about ones career (Judge, Cable, Boudreau, & Bretz), 1995. Expectancy theory (Vroom, 1964) can help explain the likelihood that an individual will transfer skills and perspectives, social-capital resources, and material resources across roles. According to expectancy theory, an individual is most likely to engage in a behavior when the potential outcome of the behavior is highly valued and when engaging in the behavior is thought to lead to the attainment of the outcome. In the instrumental path, the behavior in question is the application of a resource to Role B, and the outcome is high performance in Role B. high performance in Role B is most valued when the role is highly salient to the individual. According to social identity theory, social roles form the basis of a persons sense of self or identity (Burke, 1991; Frone, Russell, & Cooper, 1995; Tajfel & Turner, 1986). Individuals who participate in different social roles have a variety of social identities that provide meaning and purpose in life. However, social identities are often organized in a hierarchy of salience or subjective importance such that some roles are more central than others in ones self-concept (Thoits, 1991). Achieving high performance in a highly salient role is more likely to enhance well-being than achieving high performance in a less salient role, because salient role identities provide greater meaning and purpose (Thoits, 1991). The more salient a role is to an individual, the more time and emotion the individual invests in the role (Burke & Reitzes, 1991; Lobel, 1991; Lobel & St. Clair, 1992; Stryker & Serpe, 1994). Therefore, individuals intentionally apply resources to a salient role because they place a high value on performing well in a role
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that is central to their self-concept. Conversely, individuals make less deliberate effort to apply resources to a role that is not a significant source of self-identity.
SECTION-II
The section deals with the measurement of the benefits of the team work arrangements and its association with job satisfaction and low turnover intentions. The hypothesis was laid down and inferential statistics revealed the significance of the Individual Teamwork arrangements. An online survey was conducted by taking a sample of 100 participants of which 65 responded, so a final sample of 65 working adults (42men, 23 women) irrespective of the organization was taken. The mean age of Participants was 35.39 years. The arithmetic mean score was 33.45 with a standard deviation of 1.02. FINDINGS 1. 2. 3. 4. 5. 6. 60 participants reported to enriching experience of working in a team by picking up technical and managerial skills in the group learning. 59 reported to have learnt in terms of adaptation to varying behaviours. 62 reported learning different ways to work handling in their organization. 65 reported to emotional bonding and empathy learning in the team. Involvement in team work helps the employees understand different viewpoints stood statistically significant at 5% level of significance with the calculated t- value of 3.42. Involvement in team work puts employees in a good mood and helps them to feel personally fulfilled also stood statistically significant at 5 % level of significance with the calculated t-value of 3.21 and 3.30.
DISCUSSION AND CONCLUSION 1. Individual team work facilitates information exchange, knowledge sharing and knowledge development through continuous interaction through established trust relationships, values and expectations. 2. The positive emotions of optimism and hope nurtured in a team promote effective performance of an individual by increasing persistence and resilience in the face of failure and challenge.
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3. Self-esteem, self-efficacy, and self-confidence enhanced performance in another role as it stimulated motivation, effort, persistence, and goal setting. 4. The perceived relevance of a particular skill or perspective is likely to be stronger when there is more scope for learning of cognitive and interpersonal skills, coping skills, multitasking skills, and knowledge and wisdom derived from role experiences between individual and team role identities. 5. The handling of situations, such as respecting individual difference, valuing differences in cultural background, being understanding of other peoples problems, and learning the value of trust; Individual and Team work experiences complement each other. 6. Participation and personal relationships foster motivation of knowledge workers because it raises their perceived self-determination and establish psychological contracts based on emotional loyalties, such as trust, fairness, keeping promises and meeting obligations. 7. The value of improving intellectual and emotional management skills over time enabling them to handle things or task at home also. The 21st century has redefined the way of looking, assessing and measuring of the employees. The Human Resource Accounting lays down the practice of evaluating the worthfulness of investing in human resource requirement of the organizations based on putting the human resource both on assets and liabilities side, going by it and with emerging challenges of the current era marked by mega trends of Demographic changes; globalization and cultural differences ;and the rise of knowledge workers, Talent acquisition, development and retention have become a top priorities for all organizations. Global organizations must understand the needs and motivations of their people in order to provide opportunities that not only appeal to different generations and cultures, but help the company retain the necessary skills and competencies it will need to emerge stronger down the road. Employees want opportunities to develop and contribute. The route to mutual benefit lies in paying attention to the things that will engage and retain people and in turn, reflect mutual values. BIBLIOGRAPHY 1. 2. 3. Greenhaus, Jeffrey H & Powell, Gary N., 2006. When Work and family are Allies: A theory of Work-Family Enrichment. Academy of Management Review. Vol. 31. No. 1, 7292. Semb, David. 2009. The Upcoming Crisis in talent management. Chief Learning Officer. October. Pg No 54-57. Sophisticated talent management programs drive business results . CMA Management. August/September 2010.
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Performance of Micro, Small and Medium Enterprises of India

Mr. Vivek Verma, Mr. Siddharth Agnihotri and Mr. Vipin Kumar Singh
Assistant Professors Oriental College of Management, Bhopal
EXECUTIVE SUMMARY This paper attempts a critical review of the performance and policy concerning the micro, small and medium enterprises (MSMEs) in globalizing India since the early 1990s whence economic reforms were formally introduced. With an explicit accent upon participating in the global market sphere, the government policies have reoriented focus towards enhancing exports, competitiveness and efforts to be part of global value chains or global production networks. Key Words: Micro Small and Medium Enterprises (MSME), Returns to Scale, Source of Technology, Globalization. INTRODUCTION The organization of the Development Commissioner (Micro Small and Medium Enterprises) [(earlier called Development Commissioner (Small Scale Industries)] was established as Small Industries Development Organization (SIDO) in 1954 on the basis of the recommendations of the Ford Foundation. Over the years, it has seen its role evolve into an agency for advocacy, hand holding and facilitation for the small industries sector. With the enactment of the MSMED Act 2006, the organization has been renamed as Micro, Small and Medium EnterprisesDevelopment Organization (MSME-DO) with the wider mandate of promotion and development of MSME sector. It has over 60 offices and 21 autonomous bodies under its management.1 The micro, small and medium enterprises (MSME) sector contributes significantly to the manufacturing output, employment and exports of the country. It is estimated that in terms of value, the sector accounts for about 45 per cent of the manufacturing output and 40 per cent of the total exports of the country. The sector is estimated to employ about 59 million persons in over 26 million units throughout the country. Further, this sector has consistently registered a higher growth rate than the rest of the industrial sector. There are over 6000 products ranging from traditional to high-tech items, which are being manufactured by the MSMEs in India. It is well known that the MSME sector provides the maximum opportunities for both selfemployment and jobs after agriculture sector. 5
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Need of MSME The role of micro, small and medium enterprises (MSMEs) in the economic and social development of the country is well established. The MSME sector is a nursery of entrepreneurship, often driven by individual creativity and innovation. This sector contributes 8 per cent of the countrys GDP, 45 per cent of the manufactured output and 40 per cent of its exports. The MSMEs provide employment to about 60 million persons through 26 million enterprises.9 The labour to capital ratio in MSMEs and the overall growth in the MSME sector is much higher than in the large industries. The geographic distribution of the MSMEs is also more even. Thus, MSMEs are important for the national objectives of growth with equity and inclusion. The MSME sector in India is highly heterogeneous in terms of the size of the enterprises, variety of products and services produced and the levels of technology employed. While one end of the MSME spectrum contains highly innovative and high growth enterprises, more than 94 per cent of MSMEs are unregistered, with a large number established in the informal or unorganized sector. Besides the growth potential of the sector and its critical role in the manufacturing and value chains, the heterogeneity and the unorganized nature of the Indian MSMEs are important aspects for policy making and programme implementation. The Ministry of Micro, Small and Medium Enterprises (MSME) facilitates the promotion and development of MSMEs, including khadi, village industries and coir sector. 2 Services Rendered By MSME4 Advising the Government in policy formulation for the promotion and development of MSME sector. Providing techno-economic and managerial consultancy, common facilities and extension services to the MSME sector. Extending facilities for technology up gradation, modernization, quality improvement and infrastructure. Developing Human Resources through training and skill up gradation. Making available economic information services. Maintaining a close liaison with the Central Ministries, Planning Commission, State Governments, Financial Institutions and other Organizations concerned with development of MSME sector. Evolving and coordinating Policies and Programmes for development of MSME sector as ancillaries to large industries.
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The policies and programmes implemented by the Ministry span across the different areas of operations of MSMEs, covering credit, marketing, technology, skill development, infrastructure development, fiscal matters and legal/regulatory framework. These programmes are implemented through various organizations under the Ministry, commercial banks and Small Industries Development Bank of India (SIDBI) and the State/UT Governments. The Strategic Action Plan of the Ministry of MSME has been formulated based on the following parameters: 7 1. Aspiration of the Ministry Assessment of the situation Potential Strategies Plan Implementation Aspiration The purpose of the Ministry is promotion and development of micro, small and medium enterprises (MSME), including khadi, village industries and coir sector, through formulation and implementation of policies and programmes in the areas of credit, marketing, technology, skill development, infrastructure development, fiscal and legal/regulatory matters. It is envisioned that the sector will have a healthy growth with a large number of enterprises being set up and their graduation into small and medium enterprises. This would be accompanied by enhancement of their contribution to the GDP, manufacturing output, employment and exports and transition of the sector from a predominantly unorganized to the organized sector. Presently, the MSME sector is associated with low quality standards. It is envisioned that the MSME sector will be upgraded through modern and new technologies to achieve global quality standards. Niche markets will be identified and developed for MSME products, including khadi and coir products. 2. Assessment of the Situation As MSMEs are an integral part of the overall manufacturing and services value chains, both at the domestic and global level, several factors have a bearing on the growth of the sector. These include:
Overall domestic and global growth trends;
Domestic tax regime, particularly advent of GST and DTC;
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Policies governing the credit flow to the sector;

Trade policies, including free trade agreements with other countries; Labour policies, particularly multiplicity of labour laws and procedures for compliance of various labour regulations; Availability of infrastructure facilities, including power, water, roads, etc.; Availability of critical raw material at competitive prices; Availability of skilled manpower for manufacturing, services, marketing, etc. The sector has a wide range of stakeholders including the regulators, facilitators and the beneficiaries. These stakeholders are listed below: MSMEs (both existing and prospective) and their Associations; Large enterprises; State/UT Governments; Central Ministries/Departments; Banks/Financial Institutions; Entrepreneurship and Skill Development Institutions, both in the public and private sector; Research and Development Institutions;
STRENGTHS AND WEAKNESSES The strengths and weaknesses have been assessed separately for the sector as such and institutional/administrative mechanisms. The MSME sector is often driven by individual creativity. A major strength of the sector is its potential for greater innovation both in terms of products and processes. The sector is estimated to have 2.6 crore enterprises. An inherent strength of the sector is that these enterprises can be set up with very small amounts of investments and have the location flexibility to be located anywhere in the country. Their employment potential is higher compared to large enterprises and are presently estimated to employ 6 crore persons. They are amenable to be ancillaries and thus have natural linkages with large enterprises. The sector suffers from a number of constraints and weaknesses. Of the 2.6 crore enterprises, a predominant number is in the unorganized sector, often located in non-conforming urban zones. The sector is heterogeneous with pockets of high technology enterprises and majority suffering from low technology base resulting in low productivity and poor quality of products. The units being small in size also have poor access to credit and equity. While we have large pool of human resources, this sector continues to face shortage of skilled manpower due to lack of paying capacity and poor managerial capabilities. Another major weakness is absence of marketing channels and brand building capacity. 4
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There exist a strong institutional structure at the State and Central level for the promotion and development of the sector. There is a well-spread network at the national, state and the local level for providing a comprehensive range of support services under marketing, technology, finance, and infrastructure and skill development. The existing schemes/programmes of the central and state Governments span across all the areas of operations of MSMEs. These are administered by manpower, which are technically and managerially qualified. There is a fairly well established IT infrastructure for better coordination. An apex consultative body has been set up at the national level, namely, National Board for MSMEs, comprising of representatives of all sections of stakeholders for providing guidance/inputs in policy formulation and program implementation. However, the present structure suffers from poor delivery of services at the field level. The schemes and programmes have limited outreach with a large number of very small schemes. There is a lack of coordination among the various organisations involved in the promotion of MSMEs, including organisations of the State/UT Governments and poor linkages with the institutional stakeholders in the private sector. While it is relatively easy to set up enterprises, absence of a suitable exit mechanism is a major constraint for the entrepreneurs. The lack of reliable and updated data base is another area of concern as it inhibits monitoring of development initiatives and formulation of appropriate schemes to meet the differential needs of the heterogeneous profile of the beneficiaries. The strengths and weaknesses provide learning for the future strategy. There is need to improve the institutional structures at the field level and to evolve better coordination among the various organizations. There is also a need to expand the outreach of the existing schemes/programmes and develop alternative delivery channels through capacity building of the MSME Associations and the public-private partnerships in the institutional structure as also the schemes. Given the nature of the enterprises, there is a need to facilitate start-ups and evolve a time-bound exit mechanism. For proper formulation of policies and programmes, there is a need to build a dynamic and reliable data base. 3. Potential Strategies
From the above assessment of the situation, the following potential strategies emerge: For maximizing the results of the various initiatives taken by the Ministry, the institutional structures at the field level will be strengthened by providing appropriate financial support and/or through involvement of private sector, wherever feasible. Strengthen the MSME Associations through an appropriate scheme. Introduce a mechanism for registration of MSME Associations for better targeting of schemes and data collection.
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For expanding the outreach of the schemes/programmes, the Ministry will take a comprehensive review of all the existing schemes/programmes. The schemes/ programmes with overlapping objectives will be merged and those that have outlived its utility will be weeded out
In place of implementing a number of small schemes, the Ministry will provide focused attention on few large schemes to have a discernible impact on the beneficiary group. The Ministry will take steps to bring about necessary amendments in the MSMED Act, 2006 for providing an exit mechanism to the MSMEs. Facilitate start-ups through appropriate schemes for handholding and credit support. Provide network of testing facilities to ensure quality standards of MSME products. For a more coordinated institutional framework for the promotion and development of the MSME sector, the Ministry will undertake a comprehensive study. Besides analyzing the existing institutional framework, the study will also look into the best international practices in this regard. 5
4.
Implementation Plan The detailed implementation plan and resource requirements will be worked out after approval of the strategy.
Performance Of MSMEs The Office of the DC (MSME) provides estimates in respect of various performance parameters relating to the sector. The time series data in respect of the sector on various economic parameters is as noted in the Table 1. It may be mentioned that data with respect to MSMEs have been collected/compiled for the first time in 2006-07 and hence include both the industry and service sectors. Till the year 2005-06, data in the Table 2 refer to micro and small scale industry only.
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TABLE 1: MSMEs Performance: Units, Investment, Production Employment & Exports

Sl. No 1 Year 1992-93 TOTAL MSMEs (Lakh number) Fixed Investment (Rs. Crore) 109623 9.24 115795 5.63 123790 6.9 125750 1.58 130560 3.82 133242 2.05 135482 1.68 139982 3.32 146845 4.9 154349 5.11 162317 5.16 170219 4.87 178699 4.98 188113 4.07 500758 111.48 558190 11.47 621753 11.39 Production(Rs. Crore) Current Price 84413 4.71 98796 17.04 122154 23.64 147712 20.92 167805 13.6 187217 11.57 210454 12.41 233760 11.07 261297 11.78 282270 8.03 314850 11.54 364547 15.78 429796 17.9 497842 5.27 709398 166.2 790759 11.47 880805 11.39 Constant Price 92246 5.6 98796 7.1 108774 10.1 121175 11.4 134892 11.32 146262 8.43 157525.1 7.7 170379 8.16 184401 8.23 195613 6.06 306771 8.68 336344 9.64 372938 10.88 418884 15.83 NA NA NA NA NA NA Employment (lakh person) 174.84 5.33 182.64 4.46 191.4 4.79 197.93 3.42 205.86 4 213.16 3.55 220.55 3.46 229.1 3.88 238.73 4.21 249.33 4.44 260.21 4.36 271.42 4.31 282.57 4.11 294.91 12.32 594.61 42.49 626.34 5.34 659.35 5.35 Exports (Rs. Crore) 17784 28.1 25307 42.3 29068 14.86 36470 25.46 39248 7.62 44442 13.23 48979 10.21 54200 10.66 69797 28.78 71244 2.07 86013 20.73 97644 13.52 124417 27.42 150242 4.37 182538 101.62 202017 10.67 NA
73.51 4.07 2 1993-94 76.49 4.07 3 1994-95 79.6 4.07 4 1995-96 82.84 4.07 5 1996-97 86.21 4.07 6 1997-98 89.71 4.07 7 1998-99 93.36 4.07 8 1999-00 97.15 4.07 9 2000-01 101.1 4.07 10 2001-02 105.21 4.07 AT 2001-02 Prices 11 2002-03 109.49 4.07 12 2003-04 113.95 4.07 13 2004-05 118.59 4.07 14 2005-06 123.42 20.76 15 2006-07 261.01 21.5 16 2007-08 272.79 4.51 17 2008-09 285.16 4.53
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TABLE 2: PERFORMANCE OF THE SECTOR IN NORTH EASTERN REGION NAMES OF STATE Sikkim Arunachal Pradesh Nagaland Manipur Mizoram Tripura Meghalaya Assam Total TABLE 3: YEAR NO. OF UNITS 472 1614 18653 60625 14242 30772 28851 246980 402209 FIXED INVESTEMTN (Rs. Crore) 17 46.76 583.49 529.53 188.66 423.61 224.07 1733.05 3746.17 PRODUCTION (Rs. Crore) 73.7 115.2 897 1168.5 343.6 765.4 799.8 8155 12318.3 EMPLOYMENT 1828 5060 81608 173663 32984 70774 87397 556896 1010210
Comparative Data on Growth Rates of MSE Sector GROWTH RATE OF IIP**(BASE 1970) % GROWTH RATEOF IIP(BASE 2001-02) % IPP(OVERALL INDUSTRIAL GROWTH RATE OF SECTOR) %# 5.7 7.0 8.4 8.1 11.5 8.0
2002-2003 7.68 8.68 2003-2004 8.59 9.64 2004-2005 9.96 10.88 2005-2006 10.40 12.32 2006-2007 NA 12.60 2007-2008 NA 13.00* # : Source- M/o Statistics and PI website- http://www.mospi.gov.in ** : IIP - Index of Industrial Production * : Projected CONCLUSION
In a nations economy, its the small and micro enterprises which play a vital role. For, they not only give employment to a large number of unskilled and semi-skilled people but also support bigger industries by supplying raw material, basic goods, finished parts and components, etc. The critical role and place of the MSME sector in the Indian economy in employment generation, exports and economic empowerment of a vast section of the population is well
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known. There are about 2.6 crore enterprises in this sector. The sector accounts for 45 per cent of the manufactured output and 8 per cent of the Gross Domestic Product (GDP). MSMEs contributed close to 40 per cent of all exports from the country and employ nearly 6 crore people which is next only to the agricultural sector. MSME is the best vehicle for inclusive growth, to create local demand and consumption. MSMEs cater to niche markets. The MSMEs of yesterday are the large corporates of today and could be MNCs of tomorrow. 2,4 MSEs primarily rely on bank finance for a variety of purposes including purchase of land, building, plant and machinery as also for working capital, etc. Availability of timely credit at reasonable rates is the need of the sector. As at the end of March 2009, the total outstanding credit provided by all Scheduled Commercial Banks (SCBs) to the MSE sector was Rs. 2,56128 crore, constituting 11.4 percent of the Adjusted Net Bank Credit. Credit flow to MSMEs had therefore, doubled from Rs. 1,27,000 crore in 200607 to Rs. 2,57,000 crore in 200809. In 200708, credit flow to the sector was Rs. 2,13,000 crore. In September 2009 the total outstanding credit stood at 323565 crore and in February 2010 it further increased to Rs. 369866 crore. Despite the global financial crisis, there was enough liquidity in the Indian banking system and banks were willing to extend credit to viable projects. Despite the fact that there is no dearth of credit in the system there exists a gap in perception of the lenders and SME borrowers. While the lenders felt that credit to the sector is expanding, the SME borrowers felt that the lenders are not doing enough for the SMEs and are catering more to the needs of the large corporate. As only 45% MSMEs are covered by institutional funding given that approx 95% of villages are not covered by banks. There is, therefore, a need to bridge this gap through enabling policies. Reserve Bank has recently advised all the SLBC Convener banks to constitute a Sub-Committee of the District Consultative Committees (DCCs) to draw up a roadmap by March 2010 to provide banking services through a banking outlet in every village having a population of over 2,000, by March 2011. Such banking services may not necessarily be extended through a brick and mortar branch but can be provided through any of the various forms of ICT-based models, including through BCs. Reserve Bank will closely monitor extension of banking services. MSME sector is that as interest costs are a very small fraction of your operating costs, only approximately 4%, do not ask for low interest rates from the banking sector, and instead ask for credit at competitive rates. Credit has to be self-liquidating on a viable project and has a cost. In MSME sector, the failure rate is relatively higher the reasons for which range from delayed/inadequate availability of credit to non-availability of backward and forward support system. Despite the risk, financing of first time entrepreneurs is a must for financial inclusion and growth. Asymmetry of information and lack of transparency and reliability of data has been a major concern for organizations dealing with MSMEs the world over. The main reasons for the financial constraints faced by SMEs are quite generic, and high on the list is the perception that SMEs are historically a high risk group lacking in financial discipline and unable to provide trustworthy financial track records. To overcome this perception, there should be adequate and reliable credit information mechanism, such as an SME credit bureau, that serves the needs of
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both the SMEs and the potential lenders. Bodies such as the ISED could disseminate information on various relevant issues such as rating, SME policies and schemes, provide consultancies etc. Transparency shall facilitate them in obtaining finances, getting favorable contracts and improving their business prospects. A World Bank report stated that a good credit information infrastructure can contribute significantly towards assisting SMEs access to capital. The report further highlighted that small firms with access to credit bureaus have a 40% chance of obtaining a loan, whereas firms without access to credit bureaus have only a 28% chance of receiving a loan. Therefore, significant opportunities exist to increase lending activities to MSMEs with the establishment of MSME credit bureaus. BIBLOGRAPHY 1. 2. 3. 4. 5. 6. 7. 8. 9. Annual Report, 2008-09. Ministry of Micro, Small and Medium Enterprises, www.msme.gov.in Ayyagari, M., and V. Maksimovic, 2008. Industry Growth, Firm Size, and the Business Environment, USAID MicroREPORT Beck, T., Demirg-Kunt, A. and R. Levine, 2005. SMEs, Growth, and Poverty, NBER Working Paper. Corporate Governance Reforms in India (May, 2002) by Ananya Mukherjee Reed, Journal of Business Ethics Final Results Third All India Census of Small Scale Industries 2001-2002, Ministry of Micro, Small and Medium Enterprises Guide to Micro, small and Medium Enterprises, taxaman, 2007. International Finance Corporation, 2006. Micro, Small, and Medium Enterprises: a Collection of Published Data Nagarajan, G., 2008. Microenterprises in Bangladesh: Contribution to Economic Growth, USAID Micro Report. Small enterprises and their access to finance (Memo), April, 2008
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Effectiveness of Leadership : Perception of Members

Dr. R. C. Abraham
BSSS College, Bhopal
EXECUTIVE SUMMARY Most of the studies on leadership leave the impression that leadership works one way - the leader influences the members. This paper studies the effectiveness of the leadership behavior from the perspective of members. Specifically, this study examines the relationship between effectiveness of leaders and his/ her behavior in such areas as organizational performance, decision making skill, communication skill and personal characteristics. Data were collected from 140 members accountable to one structurally defined leader. The results showed that if members perceived their leaders effective in the four areas, they also perceived them as effective leaders. Differences in the biographic variables of members did not influence the relationship between leadership behavior and its effectiveness, except in case of gender. Female members accounted for better relationship than male members. Key Words: Leaders Behavior, Leadership Effectiveness INTRODUCTION There are two major publications of classical studies on leadership, one by Michigan State University (Katz etal 1950) and the other by Ohio State University (Stogdill & Coons, 1957), the interest in leadership style and its consequences has grown by leaps and bounds. There are numerous studies on the behavior of leaders (e.g. Katz & Kahn 1951; Fleishman & Harris, 1962; Zulaiha I, 1993 as well as situational determinants of leaders behavior (e.g. Fieldler, 1967; mintzberg 1973; Balkheyour, 1982; Bass, 1990). In addition, researchers have also examined the variations in leadership styles based on differences in cultures and ethic background (e.g. Yang, 1977; Everett, et.al., 1984; Kang & Saiyadain, 1994; Asma Abdullah, 1996, Carney, 1998). Most of these studies leave the impression that leadership works one way- the leader influences the members. Of late there is growing evidence to suggest that leaders behavior, to an extent is influenced by subordinates perspective and perceptions. Effectiveness of leadership behavior may perhaps be an interactionist position influenced by members expectations. A recent study concluded that leaders would be perceived most effective by their members and succeeds in exerting great influence on them when they behave in ways closely matched with the needs and values of members (Baron, 1986). In another article, Bennis (1989) suggested that members make good leaders good. Quoting several examples of significant leaders in American history,
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he feels persuaded to accept the under-appreciated importance of effective members in moulding the styles of their leaders. Research evidence in this area is rather scanty. Perhaps the first such attempt was made by Brown (1964). Respondents were asked to identify characteristics of their poorest boss, examples of their most bizarre behavior and their effect on the performance of the members. His results indicated that members identified 30 characteristics of poor bosses grouped in five categories (organizational performance, decision making skills, communication skill, relationship with others and personal characteristics). They also identified 18 bizzare behaviors and 19 effects on members. In another attempt, Hersey & Blanchard (1982) emphasized the maturity of members determining the optimal level of leadership style. Able and willing members expected delegation while unable and unwilling were required to be told. Leaders who sought negative feedback from the members were perceived more effective (Ashford & Tsui, 1991). Similarly, those leaders who were perceived to show self regulation and self control enhanced their members opinion about their effectiveness (Tsui & Ashoford 1994). In a confused world of today while the leadership ranks are getting stream lined (Buono & Bowditch, 1989, Cameron, 1991), leaders effectiveness is becoming the focus of attention. Leaders must maintain and enhance the well being of organization and in doing so must get the support from all constituents, particularly the members. Thus study examines the relationship between leadership behavior and effectiveness of leadership as perceived by the members. METHODOLOGY Questionnaire The focus of the study on the perceptions of the members was an attempt made to identify key areas of leaders behavior. As many as 72 employees with clearly defined leaders were asked to indicate 5 key areas that they felt were most important for effective leader behavior. This exercise yielded 23 areas of which decision making, communication skill, organizational performance and personal characteristics topped the list with the rest trailing far behind. Leader behavior on these four areas was measured by adapting the general scheme provided by Brown (1964). Fifteen statements were developed to cover the four areas (organizational performance = 6, decision making = 3, communication skill =3, and personal characteristics = 3). The respondents were asked to read these statements keeping their immediate supervisors in mind and show their agreement/ disagreement with them on a six point scale (strongly agree=6, agree=5, agree a little = 4, disagree a little =3, disagree=2, strongly disagree=1).
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Leadership effectiveness was measured by adopting the scale developed by Cummings (1967). It consisted of five statements based on five effective criteria (Planning, Human Consideration, Originality, Overall Effectiveness as perceived by respondents and Organization). The respondents were asked to rate their immediate supervisors on these statements using a six point scale (very high=6, high=5, somewhat high= 4, somewhat low=3, low = 2, very low = 1). Statements are presented in Exhibit-1. Sample Sample consisted of employees working in a multinational organization in Bhopal. The major criteria in the choice of sample consisted of each respondent having a structurally defined leader to whom he/ she responded for both functional and administrative purposes. The questionnaires were distributed to 223 respondents out of which 140 completed and returned them constituting 63.7 percent return rate. RESULT The sample profile is presented in Table-I. A review of the table indicates that the average age of the sample was 32.2 years. There were 63.6 percent male and 57.1 percent married respondents. In terms of education 57.8 percent had degree while the rest were non degree holders. They on an average had 4.7 years of experience and 60 percent were holding the position of engineers. Scores on items for each of the four independent variables and effectiveness of leadership were inter-correlated. Since the items for each of the variables correlated significantly with each other the scores on the individual items were added to get a single measure for each of the variables. However, in case of organizational performance two items did not correlate significantly with others. They were dropped from the final analysis (see Exhibit - 2). The results in Table-2 indicate that members who perceived their leaders effective, also perceived them effective in organizational performance, decision making skills, communication skill and personal characteristics. All the values of co-efficient are significant beyond 0.01 level of significance. To examine the contribution made by four independent variables on leadership effectiveness, stepwise regression was calculated. The results showed that all four variables together explained 62.4 percent of the variation in effectiveness. To see if the rotationship between effectiveness of leadership and four independent variables is influenced by differences in biographic variables (age, experience, gender, marital status, education and position), multiple regressions were calculated. The results showed that
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differences in none of the biographic variables contributed to the relationship except gender. The overall R2 with gender was 60.52. However when separate multiple regression with each gender were run, males as against females perceived lower relationship between effectiveness of leadership and four variables. The adjusted R 2 for male respondents was 54.96% while it was 64.65 for female respondents. DISCUSSION Effectiveness of Leadership depends on multiple constituencies. This study examined the relationship between leadership behavior (organizational performance, decision making, communication skill and personal characteristics) and leadership effectiveness as perceived by the members. The results of this study indicate that members who perceive their leaders behavior effective also perceive them as effective leaders. The components of leaders behavior contributed 62.4% to leadership effectiveness and the relationship, by and large, was found to be independent of the biographic differences among the members except the gender. Members are critical of their leader for a variety or reasons. If they perceive their leaders involving them in information generation for decision making, delegating responsibilities, and allowing full use of their capabilities, members can become an asset to the effective functioning of their leaders. Members expect their leaders to make good decisions and good decisions take into account the feelings of majority of the members (Berliner, 1979). Similarly, open, two-way communication eliminates fear, anxiety and distrust amongst members. It helps in discrepancy detection process (Ashford & Tsui, 1991). Open communication requires soliciting feedback from members which in turn provides them a sense of codetermination and enhances members perception of leaders effectiveness. Members also expect leaders to be loyal to themselves and organization (Berliner, 1979). Alert, self assured and interpersonally competent leaders set examples for members to follow. The female respondents who perceived stronger relations between the variables than their male counterparts were supervisors who worked closely with their immediate bosses. Perhaps the proximity helped them to make more realistic judgments about their leaders. Leaders are increasingly dependent on their members for a variety of activities. Silence is the one answer that leaders should refuse to accept. While for members it is hard to speak up or disagree with the leaders, effective leaders encourage openness and even dissent. They understand the momentary discomfort on being told or made to realize that they are wrong. But it is offset by the fact that reflective back talk increases leaders ability to make good decisions. Members who speak up and leaders who listen to them are an unbeatable combination (Bennis, 1989). The ultimate irony is that, by and large, members who look for effective leadership behaviors show precisely the kind of behavior that effective leadership is made of.
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CONCLUSION AND IMPLICATIONS There is growing evidence to suggest that leaders behavior is influenced by the perceptions and expectations of the subordinates. The results of this study show that if subordinates perceive their leaders effective in such areas as organizational effectiveness, decision making and communication skills and personal characteristics, they also perceive them as effective leaders. The implication for such a conclusion is clear. In order to maintain and / or enhance the overall effectiveness of the organization, leaders must get support from all the constituents, particularly from their subordinates. These subordinate, in turn, would make a good leader good. Training of sub-ordinates, maintaining high level of motivation and morale and exploiting their full competencies are potential sources for not only getting high performance but also making them to expect and receive superior output from their leaders. These are mutually reinforcing forces that organizations need to survive in todays confused environment. REFERENCES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. Ashford, J.A., and Tsui, Set of Regulation for Managerial Effectiveness: Academy of Management journal, 34(2), 251-280, 1991. Ballcheyour, A.A., Effective administrative Leadership, doctoral Dissertation, Glaremont Graduate School, 1982. Baron, R.A. (1986), Behavior in Organisations, Allyn and Bacon, Boston Brown, D.S (1964), Subordinates, View of Ineffective Executive Behavior, Academy of Management Journal, 7 (4), 288-299 Bennis, W.G., Managing the dream Leadership in the 21 st century, Journal of Organizational change Management, Vol 2 No. 1, 1989. P.7 Bennis, W (1989), Followers Make Good Leaders Good, The New York Times, December, 31 Cummings, L.L., Managerial effectiveness II: Performance at the Graduate Student level., Academy of Management journal, 10(2). 145-160 Fielder, E.F (1967), A Theory of Leadership Effectiveness, McGraw Hill, New York Fred Luthans, Organizational Behavior (7th edit) 1995, McGraw - Hill, Inc. New York. Hersey, P. and Blanchard, K.H. (1982), Management of Organizational Behavior (4 th Edit), Englewood Cliffs, N.J Pentice Hall Kang.S.H., and Saiyadain, M.S., A comparative study of the managerial styles of Malaysian and Taiwanese Managers, Isu Pengurusau, 3 1-17 Katz.D., and Kahn, R.L., Human Organization and work motivation in Industrial Production, Industrial Relations Research Association, 1951 Mintzberg.H., The nature of managerial work. Harper and Row, New York, 1973. Stog dill, R.W., and Coons, A.E., Leader Behavior Research Monograph #88, 1957 Tsui A.S., and Ashford, J.A., Adaptive Self regulation: A process view of Managerial effectiveness., journal of Managements 20(1), 93-121. 1994
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16.
Warren G Bennis Managing the dream Leadership in the 21 st Century, Journal of Organizational Change Management Vol. 2 no.1, 1989, P.7
EXHIBIT - 1 INTER ITEM ASSOCIATION Organization performance Statement 1 2 3 4 5 2 .232* 3 .185 .288** 4 .141 .560** .317** 5 .145 .127* .413** .090 6 1.97* 316** .567** .155 .507**
Decision making Statements 1 and 2 = .474** Statements 1 and 3 = .216** Statements 2 and 3 = .280* PERSONAL CHARACTERISTICS Statement 1 and 2 = .262**, statements 1 and 3 = .267** Statements 2 and 3 = .556** Leadership Effectiveness Statement 1 2 3 4 2 .489** 3 .657** .616** 4 .780** ..597** .660** -
Communication Skill Statements 1 and 2 = .200* Statements 1 and 3 = .103 Statements 2 and 3 = .327**
5 .729** .604** .614** .487**
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Table1: Sample Profile Factors Factors Experience Gender Marital Status Education Position M = 32.34 M = 4.7 Male = 63.6% Married = 57.1% Degree = 57.8% Engineer = 60.0% SD = 5.54 SD = 4.42 Female = 36.4% Single = 42.9% Non-degree = 42.2% Supervisor = 40.05%
M=Mean, SD = Standard Deviation Estimates Table 2: Coefficients of Correlation Leadership Effectiveness vs r Organisational Performance Decision Making Skill Communication Skill Personal characteristics Organizational Performance .620** Decision Making Skill .604** Communication Skill .612** Personal characteristics .700** **P<.01 r .620** .604** .612** .700**
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India Versus Norway- Scenario of Corporate Social Responsibility and Management of Natural Resources in Two Economies
Ms. Sehba Husain
Research Scholar, Barkatullah University Bhopal
EXECUTIVE SUMMARY Corporate Social Responsibility (CSR) is the continuing commitment by business to behave ethically and contribute to economic development while producing an overall positive impact on society. Norway the country having most suitable living conditions took a lead in practicing CSR practices. CSR is becoming an increasingly important activity to businesses nationally and internationally. As globalisation accelerates and large corporations serve as global providers, these corporations have progressively recognised the benefits of providing CSR programs in their various locations. Management of natural resources is one of the most important functions of CSR that can ensure long run economic gains to countries. For a number of years, leading Norwegian companies and the social partners have given high priority to CSR efforts. The social partners have played an active role in promoting decent working conditions and the right to organise, also in developing countries, and NGOs have played a leading role in mobilising companies to prioritise social responsibility. Many companies have integrated CSR into their operations and their decision-making processes. On the other hand, management of natural resources as a CSR concern is the ignorant area of attention by Indian corporate sector. This study compares the CSR perspectives in Norway which is perceived as the best country in practicing and managing their natural resource base with India which is fastest growing but still a weak nation in terms of management of natural resources as a CSR function. Key Words: Corporate Social Responsibility; Companies; Governments; Countries; Environment; Management 1. INTRODUCTION
Profitable companies make important contributions to society. They create jobs and help finance the general welfare of the population. The main task of companies is to create value and generate financial results within the legislative framework of the society in which they operate. But companies are not just operating in a market. They are also operating within a culture, a local community, a political system and most of all within the natural environment. Companies have an impact on social development where they operate. They therefore have a responsibility that extends beyond value creation. CSR (Corporate Social Responsibility) is a
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matter of clarifying exactly what this responsibility entails and how it can best be fulfilled. There are examples of companies that are profitable in financial terms, but whose activities may be harmful to employees, the local community and especially the environment. The ethical aspects of CSR have become more apparent as a result of globalisation. To a greater extent than previously, Norwegian companies are engaged in countries with poor human rights records or where human rights are challenged, where working conditions are unacceptable, or where child labour is used. They also operate in areas where there is little concern for the environmental impact of production processes. On the other side Indian companies are also gearing themselves toward adopting CSR as the effective tool for competitive advantage. But concern toward management of natural resources is still perceived as low in context of Indian corporate sector. This study compares the strategies and systems in Indian and Norwegian corporate sector and reveals that to what extent companies and Governments of both the nations are serious about management of natural resources as a corporate social responsibility function. 2. Review of the Literature
The connection between corporations and society has been to industrialists mind since the age of Henry Ford, if not before but the first effort to theorize this relationship has been made by Howard Bowens Social Responsibilities of the Businessman (1953) who tried to give systematic and rationalized arguments in favor of CSR by stating that the big corporations should consider using their power and influence with social consequences and responsibilities in mind. If the society the companies belong were to deteriorate, businesses would lose their critical support structure and customer base. This model renewed the interest in CSR and sparked more research on the subject (Fitch 1976, Elkins1977, Keim 1978). Soon, people called for a more practical approach to CSR and Carrolls article called A three-dimensional conceptual model of corporate performance (1979) that became one of the most cited articles in the field. Carroll didnt see the social goals of the company as a trade-off to the economic ones. Rather, he introduced a model where economic, ethical, legal and discretionary goals are integrated. In the same path followed the works of Watrick and Cochran. 3. Research Methodology
Normative comparison technique is used for this research because goals of this paper are not only to detect and explain but also to improve the present state of the situation, to help improving or developing similar elements in the future. This is the technique of normative comparison. Given the difficulties and importance, methodologically, of the topic addressed in this paper it covers only the fundamental tasks and questions. Firstly, in regards to the comparison of the two economies, the discussion will be limited to detecting, explaining, and improving upon the system of Indian corporate sector to manage natural resources and protect environment as a corporate social responsibility by using Norway
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as the ideal economy for benchmarking. We consequently discuss and compare the certain aspects that affect the management of natural resources in both the nations. 4. Corporate Social Responsibility in India
Dr. V.V.S.K Prasad in his study - CSR Initiatives of Indian Companies - A Study made it clear that Even much before the issue became a global concern, India was aware of corporate social responsibility (CSR), due to the efforts of organisations such as the Tata Group. (Around 66 per cent of Tata Sons, the holding group of the Tata Group is today owned by a trust). Corporate companies like ITC have made farmer development a vital part of its business strategy, and made major efforts to improve the livelihood standards of rural communities. Unilever is using micro enterprises to strategically augment the penetration of consumer products in rural markets. IT companies like TCS and Wipro have developed software to help teachers and children in schools across India to further the cause of education. The adult literacy software has been a significant factor in reducing illiteracy in remote communities. Banks and insurance companies are targeting migrant labourers and street vendors to help them through micro-credits and related schemes. In June 2008, a survey was carried out by TNS India (a research organization) and the Times Foundation with the aim of providing an understanding of the role of corporations in CSR. The findings revealed that over 90 per cent of all major Indian organizations surveyed were involved in CSR initiatives. In fact, the private sector was more involved in CSR activities than the public and government sectors. The leading areas that corporations were involved in were livelihood promotion, education, health, environment, and women's empowerment. Most of CSR ventures were done as internal projects while a small proportion were as direct financial support to voluntary organizations or communities. In a survey carried out by the Asian Governance Association, which ranks the top 10 Asian countries on corporate governance parameters, India has consistently ranked among the top three along with Singapore and Hong Kong, for the last eight years. In another study undertaken by automotive research company, TNS Automotive, India has been ranked second in global corporate social responsibility. State-owned Bharat Petroleum and Maruti Udyog were ranked as the best companies in India. Bharat Petroleum and Maruti Udyog came on top with 134 points each, followed by Tata Motors (133) and Hero Honda (131). The study was based on a public goodwill index and India received 119 points in the index against a global average of 100. Thailand was at the top slot with 124 points. Several foundations run by corporate houses plan to devise a common strategy to ensure transparency in their social and community development operations, such as tracking spending in and progress of such projects in their annual reports. The effort is significant because it brings together a wide range of Indian companies to share ideas on innovating sustainable
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programmes. Among them are Multi Commodity Exchange of India Ltd, Anil Dhirubhai Ambani Group and media company Bennett, Coleman and Co. Ltd. Audit firm KPMG will partner with them to offer guidance on evaluating corporate social responsibility or CSR programmesa trend companies are slowly embracing as India's expanding economy contrasts sharply with growing local protests over land for future industrial projects. The network alliance stems from the first sustainability summit that was organized in January by the Associated Chambers of Commerce and Industry of India. CSR could prove to be a valuable asset in an age of mergers and acquisitions, especially as it helps companies spread their brand name, The new network will also serve as a common ground to lobby with the government for tax exemptions and safeguard other interests in the future. Indian companies have made little progress in reporting development projects. And only 48 companies have so far given their commitment to support the United Nations Global Compact, a charter for improving the global business environment through standards, such as labour rights and fighting corruption. Addressing business leaders in May last year, Prime Minister Manmohan Singh said "Corporate social responsibility must not be defined by tax planning strategies alone. Rather, it should be defined within the framework of a corporate philosophy, which factors the needs of the community and the regions in which a corporate entity functions." Some say companies have an inherent "mental block" in reporting development programmes. A recent KPMG study among 27 Indian companies showed that a mere 8% mentioned their social expenditures in their annual reports, and only 25% filed CSR reports at all. But a quarter of them are also signatories of the Global Reporting Initiative, a 10-year-old movement started by an NGO called Coalition for Environmentally Responsible Economies (CERES) and the United Nations Environment Programme. This encourages companies to make voluntary disclosures and lays down framework on improving reporting principles. "Most companies tend to give to charities than make long-term development commitments. When a company voluntarily opens up for selfevaluation, it creates value for shareholders when competing with other companies," said Parul Soni, associate director of KPMG's Aid and Development Services. An estimated 100 corporate foundations and 25 foreign firms are involved in CSR activities in India, but statistics on input and output are elusive. According to Times' Pandey, the Indian corporate sector spent Rs30,000 crore on social expenditure during the last financial year, up from Rs17,500 crore the previous year. Quoting from a government report, he said, companies drew a total exemptions of Rs5,500 crore under income-tax laws last year. These figures, an analyst said, sound improbable as Indian companies still do not distinguish between philanthropy and internal practices to benefit stakeholders such as employees and community. Companies, too, continue to rely on different models to earmark its social expenditure, making it difficult to measure the overall impact. For instance, the Steel Authority of India Ltd (SAIL), the country's largest steel company, spent Rs100 crore on CSR last year; this was 2% of its
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profit after tax, exclusive of dividend tax, according to SAIL spokesperson N.K. Singhal. Yet others, such as Tata Steel Ltd, which runs a 850-bed hospital and rural projects in 800 villages around Jamshedpur, spends an average of Rs150 crore as part of its annual revenue expenditure. What eventually makes up for CSR of a company ultimately depends on leadership; as part of company decision, about 66% of Tata Sons, the holding group of the Tata group, is today owned by a trust. Pharmaceuticals company Jubilant Organosys Ltd, already runs an antituberculosis programme with the government of Uttar Pradesh. Apart from schools and hospitals that are run by trusts and societies, the government, too, is exploring to widen the scope of public-private partnerships to build and maintain schools and hospitals in return for a fixed annuity payment. Above statistical evidences show that India is on its way to achieve success in maintaining its global reputation by stressing more on CSR but, still lagging much behind in proper management of CSR as compared to Norway. 5. The Concept of CSR in context of NORWEGIAN Economy
The Government of Norway as stated in Report No. 10 to the Storting (2008-2009) Corporate social responsibility in a global economy , views the following areas as central when it comes to corporate social responsibility : respecting human rights; upholding core labour standards and ensuring decent working conditions; taking environmental concerns into account; combating corruption; and maximising transparency. The concept of responsibility used in Norway is linked to companies ethical standards, and is used in the sense of moral responsibility unless otherwise indicated. When a company fails to comply with these standards, the result may be that it is seen as failing to meet its own business objectives, or not living up to the expectations of consumers, investors or the local community. The concept of responsibility can also be invoked if companies, through their business conduct, contribute to human rights violations or other breaches of international law, or to violations of other international standards on which there is general agreement. If a company breaches environmental standards, for instance, it may risk negative sanctions. The Governments position is that CSR involves companies integrating social and environmental concerns into their day-to-day operations, as well as in their dealings with stakeholders. CSR means what companies do on a voluntary basis beyond complying with existing legislation and rules in the country in which they are operating. Companies should promote positive social development through value creation and responsible business conduct, and by taking the local community and other stakeholders into consideration. All companies operating abroad and in Norway are expected to comply with the host countrys laws and regulations, as well as with Norwegian legislation. Many developing countries
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including India have inadequate legislation, weak governance, widespread poverty and corruption. In countries such as these, the way companies do business and demonstrate responsibility is of particular importance. This does not mean that companies should automatically assume responsibility for matters that are the province of the authorities in the countries concerned. It would be unreasonable to expect this of companies, and it would not necessarily promote long-term development. 5.1 Transparency and disclosure
In the Governments view, it is important that companies demonstrate transparency and disclose information about social and environmental factors in connection with their operations. This helps to forge trust and good relations with the societies in which companies are operating. It can be important for stakeholders to know what guidelines the companies use as the basis for their activities and how these are followed in practice. This applies to shareholders, authorities, employees, clients, suppliers, partners and society at large. 5.2 Vigilance and knowledge sharing
In the Governments view, companies should be vigilant and actively seek out information about social conditions and trends in the areas where they are operating. They should adopt a holistic approach that takes into account the challenges and dilemmas they face in their international operations. Fostering openness and engaging in dialogue with the communities in which they operate are prerequisites for finding good solutions. The Government expects companies to be particularly vigilant when operating in vulnerable or conflict affected areas. 5.3 Innovation and social responsibility
The ability to convert good ideas into new solutions has never been more important for achieving positive social development and business success. Innovation is the key to competitiveness, value creation and sustainable growth for companies and countries alike. Innovation in the private sector is also essential in addressing the challenges of our time. By developing new products and services, technology, production processes, forms of organisation, business models and partnership models, the private sector can help to meet the challenges facing society. Today Norwegian companies competitive advantage lies primarily in production that is based on the natural environment and natural resources. competitive advantage that is not based on knowledge and innovation. 5.4 Corporate environmental responsibility
The Government views the participation of the private sector as crucial in addressing the challenges relating to climate change, the loss of biodiversity, and releases of hazardous substances. Companies that manage to stay at the forefront of innovation and environmentally
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sound resource use can gain comparative advantages, both in financial terms and in relation to markets. The focus of corporate environmental responsibility has shifted from avoiding damage to the environment to integrating environmental concerns and resource use into systems for managing companies products, finances and reputation. Under international agreements that have been implemented in national legislation, the private sector must comply with a number of requirements designed to limit the adverse environmental impacts of its operations. Multilateral environmental agreements are incorporated into national legislation on an ongoing basis, and thus form part of the existing legislation that companies must comply with in countries that are parties to these agreements. In addition to the ongoing development of national and international environmental standards for the private sector, companies should take a proactive approach in order to reduce the adverse environmental impacts of their operations beyond what is stipulated in such standards. By being at the forefront of developments in this area, companies can achieve lower costs, an improved strategic starting point for their long-term operations, and new market opportunities. The private sector should therefore have considerable self-interest in integrating an environmental perspective more fully into its activities. The private sector can help to mitigate environmental problems by making its own operations more environmentally friendly and by making efficient use of resources. Companies can play a part by developing innovative processes or technology designed to minimise the use of scarce resources and reduce harmful emissions. Companies can also develop new, greener products and services to replace existing ones. They can make an important contribution by collaborating with their supply chains and requiring their partners to meet high environmental standards. The most advanced companies now carry out life cycle analyses for their products, and are introducing routines that include requirements for their subcontractors. Climate change is creating new challenges, and national authorities and the private sector have a shared responsibility for addressing them. The authorities are responsible for establishing a framework that will promote innovation and cost-effective solutions. The private sector has a role to play in finding solutions by developing new technology and by using the best available techniques. It is important to raise companies awareness of their direct and indirect impacts on the climate, and what steps they can take to minimise these impacts. Norwegian Government expects enterprises in which the state has ownership interests to actively follow up social responsibility in their activities. In its report (NOU 2004:7), the Committee on State Ownership concluded that companies in which the state has ownership interests should take the lead in exercising social responsibility. The committee also pointed out that the states legitimacy could be weakened, for example as legislator and in matters concerning foreign policy, if, in its role as owner, it failed to comply with high standards in this area. The Government views the participation of the private sector as crucial in addressing the challenges relating to climate change, the loss of biodiversity, and releases of hazardous substances. Companies that manage to stay at the forefront of innovation and environmentally
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sound resource use can gain comparative advantages, both in financial terms and in relation to markets. The focus of corporate environmental responsibility has shifted from avoiding damage to the environment to integrating environmental concerns and resource use into systems for managing companies products, finances and reputation. Box 1 Carbon Disclosure Project
The Carbon Disclosure Project (CDP) is an independent, non-profit organisation that collects and publishes information on corporate greenhouse gas emissions, as well as other information on how companies are managing and reducing their greenhouse gas emissions. Altogether, 1 300 of the worlds largest companies responded to the CDP questionnaire in 2007. The CDP Corporate Supply Chain Programme was initiated in 2007. The aim of the programme is to establish a standardised approach to the reporting of greenhouse gas emissions resulting from a companys supply chain emissions. Participating Norwegian enterprises include Aker Yards, DnB Nor, Hafslund, Marine Harvest Group, Norsk Hydro, Orkla, the REC Group, Schibsted, StatoilHydro, Storebrand and Norges Bank. Under international agreements that have been implemented in national legislation, the private sector complies with a number of requirements designed to limit the adverse environmental impacts of its operations. Multilateral environmental agreements are incorporated into national
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legislation on an ongoing basis, and thus form part of the existing legislation that companies must comply with in countries that are parties to these agreements. In addition to the ongoing development of national and international environmental standards for the private sector, companies also take a proactive approach in order to reduce the adverse environmental impacts of their operations beyond what is stipulated in such standards. By being at the forefront of developments in this area, companies are achieving lower costs, an improved strategic starting point for their long-term operations, and new market opportunities. The private sector therefore has considerable self-interest in integrating an environmental perspective more fully into its activities. Climate change is creating new challenges, and national authorities and the private sector have a shared responsibility for addressing them. The authorities are responsible for establishing a framework that will promote innovation and cost-effective solutions. The private sector has a role to play in finding solutions by developing new technology and by using the best available techniques. It is important to raise companies awareness of their direct and indirect impacts on the climate, and what steps they can take to minimise these impacts. 6. Corporate Environmental Responsibility in India
Corporate Environmental Responsibility has been on the agenda in India for a considerable period. Most big Indian corporations are engaged in some CSR activities. As is the case in many countries, the private sector is generally more active in this area than the governmental/public sector. Several major CSR initiatives have been launched in India since the mid-1990s. Among these is the first voluntary code of corporate governance, Desirable Corporate Governance: A Code, established in April 1998. This was an initiative by the Confederation of Indian Industry (CII), Indias largest industry and business association. A National Foundation for Corporate Governance (NFCG) has been established by the Ministry of Corporate Affairs. This is a partnership with the Confederation of Indian Industry (CII), the Institute of Company Secretaries of India (ICSI) and the Institute of Chartered Accountants of India (ICAI). The purpose of the National Foundation for Corporate Governance is to promote better corporate governance practices and raise the standard of corporate governance in India towards achieving stability and growth. Legislation authority in India is shared between the Central Government and the State Governments. Some laws, such as those regulating minimum wages, differ from state to state. Likewise, the implementation and supervision mechanisms may vary between states. The main law on environment and production is The Environment (Protection) Act (1986). This law gives
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the central government the authority to protect and improve environmental quality, as well as control and reduce pollution from all sources. The responsibility for environmental governance is shared between the corporations and the government. Many Indian institutions have come up with voluntary guidelines on environmental friendly practice. Among these is a partnership on voluntary pollution control, developed by the Indian Ministry of Environment and Forests together with the industrial sector. Other initiatives include the Energy Efficient Initiative by the Indian Chamber of Commerce, the Indian Ecomark and the Clean Technology initiative by the Confederation of Indian Industry and others. With regard to the implementation of environmental laws, a challenge has been lack of knowledge on how to fulfill the laws in practice. There are also weaknesses in the implementation and control mechanisms, the budget and infrastructure for control has not been sufficient, although greatly improved over the last years. 7. Management of Biodiversity in Norway
In Global Biodiversity Outlook 2, the UN concluded that the pressures on biodiversity are increasing so rapidly that they threaten the very basis for sustainable development. The IUCN Red List provides an overview of threatened species. Companies that operate in vulnerable natural environments should take account of possible negative impacts on biodiversity on the basis of the Red List. Activities in the petroleum and mining sectors often involve major disturbance of the natural environment and particular caution must be exercised in the planning stages. The development of hydropower may also have major impacts. Changes in water flow affect living organisms and species diversity in rivers and lakes, and the diversion of water to hydropower production may also compete with other uses of the water, for example for irrigation and drinking. This may also have an impact on tourism and other industries. The tourist industry is one of the worlds largest industries. Tourism in vulnerable natural environments may cause wear and tear on the land and disturb animal life. On the other hand, close cooperation between tourism and conservation interests may provide a secure income base that benefits both parties. The United Nations Environmental Programme (UNEP) cooperates with the tourist industry, NGOs and interested countries on promoting sustainable tourism, based on improving coastal zone planning, reducing impact on the climate and channeling funds to the protection of areas of natural environment. By supporting these efforts, Norwegian tourism operators can help to ensure that the development and operation of tourism activities contribute positively to development in the host country.
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In many cases it is impossible to prevent commercial activity from harming the natural environment. Mechanisms, known as biodiversity offsets, have been developed to compensate for such negative impacts and reduce the total harm. This means that by ensuring sound, longterm management in other relevant areas, loss of biodiversity can be mitigated in a wider perspective. A growing number of companies are realising that biodiversity offsets can help to reduce their ecological footprint and that employing such mechanisms improves cooperation with the authorities and other stakeholders. The Business and Biodiversity Offsets Programme is a broad-based partnership for exploring biodiversity offsets and testing them in the form of practical pilot projects in Norway. 8. Biodiversity Management in India
UNDP (United Nations Development Programme) in India is committed to protect the environment and to meet the challenges posed by climate change. UNDP works with the Government of India to strengthen policy, legislative and regulatory mechanisms on biodiversity conservation, while addressing land degradation, promoting clean and renewable sources of energy, and phasing out ozone-depleting substances. The programme lays emphasis on actions to mitigate and adapt to climate change impacts and on enhancing awareness among marginalised communities for them to manage and reduce disaster and environment related risks. The biodiversity conservation initiatives support communities so they are able to administer their resources in a sustainable manner. This happens through value-addition and marketing of products based on natural resources and through the documentation as well as the sharing of benefits that arise from traditional knowledge. The programme furthermore supports efforts towards strategic management of chemicals, which contribute to pollution and the depletion of ozone layer. But in India, still most of the companies overlook the protection of biodiversity. It has been perceived as the root cause of deteriorating environmental conditions in the country. Industrialization and urbanization have resulted in a profound deterioration of India's air quality. Of the 3 million premature deaths in the world that occur each year due to outdoor and indoor air pollution, the highest number are assessed to occur in India. According to the World Health Organization, the capital city of New Delhi is one of the top ten most polluted cities in the world. As rapidly developing countries such as India industrialise, the dangers to local communities from pollution are often overlooked until there is a major disaster such as occurred in Bhopal. The effects of chemical pollution are being rapidly felt across India. It has found that the incidence of diseases related to nervous, circulatory, respiratory, digestive and endocrine systems was one to four times higher in heavily industrialised areas as compared to unindustrialized areas. Many cases of congenital deformity and chromosomal abnormalities were also reported, in addition to 11 cases of different kinds of cancer. Skin disorders are also rampant. The wave of industrialisation that began in the late 1970s has changed the complexion
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of India's once placid landscape. Natural resources are also getting badly affected. Lakes, streams, as well as the groundwater are laced with toxic heavy metals and chemicals large variety of flora and fauna is facing the repercussions of these practices. 9. Discussion and Suggestions
Norway is a small open economy at the periphery of Europe. It is often claimed that together with the other Nordic countries (Denmark, Finland, Iceland and Sweden), Norway represents an alternative model of economic and social development compared both to the continental European model and an Anglo-American model. Norway is abundantly endowed with natural resources and the utilisation of its resource base has strongly influenced the industrial structure, foreign trade, economic development and welfare of the country. Additionally, Norwegian companies are highly committed toward protection of their natural resources as their corporate social responsibility. Norway has consistently been ranked by the UN as the best country in the world to live in, and the World Economic Forum has ranked Norway as one of the top 20 most competitive countries globally. The main reason for the interest in the Norway is the ability of this country to combine a relatively high level of income with an equal income distribution and social security involving a large public sector financed by high taxes. Strong CSR agendas of Norwegian government and companies have paved the way for success for the country to achieve an excellent growth rate and building synergies for bright future. India is currently the worlds fourth largest economy in terms of real GDP (PPP) and the tenth largest economy in terms of nominal GDP. But Management of natural resources in India is perceived as quite low. Indians are increasing their expectations of what companies should be doing with respect to corporate social responsibility (CSR) according to the latest Nielsen India Corporate Image Monitor. CSR can be an effective way of building goodwill for a company, and survey respondents most admired Reliance Industries, the nations largest conglomerate, Tata Motors and Tata Steel. These companies are most closely associated with promoting education, improving healthcare infrastructure and promoting environmental consciousness. According to the survey, half of respondents said that better healthcare infrastructure is the top social issue that they believe corporations should tackle, followed by fighting diseases such as HIV/AIDS, malaria, TB and cancer (38%) and education and adult literacy (30%). Furthermore, 86 percent identified countering terrorism as a CSR initiative that should be taken up by corporate India. Environmental protection is now expected and no longer identified as a CSR initiative by respondents. There are laws but their enforcement is not up to the mark. Corruption in the society and systems is another cause of detriment conditions of natural resource base in India. In India there is a lack of interest of the local community in participating and contributing to CSR activities of companies and there is a need for capacity building of the local nongovernmental organisations as there is serious dearth of trained and efficient organisations that
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can effectively contribute to the ongoing CSR activities initiated by companies. Lack of transparency is one of the key issues brought forth by a number of surveys. The conservation and protection of the natural environment should ideally be ensured by international agreements and laid down in national legislation. However, although international agreements and legislation exist and are being enforced, in several environmental areas they often impose only minimum requirements. Particular caution is required when planning commercial activities in vulnerable habitats such as wetlands, mines, rivers and lakes and marine areas, since ecosystem integrity may otherwise be disturbed. Moreover, the areas may contain very important or rare species. Commercial activities in such areas may directly or indirectly put further pressure on the environment due to more intensive use of land and living resources, the development of physical infrastructure or increased industrial activity and transport. Public and private sector both together can help to mitigate environmental problems by making their own operations more environmentally friendly and by making efficient use of resources. Companies can play a part by developing innovative processes or technology designed to minimise the use of scarce resources and reduce harmful emissions. Companies can also develop new, greener products and services to replace existing ones. They can make an important contribution by collaborating with their supply chains and requiring their partners to meet high environmental standards. In order to ensure the effective Management of natural resources, Indian companies have to adopt the way that Norwegian corporate sector has carved. They believe... If, instead, corporations were to analyze their prospects for social responsibility using the same frameworks that guide their core business choices, they would discover that CSR can be much more than a cost, a constraint, or a charitable deed it can be a source of opportunity, innovation and competitive advantage Michael Porter, Harvard Business School. In order to crystal gaze the future of CSR in India and take time bound steps to mainstream it, there is a need for creation of awareness about CSR amongst the general public to make CSR initiatives more effective. Appropriate steps be undertaken to address the issue of building effective bridges amongst all important stakeholders for the successful implementation of CSR initiatives. Further, taking Norway as an illustration, sound CSR policy in consultation with the private sector involved directly in CRS initiatives will be the great step in this direction. BIBLIOGRAPHY 1. Andrew J. Green Public Participation and Environmental Policy Outcomes, Canadian Public Policy-Analyse De Politiques. 1997, 4: 435-448
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2. 3. 4. 5. 6. 7.
Global Compact Society (2004): The first Annual Report for 2004-05 (including Nov 03Mar04); online: http://www.unglobalcompact.org/content/Outreach/gc_india_ ar.pdf Harrison, Kathryn. Is Cooperation the Answer? Canadian Environmental Enforcement in Comparative Context, Journal of Policy Analysis and Management, 1995, (14):221245. Jonathan H. Adler. Free and Green: A New Approach to Environmental Protection. Harvard Journal of Law and Public Policy, 2001, 24 http://www.regjeringen.no/en/dep/ud/Documents/Propositions-and-reports/Reports-tothe-Storting/2008-2009/report-no-10-2008-2009-to-the-storting/2.html?id=565917 Corporate Social Responsibility Practices in India - E-book, Times Foundation, The Times of India Group www.indiatimes.com. Survey: Call for More Corporate Responsibility in India Nielsen news nielsen.com. June 30, 2009
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A Study on the Growth Prospects of the Infra-structure Sector in India, and Contribution of Mutual Funds in Development of Infrastructure sector
Ms. Pooja Gupta
Asst.Prof. Vidya Niketan Samiti Bhopal (M.P.) India
EXECUTIVE SUMMARY Indian corporate has been reporting a strong growth and earnings in recent years, inspite that the world has been hit by a great blow of sub-prime financial crisis. India witnessed the hot waves of recession in August 2007. However, in order to push through the double-digit growth barrier in the coming years, the country has the prime requirements for much higher investments in both public and private sector in infrastructure development to support the fastest growing industry and services sectors and boost the economic developments of the country. Due to the rapid expansion of the IT and ITES, the country has witnessed a remarkable shift in the middleclass income slab reflected in the 8.80% GDP reported in the last quarter of 2010. Infrastructure is the 2nd largest contributor, towards the GDP and amongst the top 3 rd segments for generating employment in the country. Infra-structure investment in India lures heavy weight investors with its lucrative returns. The aim of this paper is to study the impact of infrastructural development in the country, on the growth of economy and point-out the contribution of the Mutual fund industry in mobilizing the household savings to meet the infra-structure needs of the country. It also incorporates the analysis of the investment portfolios of the top infra-structure companies in the market and finally the performance evaluation of top Mutual Funds in the infrastructure sector reflecting the small investors sentiments to participate in the infra-structure mutual funds to take advantage of the high returns during the recessionary blow to the stock market. Key Words: Infrastructure, Gross Domestic Product, Infrastructure Mutual Funds, Public sector, Private sector, Risk, Return.
INTRODUCTION
Indian corporate has been reporting a strong growth and earnings in recent years, inspite that the world has been hit by a great blow of sub-prime financial crisis. India witnessed the hot waves of recession in August 2007. However, in order to push through the double-digit growth barrier in the coming years, the country has the prime requirements for much higher investments in both public and private sector in the area of power generation, transportation and
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communication networks together with the real estate in order to support the fastest growing industry and services sectors and boost the economic developments of the country. India is the 4th largest economy in the world and has the 2 nd highest GDP among the developing nations based on the purchasing power parity. Due to the rapid expansion of the IT and ITES, the country has witnessed a remarkable shift in the middle-class income slab reflected in the 8.80% GDP reported in the last quarter of 2010.
Source: Tradingeconomics.com; India Central Statistical Org. After agriculture, infra-structure is the 2 nd largest contributor, towards the GDP. The household consumption continues to be the key growth driver for the Indian economy, estimated as 65% of GDP supported by an upward movement for housing demand, thereby creating buoyancy in Infra-structure market. Infra-structure sector is amongst the top 3 rd segments for generating employment in the country. Infra-structure investment in India lures heavy weight investors with its lucrative returns. It is estimated that a similar investment in developed countries would fetch a return of 3%-4% whereas it fetches 12%-15% in India. According to the report generated by Department of Industrial policy and promotion (DIPP) the realty sector is expected to reach the size of US$ 180bn (INR 8010.03 billion) by 2020. LITERATURE REVIEW The severity of the current crisis can be gauged by the steep decline in the equity markets of advanced economies. The bursting of the sub-prime housing bubble caused Wall Street to lose a staggering US$8 trillion in market capitalization in a very short time (Brunnermier 2009). However, the India economy has been growing steadily with investment being the major drive for sustenance and revival from the recessionary blow (Asuncion-Mund, J.) (2005). A well developed financial market is required for creating a balanced financial system to facilitate
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economic activity and growth by mobilising savings from surplus sector to deficit sector (Machiraju, 2002). According to (Turan and Bodla, 2001) the growth of Mutual Funds (MF) in India in terms of resource mobilization, promotion of various types of schemes and NAV based risk and return has impacted the investors sentiments. The study reveals that mutual fund industry has registered a sharp rise in term of resource mobilization during the period 19901991 to 1997-1998. According to Planning Commission of India, the country needs a tremendous support of both the private and public investment for the development of the infrastructure to boost the growth rate of the economy. The latest plans to tackle Indias inadequate infrastructure present novel ways for investors to access growth, the study conducted by (Tetsuya Kamiyama, 2007) provided an overview of the assets managed within India's mutual fund market, both now and in the past, and of the legal framework for mutual funds, and then discussed the current situation and recent trends in financial products. Mutual Funds industry has moved ahead in capturing the market for mobilizing investment from the small investors and adapted the strategies to meet the current requirements (Prateek Motwani, 2008). Mutual funds have been an attraction for small investors as MFs have the ability to change their risk levels significantly over time and investor take the advantage of the change in the risk and return parameters indicated in the performance of the Mutual Funds, (Jennifer C. Huang, Clemens Sialm, 2008). OBJECTIVES The aim of this paper is to study the impact of infrastructural development in the country, on the growth of economy and point-out the contribution of the Mutual fund industry in mobilizing the household savings to meet the infra-structure needs of the country as reflected by various economic indicators, thereby making the sector lucrative for the investors, both big and small. As mentioned in the literature review, the paper develops an understanding on the infrastructure sector in India, during pre and post-recession. It also incorporates the analysis of the investment portfolios of the top infra-structure companies in the market and finally the performance evaluation of top Mutual Funds in the infrastructure sector reflecting the small investors sentiments to participate in the infra-structure mutual funds to take advantage of the high returns during the recessionary blow to the stock market. HYPOTHESIS The study in this paper aims to establish an understanding towards the below mentioned hypothesis; a. There is a significant correlation between Infra-structure development and growth rate of economy. b. There is a significant correlation between Infrastructure Mutual Funds and Infrastructure development.
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c.
There is significant correlation between high returns and high risk associated with investment in Infrastructure Mutual Funds.
RESEARCH METHODOLOGY The present study is based on analytical and exploratory nature. The use of secondary data as well as primary data has been made to support the study. The present study is based primarily on the secondary data as the factors presented in the paper are the Macro-economic factors for which the secondary data is more reliable and suitable. Data Collection and Analysis Tools: The data has been collected through the various secondary sources including the websites of Reserve Bank of India, Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, Central Statistical Organization, reports of Union budget of India, Foreign Direct Investment (FDI) fact reports, BSE and NSE stock market, Indian Infrastructure reports. The tools applied in the paper for evaluating mutual fund performance includes Treynors ratio, Sharpes ratio, Jensens alpha, Beta, standard deviation, correlation, The collected data have been tabulated and condensed to draw meaningful interpretations and conclusions by analyzing and presenting the same in tables, percentages and graphs. Pre-recession conditions of the Infra-structure: The Infra-structure investment market in India is considered to be an unorganized and segmented market with small number of players marked with lack of transparency related to unaccounted money and unscrupulous means of acquiring various regulatory approvals. Before recession, the Indian Infra-structure sector has been at a booming stage, as a result of factors related to off-shoring and outsourcing business resulting from the IT/ITES and BPO companies which have improved the demands of providing housing and other infrastructure facilities for its employees. The Infra-structure business was greatly supported by Private Equity Funds and investments by NRIs and HNIs thus creating a platform for developer and Infra-structure player to expand their portfolio in supplying residential, office or commercial spaces. The MNCs explored our country to set-up their organizational operation houses to take advantage of lower manpower and other costs. Special Economic Zones have also provided opportunity for the investors and corporate to invest in realty sector and get benefited by the booming Infrastructure market in India.
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On the contrary, the lower aversion to debts had fuelled the then prevalent credit growth trajectory. The banks had been optimistic in lending due to falling interest rates inducing the feeling of treating debt has a support instrument for investment in housing rather than a burden. Together with the decline in the effective rate of interest, as a result of favorable tax structure by the government offering fiscal concessions on interest payments and principal repayments, led to increase in effective spending and increase in consumption demand.
Source: Merrill Lynch
Source: Primary Real Estate Advisors Pvt. Ltd.
India has also seen a robust growth in the housing finance market since 1998-2005, resulting in a 70% annual growth rate to have achieved Rs.569 billion in 2003-04 from Rs.107 billion in 1998-99, giving strong support to the change in the attitude of Indian consumers. A strong support was also offered by the banks with their increase exposure to financing construction sector indicating the growing confidence in the developers and their projects.
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Source: CRIS, INFAC
Source: CMIE
The government has been proactive during this period of development by offering fiscal schemes of concession in interest and principal repayments, benefits to developers, rationalization of stamp duty and removal of Urban land Ceiling Act in 9 states. During this period, government also initiated the National Urban renewal Mission allocating the budget of Rs.55 billion. It also opened the doors for FDIs to invest in realty development projects upto 100%. It has been working on developing Infra-structure Investment Trust (REIT) regulations to smoothen the approach for much needed capital for growth of the sector.
Source: RBI and Ministry of Finance.
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Table 1: Number and Value of Deals of PE and VC in 19962006 (in US$ million) Year Number of Deals Value of Deals 1996 1997 1998 1999 2000 2001 2002 2003 2004 5 18 60 107 280 110 78 56 71 2005 146 2006 299
$20 $80 $250 $500 $1,160 $937 $591 $470 $1,650 $2,183 $7,460
Source: Evalueserve, IVCA and Venture Intelligence India www.eurekahedge.com/news/07_dec_Evalueserve_An_Indispensable_Guide_to_Equity.asp However, as a result of growing economy & business, the boom in the Infra-structure sector had been restricted to few areas of real-estate. During this phase the realty sector also suffered with the lack of competent and skilled players, lack of statistical data to analyze the trend in demand and supply, facts and figures to understand the current position of the construction business and to provide low-cost affordable housing. The most immediate effect of the crisis on India has been an outflow of FII funds from the equity market. In 2007-08, net FII inflows into India amounted to $20.3 billion. As compared with this, they pulled out $11.1 billion during the first nine-and-a-half months of calendar year 2008, of which $8.3 billion occurred over the first sixand-a-half months of financial year 2008-09. Given the importance of FII inflows in driving Indian stock markets, the pullout triggered a collapse in stock prices. As a result, the Sensex fell from its peak of INR 21,206 in January 2008 to less than INR 10,000 by October 2008. The recession has tremendously affected the stock market and shattered the confidence of the investor in the recent past. The decline in the BSE Sensex and NSE indices could be attributed to the aftermath of the recessionary blow.
Annexure 1 NSE and BSE India
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Post-recession conditions of the Infra-structure: With the blow of recession the impact could be seen on the steep decline in the GDP of the country from 8.5% in March 2008 to the lowest of 5.8% in March 2009. However, various strategies have been developed to regain the momentum in the economy, with a prominent mention to the efforts of the government to boost the demand for industrial goods and fulfill the rising needs of infra-structure to put the country back on the growth trajectory. The impact of the Public-Private Partnership (PPP) has contributed significantly to the rise in GDP to 8.80% in July, 2010.
Source: Tradingeconomics.com; India Central Statistical Org. Together with the governmental efforts, the capital market watch-dog, Security Exchange Board of India (SEBI) has join hands in issuing guidelines for attracting investment in Infra-structure through establishing Infra-structure Mutual Funds (REMF). With the growing need to build strong infra-structure, SEBI is optimistic about opening new vista of investment amounting to US$ 12 billion which is expected to grow 30% Y-O-Y. These REMF shall initially be a closeended fund with the primary objective of investing 65% of the fund directly in the realty sector, which has a market capitalization of Rs.138,820.32 cr. which is 1.95% of the total BSE market capitalization.
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Annexure 2 BSE India As per the Securities and Exchange Board of India (SEBI), number of registered FIIs as on January 29, 2010 was 1697 and the cumulative investments in equity (since November 1992 to January 29, 2010) was US$ 72.51 billion.
Source: Indian Union Budget 2009-10 The chart below indicates the FDI inflow in the country as a contribution towards the various infra-structure sectors including Housing and real-estate sector, Construction, Telecommunication and Power industries for attracting FDI followed by.
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Source: DIPP: India FDI fact sheet 2008 and 2010 and RBI, Annexure 3 The opportunities for private investment in infrastructure projects are immense. As the reach of Public-Private Partnership (PPP) increases across the sectors, the capacity of the private sector to manage these projects over their entire life cycle of 20 to 30 years would also have to be enhanced. Government of India (GOI) now allows FDI in most infrastructure sectors to the extent of 100%. The time is ripe for the foreign strategic investors to begin to taking greater interest in project development and management activity in India. The 11th Five Year Plan (20072012) of the Planning Commission envisages a growth rate of 8.5% during the plan period with focus on infrastructure development including road, rail, air & water transport, power generation, power transmission & distribution, telecommunications, water supply, education and storage will see increased investment from 4.6% of GDP in the 10th Five Year Plan to between 7 to 8 % in the 11th Five Year Plan. To achieve a target GDP growth rate of 9% set by the Planning Commission, gross capital formation (GCF) in infrastructure should rise to 9% of GDP by the end of 2012. This equates to an increase of GCF from 2,598 billion rupees in 2007-08 to 5,740 billion rupees in 2011-12. If achieved, the 11th Five-Year Plan period (2007-12) will result in an aggregate GCF of 20,115 billion rupees (US$447 billion at an exchange rate of 45rupees/U.S. dollar). As a result, India shall witness a high infrastructure investment levels in year to come,
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The market is optimistic about the rise in the private sector investment, together with public sector, in financing infra-structure projects.
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Contribution and Performance of Infrastructure Mutual Funds: The planned investments for the infra-structure sector in the 11 th Five Year Plan are more than the double level as that in 10th Five Year Plan, targeting the flow of money from the public, private and foreign direct investment. A sustainable and long-term shift to 9-10% GDP growth rate is only possible if the country is able to channel large investments in infrastructure creation. India is a country of savers, with the household saving rate to GDP hovering around the 30% mark which is pre-dominantly captured and channelized by Bank deposits, Small Savings Schemes, Insurance etc., However, with the advent of Mutual Funds the household savings have been increasingly directed towards investment into the listed equity and debt markets. Mutual Funds can invest through the listed equity route in infrastructure companies. At present there are around 11 infra-structure focused Mutual Fund Schemes operating in the nation, with the major investment in listed companies that either,
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Own or operate infrastructure assets, or Provide services to the companies operating infrastructure assets, or Are involved in the value chain in the creation of infrastructure assets.
This route of investments in infrastructure has done well in terms of garnering assets. The average assets under management (AUM) of the mutual fund industry stood at US$ 173.16 billion for the month of December 2009, an increase of nearly 88 per cent from US$ 91.79 billion in December 2008, according to the data released by Association of Mutual Funds in India (AMFI). Funds raised by the Indian corporate sector via ADRs/ GDRs has jumped over 33 times from around US$ 101.72 million in 2008 to about US$ 3.50 billion in 2009. The main players in the infra-structure mutual funds include both private and public organizations viz., Reliance, Kotak, Tata, Taurus, AIG, Birla Sunlife, HDFC, IDFC, SBI, Canara Rebaco, UTI and LIC. Among the several categories of the investment avenues available in mutual funds viz., income, growth or balance, the growth funds aims towards generating capital appreciation by investing in growth stocks. They focus on companies that are experiencing significant earnings or revenue growth, rather than companies that pay-out dividends. These rapidly growing companies will continue to increase in value, thereby allowing the fund to reap the benefits of large capital gains. In general, growth funds are more volatile than other types of funds, rising more than other funds in bull markets and falling more in bear markets. These funds are mainly for investor looking for higher return to their investments. The paper has limited the studied towards the contribution of Equity Diversified Infrastructure growth (G) MFs of public and private sector to get high return and boost infrastructure developments. Following chart reflects the percentage of the investment made by various public sector and private sector Mutual Funds in the various infrastructure activities. The total fund size investment in the equity diversified Infrastructure growth funds of the public sector MFs amounted to INR 3386.42 cr. and the total fund size investment of the private sector MFs amounted to INR 4557.21 cr.
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Table 1
Public Sector Mutual Funds Sector Allocation (%) LIC (Fund Size SBI (Fund Size INR 208.42 cr.) INR 1430.16) Auto & Auto 17.2 Ancillaries 5.95 Agriculture 1.84 1.72 Banks Construction and Infrastructure Construction materials Consumer Durables and Electronics Current Assets Engineering and Capital Goods FI HFC Mining and Minerals 17 Banks Construction and Infrastructur e Construction materials Consumer Durables and Electronics Current Assets Engineering and Capital Goods Media and Entertainme nt NBFC Petroleum, Gas & petrochemic al products Power & Control equipment Manufacture r 13
Canara Robeco (Fund Size INR 166.23 cr.) Banks Chemicals Construction and Infrastructure Construction materials
UTI (Fund Size INR 1581.61) Banks Construction and Infrastructure Construction materials Consumer Durables and Electronics 1.97 8.13
8.31 4.85
3.81 2.94
5.09 5.78
6.28 4.53
Current Assets Electronics & Electrical Equipments Engineering and Capital Goods Miscellaneous Paper and Natural fiber Petroleum, Gas & petrochemical products Power & Control equipment Manufacturer
1.34 2.1 0.39 0.26 1.09
1.07 0.8 8.93 0.5 5.27
1.87 2.89 16.3 2.44 3.46
Current Assets Engineering and Capital Goods FI Mining and Minerals Non Ferrous metals Petroleum, Gas and petrochemical products Power & Control equipment Manufacturer Power Generation
2.48 11.2 5.15 0.83 4.5
23.3
2.52
12.4
16.2
8.02
Power Generation
5.76
Non Ferrous metals Petroleum, Gas and petrochemical products
3.61
7.33
10.5
17.6
Realty
2.75
3.94
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Power Transmission
2.63
Realty Steel and Ferrous Metal
3.62 1.36
Pharmaceutical s& Biotechnology Power & Control equipment Manufacturer Power Generation
1.63
Software and Consultancy Services Steel and Ferrous Metal Telecom Services Transportati on, Supply Chain and Logistics Services Utilities Gas, Power
1.45
Power Transmission
6.56
6.54 0.45
2.92 4.02
Realty Steel and Ferrous Metal
0.13 5.8
Telecom Services Tourism and Hospitality Transportation, Supply Chain and Logistics Services Utilities - Gas, Power
7.98
Power Transmission
1.52
8.02
2.03 3.78 4.3
Realty Shipping Steel and Ferrous Metal Telecom Services Tourism and Hospitality Utilities - Gas, Power
1.34 0.55 10 3.8 1.9 2.25
8.44
Telecom Services Transportation , Supply Chain and Logistics Services Utilities - Gas, Power
4.63
1.61 5.6
Private sector Mutual Funds Sector Allocation (%) AIG (Fund Size INR 182.09 cr.) Airliners Banks Construction and Infrastructure Construction materials 2.82 5.68 0.15 7.16 Sahara (Fund Size INR 11.94 cr.) Agriculture Auto & Auto Ancillaries Construction and Infrastructure Current Assets 2.39 4.78 7.84 2.25 HDFC (Fund Size INR 1618.01 cr.) Auto & Auto Ancillaries Banks Construction and Infrastructure Consumer Durables and Electronics 5.41 32.7 11.6 1.68
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Current Assets Electronics & Electrical Equipments Engineering and Capital Goods Fertilizers, Pesticides & Agrochemicals Petroleum, Gas and petrochemical products Power & Control equipment Manufacturer Steel and Ferrous Metal Transportation, Supply Chain and Logistics Services Utilities - Gas, Power
11.3 5.51 17.3
Electronics & Electrical Equipments Engineering and Capital Goods HFC Petroleum, Gas and petrochemical products Power & Control equipment Manufacturer Power Generation Power Transmission Printing, Publishing and Packaging Realty Telecom Services Utilities - Gas, Power
4.06 23.8 2.41
Current Assets Engineering and Capital Goods HFC
4.9 8.43 1.98
6.33
18.4
Media and Entertainment Petroleum, Gas and petrochemical products Pharmaceuticals & Biotechnology Power & Control equipment Manufacturer
4.77
10.5 15.2 3.22
9.19 2.65 4.69
11.9 1.14 5.4
3.49 11.4
2.39 5.02 4.36 5.85
Power Generation Power Transmission Transportation, Supply Chain and Logistics Services
5.22 3.2 1.63
Table 2:
Private Sector Mutual Funds Sector Allocation (%)

Birla Sunlife (Fund Size INR 573.88 cr.) Auto & Auto Ancillaries Banks Construction and Infrastructure 5.05 16.2 7.07 Tata (Fund Size INR 2146.03 cr.) Taurus (Fund Size INR 25.26 cr.) Auto & Auto Ancillaries Banks Construction/ Infrastructure 6 1.9 12
Auto & Auto Ancillaries

Banks Construction and Infrastructure
1.35 19.1 5.13
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Construction materials Consumer Durables and Electronics Current Assets Electronics & Electrical Equipments Engineering and Capital Goods FI HFC Industrial Products Miscellaneous Petroleum, Gas and petrochemical products Power & Control equipment Manufacturer Power Generation Power Transmission Realty Steel and Ferrous Metal Telecom Services Tourism and Hospitality Transportation, Supply Chain and Logistics Services Utilities - Gas, Power
2.42 3.09 2.31 1.54 9.05 1.6 1.56 1.63 0.68 7.15 8.89 3.2 7.21 3.89 4.84 1.55 0.81
Construction materials Consumer Durables and Electronics Current Assets Engineering and Capital Goods FI HFC Industrial Products Non Ferrous metals Petroleum, Gas and petrochemical products Power & Control equipment Manufacturer Power Generation Power Transmission Shipping Steel and Ferrous Metal Telecom Services Telecommunications Equipment Manufacturer Transportation, Supply Chain and Logistics Services
1 4.32 0.56 11.1 3.93 6.55 0.17 2.81 11 8.93 2.66 5.12 0.44 5.24 3.87 1.29 0.97
Current Assets Engineering and Capital Goods FI Media and Entertainment Merchant Trading Non Ferrous metals Petroleum, Gas and petrochemical products Power & Control equipment Manufacturer Power Generation Shipping Software and Consultancy Services Steel and Ferrous Metal Utilities - Gas, Power
6.5 10 3.8 4.6 5.5 8 15 5.3 4.5 4.1 4.1 3.1 5.3
0.78 9.47
Utilities - Gas, Power
4.47
Data Analysis and Interpretation:
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The table below indicates the contribution of Infrastructure in the Gross Domestic Product at factor cost of the country, both in INR terms and in percentage.
New Series at 1999-2000 prices

Agriculture, Forestry & fishing, Mining & Quarrying
In Rupees cr. 199900 200001 200102 200203 200304 200405 200506 200607 200708
488109 487992 516584 486134 531302 535501 566278 591353 619121
Year
Manufacturi ng, Constructio n, electricity and water supply

In Rupee s cr.
410646 438372 450723 481758 519322 574072 635223 706280 766358
Trade, hotels, transport & communicat ion

In Rupee s cr.
387514 415650 453847 496691 556370 615849 690399 778895 875398
Finance, insurance, real-estate and financial services

In Rupees cr.
233550 243048 260737 281550 297250 323080 359888 409472 457584
Public administrati on & Defense and other services

In Rupees cr.
266707 279239 290715 302153 318514 340266 364313 385118 411256
GDP at factor cost

In Rupees cr.
1786526 1864301 1972606 2048286 2222758 2388768 2616101 2871118 3129717
In (%)
2.7 0 5.9 -5.9 9.3 0.8 5.7 4.4 4.7
In (%)
4.7 6.8 2.8 6.9 7.8 10.5 10.7 11.2 8.5
In (%)
8.2 7.3 9.2 9.4 12 10.7 12.1 12.8 12.4
In (%)
9.2 4.1 7.3 8 5.6 8.7 11.4 13.8 11.7
In (%)
11. 7 4.7 4.1 3.9 5.4 6.8 7.1 5.7 6.8
In (%)
6.4 4.4 5.8 3.8 8.5 7.5 9.5 9.7 9.0
The table indicates the Gross Domestic savings and Gross Capital Formation as a % of GDP reflecting the increase in savings of the various sectors of the economy, channelized through efficient financial market system, to improve the capital formation of the country and consequently leading to the rising in the GDP of the country.
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Year 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Gross Domestic Saving as a % of GDP Household Private Public Total 21.10 4.50 -0.80 24.80 21.60 3.90 -1.80 23.70 22.10 3.40 -2.00 23.50 22.90 4.00 -0.60 26.30 24.10 4.60 1.10 29.80 22.80 6.70 2.20 31.70 24.10 7.70 2.40 34.20 24.10 8.30 3.30 35.70 24.30 8.80 4.50 37.60
Gross Capital Formation as a % GDP Public Private Total 6.60 16.80 23.40 6.50 16.30 22.80 6.50 17.10 23.60 6.30 17.60 23.90 6.50 18.50 25.00 6.40 22.00 28.40 7.00 24.00 31.00 7.60 24.90 32.50 8.30 25.70 34.00
Infrastructure contribution to GDP in % 22.1 18.2 19.3 24.3 25.4 29.9 34.2 37.8 32.6 Correlation
GDP at Factor cost in % 6.4 4.4 5.8 3.8 8.5 7.5 9.5 9.7 9.0 0.84
GDS as a % of GDP 28.50 22.60 25.10 28.10 33.90 37.40 43.70 47.50 41.60 0.90
GCF as a % of GDP 34.90 27.00 30.90 31.90 42.40 44.90 53.20 57.20 50.60 0.94
Thus, the first hypothesis stands true, as indicated by high positive correlation between Gross Domestic Product, Gross Domestic Savings, Gross Capital Formation and Infrastructure sector contribution to GDP. For the second hypothesis, the sector allocation (%) of various public and private sector schemes in the equity diversified infrastructure (G) has been presented in the Table 1 and 2. It could be inferred that the growing number of participation of both public and private sector funds is resulting in increase in infrastructural developments in the country.
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To justify the third hypothesis the risk-return scenario for various public and private sector MFs in equity diversified Infrastructure (G) has been analyzed.
Infra structure growth fund (G) Risk (%)

Funds Mean Standard Deviation Sharpe Beta Treynor Sortino Correlatio n Fama Public Sector Funds Canara Robeco LIC SBI UTI -0.56 -0.52 -0.72 -0.64 5.98 -0.11 0.96 -0.69 -0.20 0.95 0.07 5.66 -0.11 26.34 -0.02 -0.20 26.43 -8.01 6.05 -0.14 27.66 -0.03 -0.24 27.50 -8.72 4.47 -0.17 0.75 -0.99 -0.29 0.75 -0.18 AIG -0.86 5.09 -0.19 0.79 -1.22 -0.33 0.78 -0.34 Private Sector Funds Birla Saha Sunlife HDFC ra Tata -0.63 -0.63 -0.56 -0.64 5.46 -0.13 0.88 -0.83 -0.24 0.88 -0.06 5.38 -0.14 26.78 -0.03 -0.24 26.62 -7.76 4.49 -0.15 26.42 -0.03 -0.26 26.43 -6.52 5.52 -0.14 0.94 -0.79 -0.24 0.93 -0.05 Taur us -0.76 6.81 -0.13 35.30 -0.02 -0.23 35.24 -9.74
Infrastructure growth fund (Returns %)

Funds 1 Month PRIVATE SECOTR PUBLIC SECTOR Canara Robeco LIC SBI UTI AIG Birla Sunlife HDFC Sahara Tata Taurus 1.06 0.36 -0.53 0.4 0.91 0.73 0.34 -1.12 0.38 1.01 3 Months 8.85 9.79 7.73 6.1 7.24 9.12 12.81 3.27 9.45 9.11 6 Months 12.06 9.97 7.32 5.74 7.58 10.25 17.93 3.99 12.4 10.39 1 Year 24.45 14.57 11.82 12.32 21.45 24.5 28.76 6.91 19.95 19.75 3 Years 2.34 NA -5.14 -5.19 NA 1.88 NA 1.36 0.67 3.35 5 Years NA NA NA 19.99 NA NA NA NA 24.49 NA Since Inception 20.29 1.95 3.74 22.82 0.12 15.27 11.8 13.44 25.88 13.63
In the public sector funds, UTI and Canara Robeco is a hot commodity which has offered the highest return of 22.82% & 20.29% each within 5 & 3 years of its inception, and a positive Famas alpha 0.07 of Canara Robeco has outshined UTI with -0.18, indicating an above average
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return, together with a high positive correlation of 0.95 with market returns and below 1 beta of 0.96, indicating it as less risky in terms of market risk. UTI inspite having the lowest beta of 0.75 among all the public sector funds making it less risk in terms of market risk loses attraction due to negative Famas alpha of -0.18 indicating less than average return. Taking in view the private sector funds, Tata offers higher returns of 25.88% since 5 years of its inception with a high positive correlation of 0.93 with the market return and beta of 0.94, indicating it as less risky in terms of market risk, however, a negative Famas Alpha of -0.05 indicates a below average returns. Birla Sunlife has offered 15.27% within 3 years of its inception, with a moderate positive correlation of 0.88 with the market returns, beta of 0.88 indicating it as less risk, a negative Famas Alpha of -0.06 indicates a below average performance. Taurus has offered a return of 13.63% within 3 years of its inception; however, this fund has been highly volatile and risky as measured in terms of beta of 35.50 and has the highest negative Famas alpha of -9.74 reflecting a below average return performance. Thus, it could be inferred that private infrastructure funds offer higher returns but are highly risky investments, in comparison to the interest rate offered by banks ranging between 9% - 6% in past 5 years, on the most popular instrument of Fixed Deposits among the household sector. Hence, the third hypothesis also stands true. CONCLUSION AND SUGGESTIONS Standard & Poor's (S&P) Ratings Services said that it revised the outlook on India to stable from negative. At the same time, it also affirmed the 'BBB-' long-term and 'A-3' short-term sovereign credit ratings on India. The S&P rating services confirmed that India's fiscal position could now begin to recover and that its economy will remain on a strong growth path. The government of India (GOI), in the next five-year plan starting from 2013, has included $1 trillion towards the infra-structure development, of which around half to be contributed by the Private Funds, thus allowing an expenditure of around $300 billion to be spent in FY11 and FY12. The GOI has taken the charge to streamline its policies to allow bigger role to be played by private sector, by allowing the set-up of special units to quickly resolve the issues related to land acquisition, re-drafting of the Engineering, Procurement and Construction (EPC) projects, to make it easier for private sector to tender, and also offered wider opportunities for the investors. The infrastructure sector in India shall continue to witness significant action during the11th Five Year Plan and 12th Five Year Plan (2012-17) with an expected outlay of INR 40 lakh cr. as against INR 20 lakh cr. in the 11th Five Year Plan. REFERENCES
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1. 2. 3. 4. 5. 6. 7. 8. 9.
Asuncion-Mund, J. 2005 India rising: A medium-term perspective. Deutsche Bank Research. Current Issues. June 3, 2005. Frankfurt am Main. Huang, Jennifer C. - Sialm Clemens, 2008 Risk shifting and Mutual Fund Performance, NBER Working Paper No.w14903 India FDI fact sheet 2008, India FDI fact sheet 2010 International Research Journal of Finance and Economics - Issue 24 (2009) 243 Machiraju 2002-2007 Indian Financial System, Vikas Publishing House Pvt. Ltd., 3rd edition, New Delhi. Prateek Motwani, 2008, Indian Mutual Fund Industry- The Road Ahead!!!!, The International Journal of Business and Finance, Vol.2 Report on Indian Construction by IHS Global Insight 2009. Turan and Bodla, (2001) Performance Appraisal of Mutual funds First Edition Excel Books Publications, New Delhi. Tetsyua Kamiyama (2007), Indian Mutual Fund Industry, Nomura Capital Market Review, Vol. 10, No. 4, Japan.
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Customer Awareness of B2C in Electronic Commerce: Urban V/S Metro

Mr. Zeeshan A Siddiqui, Ms. Divya Devasia BSSS College, Bhopal EXECUTIVE SUMMARY The B2C i.e. Business-To-Consumer electronic commerce is increasingly prevalent in metros, but the depiction is less complete in urban. The deficit of a reliable telecommunications infrastructure, less common acceptance of credit card payments, and prohibitively expensive computers and Internet access may cause consumers in such regions to view business-toconsumer electronic commerce differently. Differences in their perceptions of the characteristics of business-to-consumer e-commerce were analyzed. The results indicate that compatibility and visibility were perceived differently by the samples. Key Words : B2C, Compatibility, Complexity, Visibility.
INTRODUCTION The Electronic commerce known as e-commerce is "any form of economic activity conducted via electronic connections"9. Although a relatively recent phenomenon, an amazing variety of goods are available for purchase over the Web. Web shopping provides several benefits for consumers such as easier product and outlet comparison that to without driving from store to store, lower prices, and the convenience of shopping from home. B2C e-commerce is growing at a phenomenal rate in metros. Falling computer prices, excellent telecommunication infrastructures in metro cities, almost omnipresent credit card systems, and a population comfortable with catalog buying are some of the factors that may add fuel to this growth. B2C e-commerce is growing so rapidly that it is difficult to estimate its future impact. It is estimated that metro alone has the highest attraction towards these kinds of activities. 4 While the future of B2C e-commerce in developed areas such as Bangalore, Chennai, Mumbai etc appears bright, consumers in other cities, urban cities face a number of obstacles that may impact their participation in e-commerce. Some of the barriers to e-commerce in urban include:

Relatively expensive personal computers and feeble Internet access. 1 Weaknesses in payment (credit card) infrastructure. 1 Weaknesses in transaction dispute resolution systems. 6
131
Weak telecommunications infrastructure.6
Most of these barriers may soon disappear or be reduced with the efforts of the government. Nevertheless, they are serious barriers for today's market, and may lead to urban consumers viewing e-commerce differently. Exploring Customers Behavior Rather than taking a descriptive approach of examining the differences between how urban and metro consumers view B2C e-commerce, diffusion of innovation theory is introduced to guide the investigation.5 Diffusion theory is the study of factors that are thought to influence members of a social system in their decisions to accept or reject particular innovations. It should be noted that this theory is concerned with potential adopters' perceptions of the characteristics of an innovation, rather than some independent expert's opinion. The perceived innovation characteristics of interest in this study are summarized below. Each of them is believed to have positive relationships with adoption, except for complexity, which has a negative relationship to adoption.3,5,&7

Relative advantage: degree to which an innovation is seen as being superior to its predecessor. Complexity: degree to which an innovation is seen as being difficult to us. Compatibility: degree to which an innovation is seen as being consistent with existing beliefs, needs and past experiences. Result demonstrability: tangibility of the outcomes of the use of an innovation. Visibility: degree to which the actual use of the innovation is apparent to others. Image: degree to which the use of an innovation is seen as enhancing the users' social status.
Another characteristic that seems important in the aspect of e-commerce adoption is the perceived trustworthiness of e-commerce merchants. Trust is important in consumers' buying decisions,2 and this should hold true in the case of e-commerce, with trust being positively related to adoption. HYPOTHESIS To check the behavior of customers of urban versus metro in E-Commerce assuming that the two groups are differ in at least one perception. We have taken a hypothesis that the mean vectors comprised of all dependent variables for the two samples are equal can be rejected (p = 0.005), indicating that the two groups differ in at
132
least one perception. Hypothesis tests were then conducted to investigate each dependent variable separately. METHODOLOGY A survey was administered through convenience samples of 60 individuals in metro and 40 individuals in an urban. Survey completion was voluntary, where reliability and validity assessments were made using confirmatory factor analyses. 8 Table 1 presents demographics. The test revealed that urban consumers had significantly fewer years of computer usage (2.3) on average than metro counterparts (8.7) (p < 0.0001). The majority of subjects from each region were enrolled in a business curriculum. Both samples are similar in age and amount of work experience. Demographics or demographic data are the characteristics of a human population. These types of data are used widely in sociology, public policy, and marketing. Commonly used demographics include gender, race, age, income, disabilities, mobility (in terms of travel time to work or number of vehicles available), educational attainment, home ownership, employment status, and even location. Demographic trends describe the changes in demographics in a population over time (for example, the average age of a population may increase or decrease over time). Both distributions and trends of values within a demographic variable are of interest. Table 1: Demographics Sample (n) Age (mean) Years work experience (mean) Years Computer use (mean) Gender M F RESULTS To assess the differences in perceptions of the innovation characteristics and trust between the two samples, multivariate analysis of covariance was performed. Every innovation Urban 40 22.8 1.0 2.3 29 11 Metro 60 21.9 1.1 4.5 40 20 Total 100 22.5 1.2 6.8 69 31
133
characteristic and trust was included as dependent variables, while consumer geographical location was the independent variable. Demographics were included as covariates in the analysis. Table 2 presents the results. The hypothesis that the mean vectors comprised of all dependent variables for the two samples are equal can be rejected (p = 0.005), indicating that the two groups differ in at least one perception. Hypothesis tests were then conducted to investigate each dependent variable separately. Two variables, compatibility and visibility, are perceived differently by the two samples (see Table 2). Multivariate analysis of covariance (MANCOVA) in SPSS: The following steps have to be performed for multivariate analysis of covariance (MANCOVA): 1. 2. 3. 4. 5. Run SPSS and open the data file. Click on the analysis menu and select the multivariate from the general linear model. Select the dependent, independent and covariate variable from the list. Click on option and select the option that you want. Click on ok.
Results obtained are as below: Table 2: MANCOVA Analyses Overall Model Individual tests Variable Compatibility Complexity Relative Advantage Result Demonstrability Status Trust Visibility Significance 0.005 0.029 0.126 0.817 0.221 0.731 0.521 0.004
DISCUSSION AND IMPLICATIONS Urban consumers were similar to their metro counterparts, being enrolled in investigation with respect to age and work experience. Differences existed in the years of computer experience, which was significantly lower for urban consumers. This may be due to the metro education system's inclusion of computers in schools as early as the elementary level. Another difference was that females accounted for only 35% of the urban sample, and still represented 65% of the metro sample. The inclusion of demographics as covariates compensated for this variance when
134
performing hypothesis tests. The analyses indicated that two of the characteristics, visibility and compatibility, were perceived drastically by the samples. Visibility: Visibility of an innovation, in this case B2C e-commerce, concerns the degree to which the actual use of the innovation is apparent to others. Given the prohibitive costs involved in personal computer ownership and Internet access in urban, it is reasonable to believe that urban consumers are likely to use some public facility for Web access. Examples of such facilities would include college computer laboratories, office computers, or Cyber cafs. In these environments, individuals may surf for job relevant information, assignments, or to simply browse pages. However, it is unlikely that one would willingly use these public environments to make Web purchases because others may see the credit card or personal information as it is typed, or because they fear that sensitive information may be recorded on the computer, making the information available to others. It is therefore possible that urban consumers perceive the visibility of the innovation of BTC e-commerce differently since they rarely get to see others conducting such Web transactions. Compatibility: Compatibility is the degree to which an innovation is seen as being consistent with existing beliefs, needs and past experiences. One possible explanation for differences in consumers' perceptions is the difference of how goods and services are acquired in the two cultures. For example, metro consumers are used to making "distance" transactions, such as looking at catalogs and ordering on the phone or catalog order forms. Using the Web to view the merchandise is similar to looking at a catalog, and using the Web forms is similar to filling order forms and sending or faxing them to the merchant. Urban consumers, conversely, may not be as familiar with these distance transactions, and may not find that making purchases over the Web is compatible with their buying behaviors. Other Characteristics: Perhaps as interesting as the significant differences between the two groups are the perceptions that were not significantly different. There were no differences in perceptions of relative advantage, complexity, result demonstrability, image, and trust. These results are somewhat surprising, given the differences in the e-commerce environments and the barriers to the use of e-commerce in the two cases. One possible explanation is that because the urban consumers in this study were all business students they may have had some knowledge of the potential of B2C e-commerce. If so, it is possible that their perceptions are based on the potential, rather than the actual present state of e-commerce in urban. Implications This review has implications for both practitioners and researchers who are interested in ecommerce. For practitioners who wish to enlarge their contributions beyond their national borders can benefit from understanding that consumers in diverse cultures view the characteristics of e-commerce in their own way. This understanding may persuade mutually the design of the e-commerce offering and the method by which it is promoted to consumers.
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Researchers engrossed in global e-commerce can use this research as a starting point from which to view cultures other than urban, or to examine in depth the similarities and differences in urban and metros perceptions of E-commerce. CONCLUSION The web-based shopping is growing at a phenomenal rate in metros. In spite of that, it is imperative to comprehend those barriers to the global electronic commerce, such as feeble telecommunication infrastructures, the puny online payment infrastructures, weak payment dispute resolution systems, and prohibitive computer and Internet access prices exist. Researchers should work on ways to remove those barriers and promote universal access to global electronic commerce. REFERENCES
1. 2. 3. 4. 5. 6. 7. 8. 9.
Banerjee, K. (1997). On-line services in urban: A market analysis, Journal of Computer-Mediated Communication, 3(1). Hosmer, L. (1995). Trust: The connecting link between organizational theory and philosophical ethics. Academy of Management Review, 20(2), 379403. Moore, G. and Benbasat, I. (1991). Development of an instrument to measure the perceptions of adopting an information technology innovation, Information Systems Research, 2(3), 192222. Rao, H., Salam, A., Dos Santos, B.(1998). Marketing and the Internet, Communications of the ACM, 41(3), 3234. Rogers, E. (1995). Diffusion of Innovations, New York: The Free Press. Shankar, V. (1999). Waiting for the e-commerce explosion. The Hindu, March 3. Tornatzky, L. and Klein, K. (1982). Innovation characteristics and innovation adoptionimplementation: A meta-analysis of findings. IEEE Transactions on Engineering Management, 29(1), 2845. Van Slyke, C.; Belanger, F.; and Comunale, C. (1999). Adopting business-to-consumer electronic commerce: The impacts of trust and perceived innovation characteristics, Working Paper, Ohio University. Wigand, R. (1997). Electronic commerce: Definition, theory, and context. The Information Society: An International Journal, 13(1), 116.

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BSSS Journal of Management, Issue-2, Vol.

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

FTTR 0.38 0.37 0.34 0.38 0.40 -0.06 -0.18

TATR 2.2 2.38 2.2 2.42 1.90 -0.44 -0.85

CETR 3.34 3.61 3.33 3.52 2.93 -0.26 0.47

ROI (%) 5.88 7.71 6.12 2.24 6.90

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

CETR 4.6 4.5 3.88 3.75 3.30 0.15 0.26

ROI (%) 1.85 5.55 3.09 1.30 3.63

TABLE- 3 CORRELATION MATRIX Indian Oil Corporation Limited

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

WCR ATR CTTR FTTR TATR CETR ROI

WCR 1.000 0.553 0.731 -0.186 -0.262 -0.080 0.840

1.000 -0.458 -0.542 -0.425 0.651

1.000 -0.400 -0.450 -0.059

1.000 0.980 -0.444

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

WCR ATR CTTR FTTR TATR CETR ROI

WCR 1.000 0.541 0.965 0.741 -0.038 0.367 0.136

1.000 0.563 -0.112 0.331 0.211

1.000 0.441 0.606 -0.089

1.000 0.895 0.168

1.000 0.540 0.743 0.722

1.000 0.952 -0.023

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

Effect CONST ANT FTTR TATR CETR

p-Value 0.710 0.910 0.129 0.143

Effect CONST ANT FTTR TATR CETR

p-Value 0.937 0.991 0.899 0.932

Effect CONST ANT FTTR TATR CETR

p-Value 0.190 0.169 0.373 0.290

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

Micro Finance: A Tool for Economic Empowerment of Women in Kerala

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

112 (56) 55 (27.5) 21 (10.5) 7 (3.5) 4 (2) 1 (0.5) 200 (100)

34 (42.5) 35 (43.8) 8 (10) 3 (3.8) 0 (0) 0 (0) 80 (100)

87 (43.5) 66 (33) 21 (10.5) 11 (5.5) 4 (2) 11 (5.5) 200 (100)

4 (5) 40 (50) 30 (37.5) 6 (7.5) 0 (0) 0 (0) 80 (100)

94 (47) 59 (29.5) 19 (9.5) 8 (4) 13 (6.5) 7 (3.5) 200 (100)

22 (27.5) 17 (21.3) 30 (37.5) 11 (13.8) 0 (0) 0 (0) 80 (100)

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

52 (26.0) 5 (2.5) 3 (1.5) 140 (70) 0 (0) 200 (100)

30 (37.5) 12 (15.0) 14 (17.5) 24 (30) 80 (100)

64 (32.0) 6 (3.0) 4 (2.0) 126 (63) 0 (0) 200 (100)

25 (31.3) 6 (7.5) 15 (18.7) 34 (42.5) 80 (100)

44 (22.0) 1 (0.5) 2 (1.0) 153 (76.5) 0 (0) 200 (100)

19 (23.8) 8 (10.0) 11 (13.7) 42 (52.5) 80 (100)

160 (26.7) 12 (2.0) 9 (1.5) 419 (69.8) 0 (0) 600 (100)

BSSS Journal of Management, Issue-2, Vol.-2 (2011)

Total Non Members

3 (1.50) 39 (19.50) 21 (10.50) 85 (42.50) 52 (26.00) 200 (100)

7 (8.75) 50 (62.50) 0 (0.00) 23 (28.75) 0 (0.00) 80 (100)