Capital market :--A capital market is a market for securities (debt or equity), where business ent erprises (companies)

and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year,Sullivan, ar thur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle R iver,: Pearson Prentice Hall. pp. 283. ISBN 0-13-063085-3. http://www.pearsonsch ool.com/index.cfm?locator=PSZ3R9&PMDbSiteId=2781&PMDbSolutionId=6724&PMDbCategor yId=&PMDbProgramId=12881&level=4. [dead link] as the raising of short-term funds takes place on other markets (e.g., the money market). The capital market inclu des the stock market (equity securities) and the bond market (debt). Money marke ts and capital markets are parts of financial markets. Financial regulators, suc h as the UK's Financial Services Authority (FSA) or the U.S. Securities and Exch ange Commission (SEC), oversee the capital markets in their designated jurisdict ions to ensure that investors are protected against fraud, among other duties. Capital markets may be classified as primary markets and secondary markets. In p rimary markets, new stock or bond issues are sold to investors via a mechanism k nown as underwriting. In the secondary markets, existing securities are sold and bought among investors or traders, usually on a securities exchange, over-the-c ounter, or elsewhere. 1.What are the important laws related to the functioning and operation of ca pital markets in India? Briefly Discuss. Indian Securities Market Before 1992 The Indian securities market before 1992 had the following characteristics: Fragmented regulation; multiplicity of administration. Primary markets not in the mainstream of the financial system. Poor disclosure in prospectus. Prospectus and balance sheet not made available t o investors. Investors faced problems of delays (refund, transfer, etc.) Stock exchanges regulated through the Securities Contracts (Regulations) Act. No inspection of stock exchanges undertaken. FIIs also permitted to invest in unlisted securities and corporate and Governmen t debt. The Depositories Act enacted to facilitate the electronic book entry transfer of securities through depositories. Guidelines for Offshore Venture Capital Funds announced. SEBI regulations for ve nture capital funds become effective. Stock Exchanges run as brokers clubs; management dominated by brokers. Merchant bankers and other intermediaries unregulated. No concept of capital adequacy. Mutual funds virtually unregulated with potential for conflicts of interest in str ucture. Poor disclosures by mutual funds; net asset value (NAV) not published; no valuat ion norms. Private sector mutual funds not permitted. Takeovers regulated only through listing agreement between the stock exchange an d the company. No prohibition of insider trading, or fraudulent and unfair trade practices. Indian Securities Market Since 1992 The development in Indian securities market since 1992 can be summarized as follows: Capital Issues (Control) Act of 1947 repealed and the office of Controller of Capital Issues abolished;

control over price and premium of shares removed. Companies now free to raise funds from securities markets after filing prospectus with the Securities and Exchange Board of India (SEBI). The power to regulate stock exchanges delegated to SEBI by the Government. SEBI introduces regulations for primary and other secondary market intermediaries, bringing them within the regulatory framework. Reforms by SEBI in the primary market include improved disclosure standards, introduction of prudential norms, and simplification of issue procedures. Companies required to disclose all material facts and specific risk factors associated with their projects while making public issues. Listing agreements of stock exchanges amended to require listed companies to furnish annual statement to the exchanges showing variations between financial projections and projected utilization of funds in the offer document and actual figures. This is to enable shareholders to make comparisons between performance and promises. SEBI introduces a code of advertisement for public issues to ensure fair and truthful disclosures. Disclosure norms further strengthened by introducing cash flow statements. New issue procedures introduced book building for institutional investors aimed at reducing costs of issue. SEBI introduces regulations governing substantial acquisition of shares and takeovers and lays down conditions under which disclosures and mandatory public offers are to be made to the shareholders. Regulations further revised and strengthened in 1996. SEBI reconstitutes the governing boards of the stock exchanges and introduces capital adequacy norms for broker accounts. Private mutual funds permitted and several such funds already set up. All mutual funds allowed to apply for firm allotment in public issues also aimed at reducing issue costs. Regulations for mutual funds revised in 1996, giving more flexibility to fund managers while increasing transparency, disclosure, and accountability. Over-the-Counter Exchange of India formed. National Stock Exchange (NSE) establishment as a stock exchange with nationwide electronic trading. Bombay Stock Exchange (BSE) introduces screen-based trading; 15 stock exchanges now have screened-based trading. BSE granted permission to expand its trading network to other centers. Capital adequacy requirement for brokers enforced. System of mark-to-market margins introduced in the stock exchanges. Stock lending scheme introduced.

Transparency brought out in short selling. National Securities Clearing Corporation, Ltd. set up by NSE. BSE in the process of implementing a trade guarantee scheme. SEBI strengthens surveillance mechanisms and directs all stock exchanges to have separate surveillance departments. SEBI strengthens enforcement of its regulations. Begins the process of prosecuting companies for misstatements and ensures refunds of application money in several issues on account of misstatements in the prospectus Indian companies permitted to access international capital markets through Euro issues. Foreign direct investment allowed in stockbroking, asset management companies, merchant banking, and other nonbank finance companies. Foreign institutional investors (FIIs) allowed access to Indian capital markets on registration with SEBI. FIIs also permitted to invest in unlisted securities and corporate and Government debt. The Depositories Act enacted to facilitate the electronic book entry transfer of securities through depositories. Guidelines for Offshore Venture Capital Funds announced. SEBI regulations for venture capital funds become effective Regulatory Framework INSTITUTIONS Securities and Exchange Board of India Securities and Exchange Board of India (SEBI) was set up as an administrative arrangement in 1988. In 1992, the SEBI Act was enacted, which gave statutory status to SEBI. It mandates SEBI to perform a dual function: investor protection through regulation of the securities market, and fostering the development of this market. SEBI has been delegated most of the functions and powers under the Securities Contract Regulation (SCR) Act, which brought stock exchanges, their members, as well as contracts in securities which could be traded under the regulations of the Ministry of Finance (see Figure A3 for the present regulatory structure of the Indian securities market). It has also been delegated certain powers under the Companies Act. In addition to registering and regulating intermediaries, service providers, mutual funds, collective investment schemes, venture capital funds, and takeovers, SEBI is also vested with power to issue directives to any person(s) related to the securities market or to companies in areas of issue of capital, transfer of securities, and disclosures. It also has powers to inspect books and records, suspend registered entities, and cancel registration. Reserve Bank of India Reserve Bank of India (RBI) has regulatory involvement in the capital market, but this has been limited to debt management through primary dealers,

foreign exchange control, and liquidity support to market participants. It is RBI and not SEBI that regulates primary dealers in the Government securities market. RBI instituted the primary dealership of Government securities in March 1998. Securities transactions that involve a foreign exchange transaction need the permission of RBI. Department of Company Affairs In 1947, the Capital Issues (Control) Act was enacted, which formalized and continued initial controls on the issue of securities that were introduced during World War II. This Act was administered by the office of the Controller of Capital Issues (CCI), which was a part of the Ministry of Finance. In line with economic reforms, it was repealed in 1992 to liberalize capital issuance and pricing. While capital issuance used to be regulated by the office of the CCI, both private and public companies were governed by the Companies Act of 1956, which was and continues to be administered by the Department of Company Affairs (DCA) under the Ministry of Law, Justice and Company Affairs. Besides governing the incorporation, management, mergers, and winding up of companies, this Act also specifies certain aspects concerning capital issuance and securities trading, particularly the issue of prospectus for public offers, contents of the prospectus, completion of allotment, issue, and trading of securities, and transfer and registration of securities. Stock Exchanges SEBI issued directives that require that half the members of the governing boards of the stock exchanges be nonbroker public representatives and include a SEBI nominee. To avoid conflicts of interest, stock brokers are a minority in the committees of stock exchanges set up to handle matters of discipline, default, and investor-broker disputes. The exchanges are required to appoint a professional, nonmember executive director who is accountable to SEBI for the implementation of its directives on the regulation of stock exchanges. SEBI has introduced a mechanism to remedy investor grievances against brokers. DISCLOSURE Similar to companies in capital markets in other countries, a company offering securities in the Indian capital market is required to make a public disclosure of all relevant information through its offer documents. These documents are as follows: prospectus, application form and the abridged prospectus (in case of an issue to the public), or letter of offer (in case of a rights issue to existing shareholders or debenture holders of a company with or without the right to renounce in favor of other persons). After a security is issued to the public and subsequently listed on a stock exchange, the issuing company is required under the listing agreement to continue to disclose in a timely manner to the exchange,

to the holders of the listed securities (the shareholders or the bondholders), and to the public (through the exchange or the media), any information necessary to enable the holders of the listed securities to appraise its position and to avoid the establishment of a false market in such listed securities. Such information include: the date of the meeting of the board of directors for corporate actions; the audited financial results on an annual basis and the unaudited ones on a semiannual basis; any proposed change in the general character or nature of the company s business; any alterations of the company s capital; and any change of the company s directorate, including managing directors and auditors. Changes to Capital Markets Regulations On October 25, 2010, SEBI announced a number of changes to regulations governing capital markets. 1. Public offerings. A new regime is being established for IPOs by insurance companies. Rather than i ssue a new set of guidelines for that industry, SEBI has decided to apply the IC DR Regulations, 2009 along with additional industry-specific disclosures such as specific risk factors, overview of the insurance industry and a glossary of ter ms. Other changes in public offering norms include enhancement of a maximum appl ication size for retail individual investors to Rs. 2 lakhs across all issues, t he introduction of mandatory pro forma financial statements for issuer companies that have undergone a merger or restructuring after the last disclosed financia l statements and the removal of a requirement for minimum promoters contribution in a further public offering (FPO). In progressively addressing issues of gun-jumping, SEBI now requires investment banks to submit a compliance certificate as to whether the contents of the news r eports that appear after the filing of the [draft offer document] are supported by disclosures in offer document or not . An item which is noteworthy is the refer ence to news reports appearing in media where the issuer has a private treaty wi th such media group. This will ensure that the securities are sold pursuant to t he offer document, which constitutes the single source of information for market ing purpose as also for legal consequences (such as liability of misrepresentati on). 2. Preferential Issues In a measure that tightens restrictions on issue of securities to promoters, SEB I has provided that promoters (or promoter group) are ineligible to receive equi ty shares, convertible securities or warrants for a period of one year if they h ave failed to exercise previously issued warrants. This will operate as a disinc entive against issue of warrants to promoters and promoter group, and further cu rb the misuse of warrants. For a previous discussion on regulation of such warra nts, see here and here). 3. Rights Issue for IDRs SEBI has proposed a new framework for rights issues for foreign companies that h ave outstanding Indian depository receipts (IDRs). Issuers are required to circu late a wrap document that contains information specific to IDR holders. The leve l disclosures will be similar to that expected in a rights issue by an Indian co

mpany. On a related note, the IDR holders of Standard Chartered were faced with certain legal and regulatory issues regarding their ability to participate in th e bank s recent rights offering, and it is hoped that the new regulatory framework will iron out those issues. Conclusion:--The lack of an advanced and vibrant capital market can lead to underutilization of financial resources. The developed capital market also provides access to the foreign capital for domestic industry. Thus capital market definitely plays a c onstructive role in the over all development of an economy. Question 2. LARGE FIRMS EFFICIENCY The increase in efficiency of production as the number of goods being produced i ncreases. Typically, a company that achieves economies of scale lowers the avera ge cost per unit through increased production since fixed costs are shared over an increased number of goods. There are two types of economies of scale: -External economies - the cost per unit depends on the size of the industry, not the firm. -Internal economies - the cost per unit depends on size of the individual firm. economies of scale gives big companies m to operate with greater geographical medium) companies, however, size does se in size (output) actually causes an led "diseconomies of scale" access to a larger market by allowing the reach. For the more traditional (small to have its limits. After a point, an increa increase in production costs. This is cal

Economies of scale are reductions in average costs attributable to production vo lume increases. They typically are defined in relation to firms, which may seek to achieve economies of scale by becoming large or even dominant producers of a particular type of product or service. A distinction can be made between interna l and external economies of scales. Internal economies of scale occur when a fir m reduces costs by increasing production. External economies of scale occur when an entire industry benefits from expansion; for example, through the creation o f an improved transportation system, a skilled labor force, or by sharing techno logy. Economies of scope are reductions in average costs attributable to an increase i n the number of goods produced. For example, fast food outlets have a lowe+r ave rage cost producing a multitude of goods than would separate firms producing the same goods. This occurs because the preparation of the multiple products can sh are storage, preparation, and customer service facilities (joint production). ECONOMIES OF SCALE The basic notion behind economies of scale is well known: As a plant gets larger and volume increases, the average cost per unit of output is expected to drop. This is partially because relative operating and capital costs decline, since a piece of equipment with twice the capacity of another piece does not cost twice as much to purchase or operate. If average unit production cost = variable costs + fixed costs/output, one can see that as output increases the fixed costs/outp ut figure decreases, resulting in decreased overall costs. Plants also gain efficiencies when they become large enough to fully utilize ded icated resources for tasks such as materials handling. The remaining cost reduct ions come from the ability to distribute non-manufacturing costs, such as market ing and research and development, over a greater number of products. This reduct ion in average unit cost continues until the plant gets so big that coordination

of material flow and staffing becomes very expensive, requiring new sources of capacity. This concept can be related to best operating levels by comparing the average un it cost of different sized firms. In many types of production processes, the mos t efficient types of production facilities are practicable only at high output l evels. It is very expensive to build custom-made cars by hand, and would be equa lly or more expensive to use a large General Motors assembly plant to build just a few Chevrolets per year. However, if the plant is used to build 6 million car s per year, the highly specialized techniques of the assembly line allow a signi ficant reduction in costs per car. Suppose, for example, that Honda were constrained to produce only 10,000 motorcy cles a year instead of a possible 1 million. With this circumstance, the need fo r an assembly line would become obsolete. Each motorcycle could be produced by h and. Honda could rule out benefits that might be derived from the division and s pecialization of labor. In producing such a small number, the use of any product ion techniques that reduce average cost would become obsolete. In these two exam ples, Honda and General Motors would enjoy economies of scale with reduced avera ge cost simply by increasing the scale of their operations. More broadly, economies of scale can occur for a number of reasons, including sp ecialization efficiencies, volume negotiating/purchasing benefits, better manage ment of by-products, and other benefits of size that translate into savings or g reater profitability for a large-scale producer. SPECIALIZATION. In a small firm, labor and equipment must be used to perform a number of differe nt tasks. It is more difficult for labor to become skilled at any one of them an d thereby realize the gains in productivity and reduction in per-unit costs that specialization permits. In the same way, management functions cannot be as spec ialized in a smaller firm. Supervisors may have to devote time to screening job applicants, a task usually more efficiently handled by a personnel department in a larger firm. Executives may have to divide their attention between finance, a ccounting, and production functions that could be handled more proficiently by d epartments specializing in each of these areas in a larger firm. According to Langlois, some economies of scale result from the specialization an d division of labor. Mass production allows the use of specialized equipment and automation to perform repetitive tasks. The larger the output of a product, pla nt, or firm, the greater will be the opportunities for specialization of labor a nd capital equipment. Similarly, machinery and equipment cannot be used as effic iently when it has to be switched back and forth between tasks. Increased specialization in the use of labor is feasible as a plant increases in size. Hiring more workers means that jobs can be divided and subdivided. Instea d of performing five or six distinct operations in the productive process, each worker may now have just one task to perform. Workers can be used full-time on t hose particular operations at which they have special skills. In a small plant a skilled machinist may spend half his time performing unskilled tasks, resulting in higher production costs. Furthermore, the division of work operations made p ossible by large-scale operations gives workers the opportunity to become very p roficient at the specific tasks assigned to them. Finally, greater specializatio n tends to eliminate the loss of time that accompanies the shifting of workers f rom one job to another. VOLUME DISCOUNTS. Oftentimes, the suppliers of raw materials, machinery, and other inputs will cha rge a lower price per unit for these items if a firm buys in large quantities. W hen a firm produces at high output levels, it needs a large volume of inputs and can take advantage of the associated price discounts to reduce its per-unit cos ts; if the company is large enough it may have strong negotiating power on this point. There may be similar economies of scale for stocks of raw materials, and intermediate and final products, part of which may be held to meet interruptions to the supply of raw materials, a temporary breakdown of firms, and the uncerta in flow of orders from customers. ECONOMIC USE OF BY-PRODUCTS.

The production of many types of goods gives rise to economically valuable by-pro ducts. Large-scale firms are often able to recycle "waste" by-products that smal ler size firms simply have to throw away because it is not economical to do anyt hing else with them. For example, a small sawmill may simply throw away sawdust and old wood scraps. Many processing firms find that the volume of these waste p roducts is large enough to warrant their resale. For example, sawdust can be sol d as a sweeping compound for cleaning floors and hallways in large buildings. Wo od scraps may be packaged, processed, and sold as kindling wood and artificial l ogs for home barbecues and fireplaces. In this way, the sale of by-products effe ctively reduces the per-unit costs of producing lumber in large volumes. For the same reasons, large oil firms often produce a host of petroleum by-products, an d meatpacking firms produce fertilizers, glue, leather, and other by-products of meat production. EXTERNAL ECONOMIES OF SCALE. The growth of supporting facilities and services is encouraged by a firm's large scale of operation. As a firm's scale of operations gets larger, it often becom es worthwhile for other firms and local governments to provide it with unique se rvices that result in direct or indirect cost advantages. If a firm builds a lar ge plant in a particular area, an improvement in highways and expanded transport ation services may soon follow. Smaller suppliers that find a large part of thei r sales going to the larger firm may move closer to reduce transportation costs. All of these developments could result in lower per-unit costs for the large fi rm. LARGE ECONOMIES OF SCALE. Larger firms have a cost advantage over their competitors. Not only does a large r plant gain from economies of scale, it also will produce more. Companies often use this advantage as a competitive strategy by first building a large plant wi th substantial economies of scale, and then using its lower costs to price aggre ssively and increase sales volume. Large economies of scale cause the firm's lon g-run average total cost curve to fall over a sizeable range as output is increa sed. In industries where the technology of production leads to economies of scal e, the long-run average total cost curve for a single firm may fall over almost the entire range of output covered by the industry demand curve. When long-run a verage total cost falls in this fashion, it is possible for a firm that gets int o this market ahead of others to obtain a competitive advantage. The ever lower per-unit costs it realizes at higher and higher levels of output permit the firm to charge a price lower than the average per-unit costs that prevail at lower l evels of output. In this way, the firm is able to satisfy the entire market dema nd at a price below that which potential new rival firms must charge when gettin g started. These new firms would thus not be able to charge a price low enough t o compete for sales with the established firm. Therefore, the established firm i s able to keep rivals out of the market and maintain a monopoly position. ECONOMIES OF SCOPE " economies of scope exist if a firm can produce several product lines at a give n output level more cheaply than a combination of separate firms each producing a single product at the same output level. Economies of scope differ from econom ies of scale in that a firm receives a cost advantage by producing a complementa ry variety of products with a concentration on a core competency. While economie s of scope and scale are often positively correlated and interdependent, strictl y speaking the benefits from scope have little to do with the size of output. For instance, in the paper products industry it is common for large firms to pro duce their own pulp, the primary ingredient in paper, before manufacturing the p aper goods themselves. However, smaller firms may have to purchase pulp from oth ers at a higher net cost than the large companies pay. The savings from producin g both pulp and paper would be an economy of scope for the large producers, alth ough the large companies probably also have economies of scale that make it feas ible to invest in pulping operations in the first place. In another example, banks have economies of scope when they offer a variety of r elated financial services, such as retail banking and investment services, throu gh a single service infrastructure (i.e., their branches, ATMs, and Internet sit

e). Clearly, the costs of providing each service separately would be much greate r than the costs of using a single infrastructure to provide multiple services. Research concerning hospitals has suggested that other types of services, such a s pediatric care, may have economies of scope. With increasing competition and e mphasis on service, economies of scope are necessary for hospitals to provide th ese services profitability. DISECONOMIES OF SCALE When a firm grows beyond the scale of production that minimizes long-run average cost, diseconomies of scale may result. When diseconomies of scale occur the fi rm sees an increase in marginal cost when output is increased. This can happen i f processes become "out of balance," or when one process cannot produce the same output quantity as a related process. Diseconomies of scale also can occur when a firm becomes so large that: Transportation costs increase enough to offset the economies of scale Monitoring worker productivity becomes too imperfect or costly Coordinating the production process becomes too difficult Frequent breakdowns result Maintaining efficient flows of information becomes too expensive Workers feel alienated and become less productive The focus of the firm is reduced, leading to inefficiencies and loss of strate gic position SMALLER FIRMS EFFICIENCY 1. Control monitoring the productivity and the quality of output from thousand s of employees in big corporations is imperfect and costly this links to the con cept of the principal-agent problem how best can managers assess the performance of their workforce when each of the stakeholders may have a different objective or motivation which can lead to stakeholder conflict? 2. Co-ordination - it can be difficult to co-ordinate complicated production p rocesses across several plants in different locations and countries. Achieving e fficient flows of information in large businesses is expensive as is the cost of managing supply contracts with hundreds of suppliers at different points of an industry s supply chain. 3. Co-operation - workers in large firms may feel a sense of alienation and su bsequent loss of morale. If they do not consider themselves to be an integral pa rt of the business, their productivity may fall leading to wastage of factor inp uts and higher costs. Traditionally this has been seen as a problem experienced by large state sector businesses, examples being the Royal Mail and the Firefigh ters, the result being a poor and costly industrial relations performance. Howev er, the problem is not concentrated solely in such industries. A good recent exa mple of a bitter dispute was between Gate Gourmet and its workers. Question .3 INDUSTRIAL POLICY SINCE 1956 When India achieved Independence in 1947, the national consensus was in favour o f rapid industrialization of the economy which was seen not only as the key to e conomic development but also to economic sovereignty. In the subsequent years, I ndia's Industrial Policy evolved through successive Industrial Policy Resolution s and Industrial Policy Statements. Specific priorities for industrial developme nt were also laid down in the successive Five Year Plans. Building on the so-called "Bombay Plan"1 in the pre-Independence era, the first Industrial Policy Resolution announced in 1948 laid down broad contours of the s trategy of industrial development. Constitution of India had not taken final sha pe nor was the Planning Commission constituted. Moreover, the necessary legal fr amework was also not put in place. Not surprisingly therefore, the Resolution wa s somewhat broad in its scope and direction. Yet, an important distinction was m ade among industries to be kept under the exclusive ownership of Government, i.e ., the public sector, those reserved for private sector and the joint sector. Su

bsequently, the Indian Constitution was adopted in January 1950, the Planning Co mmission was constituted in March 1950 and the Industrial (Department and Regula tion) Act (IDR Act) was enacted in 1951 with the objective of empowering the Gov ernment to take necessary steps to regulate the pattern of industrial developmen t through licensing. This paved the way for the Industrial Policy Resolution of 1956, which was the first comprehensive statement on the strategy for industrial development in India. At that time the Industrial Policy Resolution - 1956 The Industrial Policy Resol ution - 1956 was shaped by the Mahalanobis Model of growth, which suggested that emphasis on heavy industries would lead the economy towards a long term higher growth path. The Resolution widened the scope of the public sector. The objectiv e was to accelerate Bombay Plan prepared by leading Indian industrialists in 194 4-45 had recommended government support for industrialization, including a direc t role in the production of capital goods. Economic growth and boost the process of industrialization as a means to achieving a socialistic pattern of society. Given the scarce capital and inadequate entrepreneurial base, the Resolution acc orded a predominant role to the State to assume direct responsibility for indust rial development. All industries of basic and strategic importance and those in the nature of public utility services besides those requiring large scale invest ment were reserved for the public sector. The Industrial Policy Resolution - 1956 classified industries into three categor ies. The first category comprised 17 industries (included in Schedule A of the R esolution) exclusively under the domain of the Government. These included inter alia, railways, air transport, arms and ammunition, iron and steel and atomic en ergy. The second category comprised 12 industries (included in Schedule B of the Resolution), which were envisaged to be progressively State owned but private s ector was expected to supplement the efforts of the State. The third category co ntained all the remaining industries and it was expected that private sector wou ld initiate development of these industries but they would remain open for the S tate as well. It was envisaged that the State would facilitate and encourage dev elopment of these industries in the private sector, in accordance with the progr ammes formulated under the Five Year Plans, by appropriate fiscal measures and e nsuring adequate infrastructure. Despite the demarcation of industries into sepa rate categories, the Resolution was flexible enough to allow the required adjust ments and modifications in the national interest. Another objective spelt out in the Industrial Policy Resolution - 1956 was the r emoval of regional disparities through development of regions with low industria l base. development of such regions was duly emphasized. Given the potential to provide large-scale employment, the Resolution reiterated the Government s determi nation to provide all sorts of assistance to small and cottage industries for wi der dispersal of the industrial base and more equitable distribution of income. The Resolution, in fact, reflected the prevalent value system of India i n the early 1950s, which was centered around self sufficiency in industrial Accordingly, adequate infrastructure for industrial production. The Industrial P olicy Resolution 1956 was a landmark policy statement and it formed the basis of subsequent policy announcements. Question .4 J N Bhagwati and A Krueger, in their comparative analysis of the impact of foreign trade regimes and economic development in a number of countries, defined a set of analytical phases with reference to the EXIM policy of a country. These phases in the foreign trade regime were designed essentially as a classificatory and descriptive device to capture meaningfully the evolution of foreign trade regime in terms of its restrictionist content and the dimensions a nd pattern of its use of control and price instruments. There are broadly five phases which are as follows: Phase I : Characterised by the systematic and significant imposition of

quantitative restrictions (QR). It might start in response to an unsustainable balance of payments deficit. Throughout Phase I, controls are generally maintained and often intensified. Phase II : Characterised by continued reliance upon quantitative restrictions and generally increased restrictiveness of the entire control system. Phase II i s distinguished by two additional and related aspects of the QR system, both relatively unimportant during Phase I. (1) The detailed workings of the control system become increasingly complex, and (2) Price measures are adopted to address the functioning of the control system. Both these characteristics of Phase II arise from dissatisfaction with the resul ts of an undifferentiated system and are often the result of many small decisions rather than an overall policy design. Price measures are introduced to both exports and imports. The continuation or intensification of foreign exchange shortage leads to the recognition that additional export earnings would be desirable. Rebate schemes, import replenishment schemes, special credits for exporters, and a variety of other devices may be instituted that offset part or all of the discrimination against exports implicit in an overvalued exchange rate. As for imports, price measures are also adopted to absorb part of the excess demand for imports. Tariffs may be increased or surcharges added to the cost of importing. The following aspects of the price situation in Phase II are then evident : (1) the exchange parity is overlaid by tariffs and subsidies, levied in lieu of formal parity change, (2) domestic currency is overvalued at the current parity plus trade tariffs and subsidies, implying a premium on imports. Phase III : In this phase, attempts are made to systematise the introduced during the previous phase: It may consist of a mere operation directed at replacing the diverse import premiums by reasonably uniform tariffs such that the differential incentive by diverse premiums on different imports are greatly reduced or eliminated. External Sector Alternatively, the tidying-up operation may replace the existing tariffs and exp ort subsidies with a formal parity change, the result being that the effective exchange rates on exports and imports do not change much but the dispersion of tariffs is replaced by uniform devaluation. On the other hand, Phase III may take the form of a devaluation cum liberalisation package. Such a package may have a gross devaluation large enough to leave a net devaluation despite the removal of trade tariffs and subsidies, and measures of import liberalisation. Question 5 :--The two principal reasons for holding cash are for "transactions" and for "compen sating balances". Transaction motive:-The transactions motive for money demand results from the need for liquidity for day-to-day transactions in the near future. This need arises when income is rec eived only occasionally (say once per month) in discrete amounts but expenditure changes tidying-up effects caused virtually

s occur continuously. Compensating Balances:-Cash balances held as part of a loan agreement or as compensation for bank servi ces received. A compensating balance requirement serves both as a term of a loan imposed by the lender and as compensation for services rendered by the bank. As such, it is sometimes negotiable. For example, the borrower can attempt to have the size of the required balance reduced or negotiate the nature of the terms. Rather than requiring that the company maintain $100,000 balance at all times, the lender may agree to allow the firm to maintain an average balance of $100,000 over a specified period. The latter case gives the borrower more flexibility. Yo u should also point out that firms that normally hold significant amounts of liqui d assets do not find a compensating balance requirement constraining. However, for many firms, it is cheaper to pay explicit fees to obtain a loan than it is t o maintain large no- or low-interest-bearing accounts. Question 5:--Economic devopment:-Economic development generally refers to the sustained, concerted actions of pol icymakers and communities that promote the standard of living and economic healt h of a specific area. Such actions can involve multiple areas including developm ent of human capital, critical infrastructure, regional competitiveness, environ mental sustainability, social inclusion, health, safety, literacy, and other ini tiatives. Economic development differs from economic growth. Whereas economic de velopment is a policy intervention endeavor with aims of economic and social wel l-being of people, economic growth is a phenomenon of market productivity and ri se in GDP. Consequently, as economist Amartya Sen points out: economic growth is one aspect of the process of economic development. [1] The scope of economic development includes the process and policies by which a n ation improves the economic, political, and social well-being of its people.[2] The University of Iowa's Center for International Finance and Development states that: 'Economic development' is a term that economists, politicians, and others have u sed frequently in the 20th century. The concept, however, has been in existence in the West for centuries. Modernization, Westernization, and especially Industr ialization are other terms people have used when discussing economic development . Although no one is sure when the concept originated, most people agree that de velopment is closely bound up with the evolution of capitalism and the demise of feudalism.[3] Mansell and Wehn also state that economic development has been understood since the World War II to involve economic growth, namely the increases in per capita income, and (if currently absent) the attainment of a standard of living equival ent to that of industrialized countries.[4][5] Economic development can also be considered as a static theory that documents the state of an economy at a certai n time. According to Schumpeter (2003), the changes in this equilibrium state to document in economic theory can only be caused by intervening factors coming fr om the outside.[ Administered Prices:--An administered price is in general a price which is either set (fixed) by legal statute or by a standard procedure formulated as an official policy, instead of

being determined directly by supply costs and market demand. Even if supply and demand conditions change, the administered price may therefore stay the same, o r it may change in the opposite direction - if e.g. demand falls, the administer ed price is kept the same or raised, to subsidize the supplier and protect his i ncome, or alternatively the price is kept constant to protect the consumer/purch aser. administered price, price determined by an individual producer or seller and not purely by market forces. Administered prices are common in industries with few competitors and those in which costs tend to be rigid and more or less uniform. They are considered undesirable when they cause prices to be higher than a compe titive standard, when they are accompanied by excessive non-price competition (e fforts to increase sales without enhancing the value of the product), or when th ey add to inflationary tendencies either by failure to lower prices in response to cost reductions or by increasing prices to maintain a given margin of profit in the face of rising costs. The stability of administered prices is counted by some observers as an advantag e in its provision of a basis for planning. Some consumers have been found to pr efer predetermined prices as facilitating budgeting in advance. Claims have also been made that administered prices are necessary to the operation of a mass pro duction to avoid the inefficiency in negotiating prices in each transaction. A m ore accurate statement might be that the undesirable effects are not inherent in administered prices but in the nature of the competition that accompanies them ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------An information system is comprised of all the components that collect, manipulat e, anddisseminate data or information. It usually includes hardware, software, p eople,communications systems such as telephone lines, and the data itself. The a ctivities involvedinclude inputing data, processing of data into information, st orage of data and information,and the production of outputs such as management r eports.MIS creates an evolution in whole world in every business and so in banki ng system.Organizations have been developing and implementing computer-based man agementinformation systems (MIS) at an increasing rate for the last 35 years. Ho wever, evidenceindicates that many computer-based MIS are not as successful as t hey should be and manymay be considered failures.There has been much research to investigate organizational factors, individual differences,user involvement and their relationship to MIS success, and in particular, one indicator of MIS succ ess, user information satisfaction (UIS). Little attention, however, has been pa id towhether UIS for any particular MIS varies for users from different organiza tion functions anddifferent management levels within an organization.This paper reports the results of a field study of MIS in ICICI Bank. ICICI bank hassuccess fully utilised its MIS in providing banking products to its customers and also i nimproving its organisational efficiency. It is one of the few banks which adapt s quickly to thechanging environment and keeps pace with the ever changing techn ology.4|Page INTRODUCTIONMANAGEMENT INFORMATION SYSTEMDefinition: A Management Information S ystems (MIS) is An integrated user machine system For providing information To support operations, management, analysis and decision making functions in anOrganizatio nThe system utilizes Computer hardware and software Manual procedures Models for analy sis , planning , control and decision making A databaseThe development and managem ent of information technology tools assists executivesand the general workforce in performing any tasks related to the processing of information.MIS and busines s systems are especially useful in the collation of business data and the produc tion of reports to be used as tools for decision making.5|Page